In a recent Legislative Council session, Secretary for Financial Services and the Treasury Mr. Christopher Hui responded to Hon Edward Leung's inquiry on strategies for encouraging local investments to focus on Hong Kong's market. The 2024 Policy Address supports partnerships with sovereign wealth funds to enhance Hong Kong's position as an asset management hub. Key discussion points included:

· Foreign Exchange Reserves: The HKMA manages US$422.8 billion in foreign reserves, prioritizing financial stability. Around 90% of the Exchange Fund's assets are managed by investment managers with Hong Kong offices, and the fund has invested in local hedge funds and private equity managers, with a focus on Hong Kong-based firms to support local economic growth.

· Mandatory Provident Fund (MPF): As of March 2024, MPF assets totaled HK$1.183 trillion. Investments in Hong Kong equities amounted to HK$242.3 billion (31% of MPF equity assets), and the majority of MPF deposits and cash are held in Hong Kong dollars. For the top five MPF trustees, the allocation of Hong Kong-listed equities ranged from 20% to 43%, and Hong Kong dollar debt securities comprised 18% to 51% of their debt holdings.

· Insurance Premiums: While the Insurance Authority (IA) oversees the insurance industry, it currently lacks detailed data on local versus global asset allocations of insurance premium investments. The government did not provide specific investment percentages for insurance assets in the local market.

· Stock Market Impact and Government Initiatives: The government is cautious about directly investing Exchange Fund assets in the local market to avoid creating pressure should assets need to be liquidated. However, it has formed a Task Force on Enhancing Stock Market Liquidity to improve Hong Kong's stock market attractiveness through structural reforms, addressing factors like the listing regime, trading mechanisms, and market structure.

· Guidelines for MPF and Insurance Investments: The government promotes investment diversification within MPF and insurance companies to reduce risk, encouraging flexibility based on each investor's objectives. Current policy avoids imposing a minimum local market investment percentage on MPF or insurance assets, as it may conflict with the goal of risk-balanced, diversified portfolios.

The government emphasized the need for cautious investment strategies while promoting market liquidity improvements and financial stability, underlining its commitment to sustainable growth in Hong Kong’s financial market.

For the complete discussion details, refer to the Legislative Council documentation.