Bet on stocks… but where? 

In the wake of the latest proposal concerning a Macau Stock Exchange, analysts weigh in the pros and cons of the two potential locations for the bourse — Macau or Hengqin — amid the lack of details about the project 


Since the Central Government first proposed that Macau should establish a yuan-denominated stock exchange in early 2019, the attitudes from the authorities in both the city and nearby Guangdong province have been strikingly different. While local officials have adopted a cautious approach, those across the border have been eager to give the territory a helping hand. This disparity continues amid the recent news of the possibility of the Macau Stock Exchange being set up in Hengqin, Zhuhai of the nearby province; an idea regarding which analysts say more research has to be done so as to fully unleash the potentials of the Macau bourse. 

Mainland Chinese media outlets widely reported in late November that in a recent reply to an enquiry of members of the Chinese People’s Political Consultative Conference (CPPCC), the Chinese National Development and Reform Commission noted Beijing is mulling the establishment of a Macau Stock Exchange in Hengqin. Hailing the nearby island as boasting “unique advantages” for the Guangdong-Macau collaboration, the country’s top economic planner noted in the reply: “[Various departments of the central government] are studying the possibility of setting up the Macau Stock Exchange in Hengqin, which could support Macau to develop its ‘characteristic financial industry’ in tandem with its own demands, expedite the appropriate economic diversifications of Macau, and support the development of the Guangdong-Hong Kong-Macau Greater Bay Area.” 


“Before anything, it should be made clear what financial services the Macau Stock Exchange could provide and the service target, as well as how the bourse could complement the other stock exchanges in the Greater Bay Area,” says academic Samuel Tong 

Though the development and reform commission did not provide further details, it is believed the Macau bourse might be located in a demonstration zone of the cross-border financial cooperation between Guangdong and Macau in Hengqin, where both sides started to develop since October 2019 to explore financial innovation in tandem with the policy initiatives laid down by the central government in the Outline Plan for the Greater Bay Area in early 2019. Over 5,000 financial firms have registered and more than 10 Macau financial institutions have set up representative offices in the zone, the nation’s top economic planner stressed.  

Addressing the latest news from the the development and reform commission, Guo Yonghang, secretary of the Zhuhai Municipal Committee of the Communist Party of China, was quoted by the official Southern Daily as saying: “Because of Macau, the Zhuhai Special Economic Zone has been established; because of Macau, the Hengqin New Area has become prosperous. Since its establishment [Hengqin] has been tasked with the mission of serving ‘One Country, Two Systems’ and Macau.” ‘One Country, Two Systems’ refers to the mini-constitution of the city that keeps its economic, social and political systems separate and highly autonomous from across the border in the wake of the handover.  

In contrast to the attitude from the Guangdong authorities, the Macau administration has been more muted in its response to the possibility of a Macau stock exchange in Hengqin. Questioned by legislators about the proposal, Macau Secretary for Economy and Finance, Lei Wai Nong, responded that he had yet to study what the top planner said, noting, “We are open to the study [on this topic]. We don’t rule out any possibilities as long as it could help facilitate the development of Macau.” The official further remarked in a legislative session that from a legislative framework to infrastructure and talents to positioning and target market, all these factors have to be thoroughly considered before any decision can be made. 


“There is no restriction for foreign currencies in Macau, which also facilitates capital mobility, laying down a good foundation for developing the financial industry,” says scholar Lao Pun Lap. “No mainland cities could boast [this advantage] at the moment.” 

A scarcity of details has so far been available about the Macau Stock Exchange since this idea was first proposed in February 2019, apart from a brief remark of He Xiaojun, head and party secretary of Guangdong Financial Supervisory Authority, who said in the same year that the Macau Stock Exchange is positioned as the “Chinese offshore yuan version of Nasdaq.” The Macau authorities, meanwhile, have only acknowledged that a feasibility study on the matter is being carried out. 

Given the lack of information about the nature and positioning of the Macau bourse, local scholar Samuel Tong Kai Chung notes it’s premature to say whether the stock exchange could be located in the city and nearby island. “Before anything, it should be made clear what financial services the Macau Stock Exchange could provide and the service target, as well as how the bourse could complement the other stock exchanges in the Greater Bay Area,” says the president of the Macau Institute of Management. Besides the proposed Macau bourse, there are two more stock exchanges in the region, located in Hong Kong and Shenzhen, respectively.  

Despite the lack of details, there seems to be a consensus that the Macau Stock Exchange could focus on the bond market in the beginning, which is also on the rise in the territory in recent years. Chongwa (Macao) Financial Asset Exchange Co Ltd (MOX) — the first financial institution in the territory to provide services of bond issuance, listing, registration, custody, trading and settlement — was established in December 2018. Over the past two years, the financial arm of Nam Kwong Group, a Chinese state-owned conglomerate in Macau, has issued 37 debt products as of late 2020 for a total value of over MOP100 billion. Though it pales in comparison to the debt issuance of HK$4.18 trillion in the nearby Hong Kong market in 2019, MOX stressed in a statement the Macau bond market was just in the beginning stage. “The volume of debt issuance in Macau has totalled over MOP100 billion in the past two years, while the amount of residents’ investments on foreign equities have also been on a hike, showcasing the demand for debt products from overseas investors and residents,” says Lao Pun Lap, chairperson of the Macau Association of Economic Sciences. “The development of the [Macau] bond market could serve as a new financing channel for Mainland Chinese private firms and Macau enterprises… amid the quantitative easing measures in western countries.” 

