Is a healthy financial culture another beacon for Hong Kong’s future?
The capital market mainly serves three individuals, namely enterprises, individuals and the government. These three are both users and providers of capital at the same time, among which the role of enterprises is the most important.
Author: GUDORDI | 2023-12-11
London’s small 1.12-mile traditional financial district (the Square Mile) is actually run by the City of London Corporation. This corporation is highly independent, and the British government may not necessarily be able to control it. (Shutterstock)
Wall Street requires people to take action to make money. When people generally gamble, the money they make is much greater than when people generally invest. “They (Wall Street) don’t make money unless people do things, and they get a piece of them. They make a lot more money when people are gambling than when they are investing.”
Warren Buffett
In the last episode, the author mentioned that cooperating with London to seize opportunities in areas where the global capital market has not done well is one of Hong Kong’s options.
Keynes’s “casino capitalism” worries
What many people may not know is that due to historical and various reasons, London’s small 1.12-mile traditional financial district (commonly known as “the Square Mile”) is actually owned by the City of London Corporation. ), this corporation is highly independent, just like another government, and the British government may not necessarily be able to control it. This is one of the unique features of London’s financial system.
In terms of financial strength, New York is much larger than London, but in terms of scale and depth, London should be better than New York. Upon closer inspection, New York’s financial center is actually quite local. New York is an international financial center because it is the world’s largest capital pool, so the whole world must follow New York’s rules of the game. But London is much more international. Its funds and practitioners come from all over the world. Its rules of the game are formed by people and institutions from all over the world after hundreds of years of interaction and precipitation. They cannot be controlled by any force alone. Come. It is worth noting that the total number of financial and various related institutions in London easily exceeds 10,000. It is not unimaginable to say that 30 or even 100 of them are willing to accept cooperation with Hong Kong.
Assuming that London can really cooperate with Hong Kong, are there any major opportunities in the global capital market that can be jointly developed? The answer depends very much on the level at which we look at it. If the level is high enough, there are still many things that the global capital market should and can do, but has not done or not done well. Keynes’s views quoted at the beginning of this column indicate that as early as the 1930s, he had already vaguely felt that the global capital market was not developing on a healthy path. In private, he describes it as “Casino Capitalism”. The concerns are appreciable.
The recently deceased Charlie Munger once criticized that the annual income of the entire US financial intermediaries is similar to the total annual profits of all listed companies, showing that the value created by listed companies is almost eroded by intermediaries. (Shutterstock)
What is happening in the real financial world is that wealth is constantly being redistributed.
Basically, the capital market mainly serves three individuals, namely enterprises, individuals and the government. These three are both users and providers of capital at the same time. Among these three, the enterprise’s The role is most important. The author’s observation is that currently these three individuals are not very satisfied with today’s global capital market as a whole, and the biggest beneficiaries of the entire system are intermediaries. The recently deceased Charlie Munger once bluntly pointed out that the annual income of the entire U.S. financial intermediaries is similar to the total annual profits of all U.S. listed companies, which shows that almost all of the value created by listed companies for shareholders is eroded by intermediaries. .
From this perspective, what is happening in the real financial world is that huge amounts of money are constantly moving around in different stocks, funds and investment products. In this process, investors make gains and losses, but Intermediaries are constantly charging fees, and the profits made by many investors are actually from the losses of other investors. Therefore, what is really happening in the investment market is that financial intermediaries use a variety of investment tools and investment themes to own funds. Their wealth is constantly redistributed and redistributed.
Improving the status of Hong Kong and pan-Asian companies in the international capital market is a business opportunity
Basically, the current core of the global capital market is the United States, followed by several other traditional developed countries (Developed Markets). About 80% of the world’s investment funds are placed in the markets of developed countries, among which countries in the Pan-Asia-Pacific region have Only Japan and Australia are of certain importance, but neither of them is actually the core. Therefore, in the current global capital market, the real protagonists may only be intermediaries and a few star companies.
However, it is worth noting that there may not be 1,000 of these star companies in the world in total (mainly in the United States and various developed countries, only a few in Pan Asia, and even fewer outside Japan and Australia), accounting for 1,000 of them globally. Currently, less than 2% of the more than 58,000 listed companies are listed, showing that most of the global and pan-Asian companies do not have much international recognition. If the entire world was still stuck in the 1980s, the relevant world view could be said to be normal.
Pan-Asian companies are already in the top 20 in many different industries around the world, but the progress of Hong Kong and pan-Asian companies over the past few decades has not yet been recognized by the capital market. (Shutterstock)
However, in the past three to forty years, many Hong Kong and Pan-Asian companies have continued to develop and progress. In many different industries around the world, Pan-Asian companies have ranked in the top 20 or even higher. Therefore, Hong Kong and Pan-Asian companies have continued to develop and progress. The progress pan-Asian companies have made in their respective industries over the past few decades has yet to be recognized by capital markets. This is a typical example of the disconnect between capital market value and business value. Therefore, promoting the status and recognition of Hong Kong and pan-Asian companies in the international capital market (and the reflection in valuation) is an opportunity that Hong Kong and London can jointly develop. One, and the investment value released by this alone can exceed one trillion US dollars.
As Buffett’s words quoted at the beginning of this article illustrate, a healthy capital market should not be a casino – the author believes that it should be a market that can assist the development of various industries and satisfy its enterprises, individuals and governments. If we regard this as our goal, then there are still many deficiencies in the global capital market. However, these places will be involved in some fundamental issues of the global capital market. Hong Kong’s financial strength alone should not be able to do much, but if it can be solved together with London and other financial centers, the situation will be different. May be different. Therefore, the question will be whether there is anything in Hong Kong worthy of the attention of London and other financial centers. This involves another shining light of Hong Kong, which is Hong Kong’s inherent cultural genes. We’ll talk about that next time.
“Hong Kong’s Legendary Future” Series 45
Contact the author: Gudordi@proton.me
