Last August, a Fortune magazine article asked: “Can Hong Kong’s stock exchange CEO save the city?” The chief executive in question is Nicolas Aguzin, the former J.P. Morgan banker who was appointed to head Hong Kong Exchanges and Clearing (HKEX) almost two years ago.

He has since been energetically globetrotting to promote the future of Hong Kong’s equity market and its role as a listing centre and IPO hub. He has had the support of Chief Executive John Lee Ka-chiu and Financial Secretary Paul Chan Mo-po. After the financially traumatising past few years of the pandemic, there can be no question that our economy needs every bit of help it can get.

As the administration begins the long and difficult task of rebuilding our credibility as Asia’s leading international business hub, dynamic growth of our equity market – and of financial services more broadly – will undoubtedly play an important part.

In reality, Fortune’s question was melodramatic. The stock market is an important contributor to the Hong Kong economy as a component of our financial services sector in general – the entire sector accounts for more than 20 per cent of GDP and about 7.5 per cent of jobs. However, it is nowhere near so critical that our entire future depends on it.

This is probably a good thing. Hong Kong’s economic recovery and the task of strengthening our stock market and its role as a capital-raising hub are likely to be a painfully protracted process.

People walk through Exchange Square outside the Hong Kong stock exchange on February 23.

Our problem is not simply that the Covid-19 lockdown harmed our economy, shut us off from essential global linkages across the financial services sector, and triggered a significant exodus of indispensable financial professionals. Probably more important are external factors such as the US-China trade and technology conflict and the precarious state of financial markets worldwide.

Russia’s invasion of Ukraine, its impact on inflationary forces and rising anxieties over the possibility of a global recession have made life miserable for stock markets everywhere. These have prompted even healthy companies to question whether now is a good time to raise funds or consider international expansion.

Equity markets last year had one of their most dreadful years on record. The S&P 500 fell by 19.4 per cent and the Nasdaq by almost 34 per cent. In China, the Shanghai and Shenzhen indices fell 15 per cent and 21 per cent respectively. The only large index to end the year in positive territory was London’s FTSE, up a meagre 1.2 per cent.

As the valuation of listed companies fell across the world’s leading markets, interest in raising equity capital shrivelled as companies interested in IPOs put their plans on hold. Global IPO proceeds that had surged to more than US$600 billion in 2021 – US$350 billion in the US markets and US$168 billion in Asia – slumped by 90 per cent in the US and 70 per cent in Asia.

While IPO fundraising on the HKEX fell last year, Hong Kong retained its global standing as an IPO listing hub only because so many other listing centres saw IPO business contract even further.

Whether IPO fundraising revives in 2023 seems still in the balance. Adversity and uncertainties continue to keep the markets on tenterhooks. Inflationary forces continue to push interest rates in the wrong direction. The danger of recession continues to haunt economies worldwide.

Here in Asia, the US-China trade war and its impact on regional supply chains continues to make international companies hesitate on international business expansion plans. Even inside China, uncertainty over regulators’ treatment of companies looking at international expansion is prompting many to put their fundraising plans on hold.

Despite these uncertainties, financial market experts remain upbeat. More than 100 companies are queuing to launch IPOs in Hong Kong, according to forecasts. While most of these are Chinese – some face possible delisting in the US – there is interest from other international companies. After Lee’s recent visit to the Middle East, this includes hopes that Saudi Aramco will consider a secondary listing here.

Even if uncertainties abate and the IPO flow revives, Hong Kong’s leading role as a corporate capital-raising centre will not go unchallenged. Compared with a decade ago, the Shanghai and Shenzhen stock markets have grown rapidly and have in their own right become world-leading centres for IPO listings.

More idiosyncratically, Switzerland’s SIX equity market has emerged as an attractive locus for Chinese companies looking to expand their international business. Since regulatory agreements last July, nine Chinese companies have listed and raised around US$3.2 billion, with the EV battery-maker Contemporary Amperex Technology soon expected to raise global depository receipts there.

Aguzin might be too optimistic about the speed of Hong Kong’s recovery, and Fortune magazine might be overhyping his role in “saving” Hong Kong’s economy. Nevertheless, it remains likely that as international capital-raising activity revives, Hong Kong’s leading role as a global IPO base will remain strong, in particular for Chinese companies.

Mainland companies already make up around three-quarters of the HKEX market capitalisation, and it would be surprising if large numbers of them did not continue to use their long-standing international home in Asia to underwrite future international growth plans. But Aguzin would certainly be foolish to take that for granted.