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From the Strength of the Hong Kong Dollar

Earlier this month, the Hong Kong dollar exchange rate remained persistently strong, trading close to 7.75 against the US dollar, and triggered the strong-side Convertibility Undertaking four times. In response, the Hong Kong Monetary Authority (HKMA) repeatedly bought US dollars, injecting a total of about HK$129 billion into the market. The inflow of funds into the Hong Kong dollar bolstered market liquidity, leading to a decline in local interbank interest rates. Notably, the one-month Hong Kong Interbank Offered Rate (HIBOR), which is closely related to mortgage rates, dropped from 4% to around 1.3% recently. However, capital flows and interest rate trends are influenced by multiple internal and external factors, and uncertainties remain. The Government and regulatory authorities will continue to closely monitor market developments to safeguard financial stability.

Since the beginning of this year, the Hong Kong stock market has shown a generally upward trend amid volatilities. Despite temporary pressure in early April due to the tariff war, the market has since rebounded. The Hang Seng Index closed at 23,345 points last Friday, marking a cumulative rise of about 16%, outperforming other major markets. Trading activity has also picked up significantly. For example, in April, the average daily turnover exceeded HK$270 billion, representing a 1.4-fold increase compared to the same period last year.

The initial public offering (IPO) market is thriving. This Tuesday, the Hong Kong Stock Exchange will welcome the highly anticipated listing of a leading Mainland new energy company, which will mark the world’s largest global IPO this year. This listing will push Hong Kong’s total IPO proceeds since this year to over HK$60 billion, more than six times compared to the amount in the same period last year, ranking first globally so far this year.

For the banking sector, as of March this year, Hong Kong’s total bank deposits banks reached nearly HK$18 trillion. This marks a further 3.5% increase since this year, after a 7% increase in 2024.

International capital flows reveal investors’ strategic positioning for future trends. They also serve as a barometer of market sentiment, reflecting assessments of political and economic conditions. Currently, markets are concerned not only about how US unilateral policies may impact on the global economy and future growth prospects, but also about the long-term risk of rising interest rates stemming from the mounting debt of the US Government.

Amid a global economic outlook fraught with multiple uncertainties, the measures implemented by our country under the strong leadership of the Central Government to stabilise the economy and expectations have gradually yielded results. Adhering to a development path of openness and mutual benefit, our country has upheld the principle of “neither provoking nor fearing troubles” in its response to the tariff war, earning widespread international recognition and support. At the same time, the country's innovation and breakthroughs in cutting-edge technologies, such as artificial intelligence, have continued to accelerate, with expanding application scenarios and ongoing improvements in the industrial ecosystem. These advancements not only create new value for the domestic economy but also contribute significantly to promoting global stability and inclusive development.

Looking across major global markets, capital is increasingly flowing toward leading tech companies at the forefront of innovation and strategic future industries. We are continuously strengthening the synergistic development of our dual engines, namely finance plus innovation and technology (I&T), to nurture high-potential tech enterprises while driving more comprehensive growth in financial markets. This mutually reinforcing dynamic will propel Hong Kong’s development as both an international financial hub and a global I&T centre to new heights.

Hong Kong's efforts in driving research and development (R&D) and the commercialisation of innovation outcomes, supporting tech enterprises, and attracting key enterprises to establish a presence here are delivering increasingly tangible results. In fact, our strengths under the “one country, two systems” framework – including the common law system, robust intellectual property rights protection, free flow of capital and information, a concentration of global talent, and world-class academic and research capabilities – serve as key attractions and catalysts for economic development. Our vision is to bring together top scientific minds, leading tech giants, and outstanding startups and entrepreneurs in Hong Kong. At the same time, we are continuously expanding and streamlining financing channels to ensure that capital effectively supports technological innovation, thereby injecting new momentum into the economy and creating higher-quality, more diverse job opportunities for our residents. This financing chain operates across different stages: the early stage relies on “patient capital” from sources like venture capital and sovereign wealth funds; while the middle-to-late-stage is supported by private equity, mergers and acquisitions, IPOs and refinancing.

Beyond policy-level guidance, the Hong Kong Special Administrative Region Government is leveraging the Hong Kong Investment Corporation Limited (HKIC) to deploy “patient capital”, including the adoption of strategies such as “investing early, investing in small, and investing in hard tech”, to bolster the development of Hong Kong's innovation and technology ecosystem. These efforts actively contribute to accelerating the cultivation of new quality productive forces and advancing high-quality development. To date, the HKIC has invested in over 100 projects, achieving a 1:4 leverage ratio – every dollar invested by the HKIC has attracted 4 dollars of investment from long-term capital. This approach mobilises global patient capital to empower technological innovation, thereby enhancing Hong Kong’s economic growth and competitiveness.

This Thursday, the HKIC will host its first “International Patient Capital Forum” with the theme “Uniting the Power of Patient Capital, Collectively Building a Bright Future”. The Forum will bring together hundreds of representatives representing patient capital – from sovereign wealth funds, pension funds, university endowments, family offices, and corporate venture capital entities from the Global South and other regions – as well as startups and investment institutions. Participants will focus on building collaborative platforms, exploring cooperation opportunities and harnessing the power of investment to drive better regional development.

In a complex and volatile external environment, we can achieve high-quality development despite uncertainties – so long as we remain committed to our goals, remain open and inclusive, and continue to leverage our unique advantages and focus on our priorities.

May 18, 2025