Many politicians thought that Britain got a bum deal when Hong Kong became a British colony in 1841. The Prime Minister Lord Palmerston declared that the tiny island was 'a barren rock. It will never be a mart for trade.' This is somewhat ironic. Palmerston's 'barren rock' is now home to over 700,000 millionaires, representing around 12% of the island's population.
It has become a dynamic metropolis, one of the world's leading financial centres and home to the seventh largest stock exchange in the world. Stockopedia will be providing data on Hong Kong stocks very soon. Following on from previous weeks where we’ve covered Singapore and Japan, we’ve put together this guide to help investors navigate and get started in Hong Kong markets.
Why invest in Hong Kong?
Open Market Economy
Hong Kong has long been a capitalist outpost in the Far East. Back in 1977 the The Economist wrote that 'a businessman setting up shop in Hong Kong finds low taxes, no foolish government interferences…a government leaning over to encourage him to make as much money as he can.' Hong Kong is now technically part of a communist country, China, but it has retained an open market economy since the British hand over in 1997. It operates a 'one country, two systems' regime whereby the island is free to operate a capitalist economy while managing its own taxes and currency. Regulations have been introduced since 1997, but the Index of Economic Freedom has ranked Hong Kong amongst the freest countries in the world every year since 1995. In 2015 it ranked as the most free economy for the 20th consecutive year. The Index measures restrictions on business, investment, property rights and labour, and considers the impact of corruption and government size on economic growth.
Exposure to China
Hong Kong has benefited from being strategically located near to the dynamic growth economies of the Far East. The island has long served as a bridge between China and the rest of the world, conveying trade and investment both ways. It has therefore been particularly well placed to benefit from China's growth. Furthermore, the Hong Kong stock markets provide exposure to China because many companies that are based in mainland China trade on the Hong Kong Stock Exchange. Examples include China Mobile, which has the world's largest subscription…