Regarding the location of the Macau Stock Exchange, the economist, who headed the now-defunct official think tank, Policy Research Office, says, “Comparative research should be carried out to see whether [the bourse] should be established in Macau and Hengqin to better serve the Greater Bay Area and the country.” 

●       Capital Control and Openness 

Indeed, one of the main reasons behind Beijing’s plan to set up the Macau Stock Exchange is to provide more avenues for the mainland firms to raise capital, in line with what Mr. He, the Guangdong provincial official, said when outlining the “Chinese Nasdaq” ambition. There were about 45,000 high-tech state-level firms in Guangdong, among which only 600 were listed, the provincial official stated at the time, showcasing the bourses in the mainland at the moment could not satisfy the financing demand of the mainland enterprises. 

While the Macau Stock Exchange could be a solution, its potential location in Hengqin might impose hurdles. “The biggest problem to be resolved now [for the Macau bourse to be installed in the nearby island] concerns the free capital flow, as there are restrictions for foreign capital to invest in the financial market in the Mainland,” says Mr. Tong, the academic from the Macau Institute of Management. “A stock exchange is only possible [in Hengqin] if there are innovative policies to be implemented in the area.” 

“There is no restriction for foreign currencies in Macau, which also facilitates capital mobility, laying down a good foundation for developing the financial industry,” Mr. Lao highlights, echoing the same sentiment of Mr. Tong. “No mainland cities could boast [this advantage] at the moment.” 

●       Legal framework  

While Macau has advantages over Hengqin in openness, the SAR lags behind in software. Shortly after taking over the position as the Chief Executive in late 2019, Ho Iat Seng noted that there were still a lot of blank spaces to be filled in legislation to facilitate the development of the city as a financial hub. A recent research report by the City University of Macau on the Macau financial market also highlights that the biggest challenge for Macau to set up a bourse is the shortage of a comprehensive legal framework for the sector. 

Addressing the progress of the formulation of more financial regulations, Secretary for Administration and Justice Andre Cheong Weng Chon noted in late November in the Legislative Assembly that the government is studying to come up with a set of financial sector-related laws, namely rules on funds, bonds, and trust funds. Given the lack of local expertise, the official added they had commissioned mainland Chinese entities to prepare a drafted framework. 

“Besides the legal framework, there is still a lack of finance infrastructure in the city like settlement systems and others, which possibly take time to mature,” says Mr. Tong. Should the stock exchange be built in the Guangdong-Macau demonstration zone in Hengqin, the rules and infrastructure could be in place more quickly given the zone’s nature of innovations, he adds. 

●       Land, infrastructure and human resources 

“The development of the financial industry has to be complemented with information technology… and it’s difficult to find land in Macau to develop some financial infrastructure and data centres,” says legislator-cum-legal scholar Chan Wa Keong. As the land size of Hengqin, which is over 106 square kilometres, triples the size of Macau, the lawmaker believes there will be more land resources on the island for the start-up of the bourse and other ancillary facilities. 

The policies for human resources, especially talent importation, could also be “more flexible” should the stock exchange be located in Hengqin, Mr. Chan notes. “To complement the development of the financial industry, adjustment has to be made in the current labour importation system [of Macau],… which could take a long time,” he adds. The latest Policy Address has foreshadowed the Macau government would formulate an overall strategy of talent development here, alongside more open and scientific policies for labour importation, but there are still few details what changes the authorities could bring amid the mounting pressure from local workers. 


“The central government could officially authorise the authorities of Guangdong and Macau to co-develop the demonstration zone [in Hengqin], stating clearly the Macau government will lead the project and part of the revenue from the zone will be counted as the GDP [gross domestic product] of Macau,” says legislator Chan Wa Keong 

●       Politics, GDP and more 

But it might also take time for both sides to work along for the project should the bourse be located in Hengqin. “The past track record of the cooperation between Guangdong and Macau shows that it is not a smooth path for any cross-border collaborative projects,” says a local political figure, who declined to be identified. “For a project like the Macau Stock Exchange, it will definitely require a heavy-handed approach from the central government to intervene in every step to get the project rolling due to the vested interests involved in both sides [both Guangdong and Macau].” 

Questions remain regarding how both sides could collaborate and how it could benefit Macau for the project to be located in Hengqin. “Will this be the case like the Hengqin campus of the University of Macau, where the city has jurisdictions over the entire area? But will the Guangdong government and public consent to give up the land and rights?” the figure asks. “If both Macau and Guangdong have equal say over the project, how could this facilitate the economic diversifications of Macau when most of the activities are done beyond the city?” 

The source adds: “A stock exchange is a significant landmark and milestone for any place — should the Macau bourse be located in Hengqin the Macau government has a lot of work to convince the public and the local financial industry why this decision is made.” 

In the perspective of the lawmaker, Mr. Chan, some of these questions could be resolved with the Guangdong-Macau demonstration zone. “The central government could officially authorise the authorities of Guangdong and Macau to co-develop the demonstration zone [in Hengqin], stating clearly the Macau government will lead the project and part of the revenue from the zone will be counted as the GDP [gross domestic product] of Macau,” he says.  

“A brand new and innovative approach should be adopted to develop this demonstration zone… [exploring] new opportunities for the development of Macau,” he adds.