Another Capital Market Paradigm
“ It is Enterprise which build and improves the world’s possessions. .. If Enterprise is afoot, Wealth accumulates whatever may be happening to Thrift; and if Enterprise is asleep, Wealth decays, whatever Thrift may be doing.. ”
“Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes a bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done ”
– John Maynard Keynes
We see Enterprises as a very important component of the modern economies and our paradigm on the Capital Market is derived from the Firm-Market Paradigm inspired by The thoughts of 1991 Nobel Laureaute Ronald Coase with the key being whether the society can establish a virtuous cycle between the Market and its Firm. We think one measure of the achievement of a Capital Market is how well it serves the three key components of it – Enterprises, Individuals and Non-commercial Entities – which are both providers of Capital and Seekers of Capital.
We would think that the current global capital market is not a very effective one, with one obvious issue being the relative neglect of companies in Pan-Asia.
Rightly or wrongly, the investing world is compartmentalised into the Developed Markets and the Emerging Markets and one consequence of this mindset on the global capital market is that it has been dominated by the Established Developed Markets especially the US, followed by others in Europe, Canada, and among countries in the Pan-Asia time zone, probably only Japan and Australia are of relevance and importance, but still both are not really the core markets in the Developed Markets Universe where about 80% of the world’s investing capital is being put into.
As such, the entire Pan-Asia is not really an important market for the global capital market and the investing world despite the fact that Pan-Asia has made a big leap forward from the Bretton Wood days of 1944 and now accounts for over 40% of the world’s nearly 60,000 listed companies and also over 50% of the world’s GDP.
We see this as a disconnection which one where Hong Kong could potentially capitalise on and ESG may constitutes one of the way to brand HK companies which could later be extended to other HK-listed companies. Indeed, we see the prospects that Hong Kong could develop into a leading market in Pan-Asia in terms of ESG.