Stock Exchange of Hong Kong
Securities trading in Hong Kong started in 1866; however, the first formal stock market, the Association of Stockbrokers in Hong Kong, was established in 1891. It was renamed as Hong Kong Stock Exchange in 1914. In 1921, a second exchange was incorporated - the Hong Kong Stockbrokers' Association. The two exchanges merged to form the Hong Kong Stock Exchange in 1997. The rapid growth of the Hong Kong economy led to the establishment of three other exchanges in late 1960s and early 1970s, including the Far East Exchange (1969), the Kaghan Stock Exchange (1971) and the Kowloon Stock Exchange (1972). Prompted by the 1973 market crash and the need to strengthen market surveillance, the Hong Kong government set-up a working committee/group in 1977 to consider the unification of the four stock exchanges. As a result, the unified exchange - the Stock Exchange of Hong Kong was incorporated on July 7, 1980. The four exchanges ceased trading after the close of business on March 27, 1986. A new era began with the commencement of trading via a computerized system on the unified exchange on April 2, 1986. After the October crash in 1987, the exchange underwent a complete reform, including the establishment of a more widely representative council and strong participants to operate and develop the market effectively. During the past thirteen years, the exchange has developed from a largely domestic operation to a major international stock exchange. With a market capitalization of almost U$457.29 billion ($635 billion) at the end of December 2002, it stood ninth in the world and second in Asia. The objectives of the exchange are to promote capital formation and securities trading in Hong Kong and China by providing a fair, transparent and efficient central securities market-place.
The Exchange's development in the past three years was governed by its previous strategic plan, "The Way forward", published in February 1995. In that strategic plan, the exchange set three strategic objectives: to upgrade its market facilities to meet international standards, to expand its China dimension with a vision to become a major trading venue for China stocks, and strengthen itself as an institution. After three years of implementation, many strategies in The Way Forward have been completed and this contributed to the success of the exchange today as a leading international securities market in Asia and an important listing and trading venue for Chinese stocks. After the success of "The Way Forward", the exchange developed new strategies to accomplish its long-term vision. China offers the largest business potential for the Hong Kong securities market. To support its economic development, China has a deep long-term need for capital and financial services. Hong Kong can play a bigger role in channeling international funds to China via equity and debt financing. In turn, China based investors will become important investors in Hong Kong listed securities. The Hong Kong domestic market will always be a major source of growth but the Asia-Pacific region can be a good growth driver for the Hong Kong Stock Market. Several exchanges (e.g., Singapore, Kuala Lumpur and Taipei) are gearing up to challenge Hong Kong's regional prominence. These markets, along with several other Asian Exchanges, are investing heavily to seize domestic growth opportunities and capture an increasing share of the regional business and have already surpassed Hong Kong in some areas (e.g., trading infrastructure, clearing and settlement systems). In the long run, stock exchanges in mainland China may also emerge as major exchanges in the region. The influx of mainland Chinese issuers and investors into Hong Kong boosted by the recently announced economic reforms has not only accelerated the market's growth but also affected the market's profile and potential status with international investors. Thus, Hong Kong faces two conflicting challenges - one, capturing the growth potential of mainland China, and two, ensuring that the regulatory standards are maintained.