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00:00 (upbeat music)
00:02 - We have a very esteemed panel here in front of me
00:07 to talk about this.
00:08 Anita Moe, the CEO of the HangSend Index Company,
00:12 please join us on the stage.
00:13 Mateus Buczler, the Chief Strategy and Transformation Officer
00:18 of Abu Dhabi Securities Exchange
00:21 and the anchor from CNBC Arabia, Hussein Syed.
00:25 So welcome to the stage.
00:26 A big round of applause, ladies and gentlemen,
00:28 for our next panel, Bull Bears, Falcons and Tigers.
00:32 (upbeat music)
00:35 - Well, thank you, Sarah, very much for this introduction.
00:53 And as you just mentioned, Sarah, now that 2023,
00:57 we have seen so many ups and downs.
01:00 Bulls were there, bears were there, tigers, falcons,
01:05 everybody was participating in this market.
01:08 And it's interesting to see what are regulators doing,
01:13 exchanges, indices, providers, and all that stuff.
01:20 I think we're short on time,
01:21 so I'm gonna cut the introduction
01:23 and start directly to the point.
01:25 And Mateus and Anita, I would like you to give me
01:30 an overview of what has been happening,
01:33 whether from an exchange perspective
01:36 or an index provider over the past few years,
01:41 how things have been developing.
01:43 And let me start with you, Mateus,
01:45 from a local perspective.
01:47 - Thank you, thank you very much, Hussein.
01:50 So yeah, it has been a very interesting and dynamic year.
01:55 What we see here locally is a tremendous demand
01:59 for the Middle East, for IPOs, for investments.
02:03 We have seen a clear shift.
02:05 So just looked at the league tables this morning for IPOs,
02:09 and I think it tells a very strong story.
02:11 40% of all the IPOs this year were actually in China,
02:15 where Anita will talk about.
02:19 30% were in the US and Canada.
02:22 And now, to probably surprise most people here,
02:26 11% were in the Middle East.
02:28 And out of these 11%, a total of 7% was here in Abu Dhabi.
02:33 So what we see on the back of this and driving this
02:38 is really the vision of connecting Abu Dhabi
02:43 to the international financial markets.
02:45 It's about driving liquidity, connecting investors,
02:50 and obviously have a regulatory framework
02:52 as well as a technology backbone
02:54 that makes it easy to access Abu Dhabi,
02:58 and ultimately also telling the story
03:00 of the opportunity that is here and is very real indeed.
03:04 - Interesting. Anita.
03:06 - So this is something really happened early this month,
03:10 is we already got obtained the data license
03:12 from the Beijing Stock Exchange.
03:14 So all of you know that Beijing Stock Exchange
03:16 is the third exchange in China.
03:20 And nowadays, Hang Seng Indexes
03:22 is the only one offshore index compiler
03:24 that can provide the comprehensive coverage
03:27 for the China exchange data.
03:28 Because we understand that the institutional investors
03:31 from the overseas perspective,
03:33 it's a little bit complicated to understand China
03:35 because we have so many exchanges,
03:37 we have different class of shares,
03:39 but we hope that what we are trying to do can help.
03:42 And I think the magic, okay,
03:44 in terms of why the power of having
03:46 such comprehensive coverage can eventually be amplified
03:51 because of exactly the role of Hong Kong
03:53 as the super connector.
03:55 So probably you know that 10 years ago,
03:57 Hong Kong start to have the Stock Connect program,
04:00 which overseas investors can get in more easier
04:04 to access the Asia market.
04:05 And on the other hand, the mainland investors
04:07 also get easier to come out
04:09 and then to invest in the Hong Kong shares.
04:11 And the latest development again
04:13 is something happened in July last year,
04:15 they have the ETF Connect.
04:16 Or you can see that they actually put the ETF
04:20 under the Stock Connect.
04:21 So that means the international investors
04:23 can easier to get access to more Asia ETF listing onshore.
04:28 And on the other hand, mainland investors
04:30 can also be more easy to get access
04:33 to the Hong Kong listed ETF.
04:34 Indeed, it's actually echoing your keyword, connect.
04:37 So actually this is helping the two markets to connect
04:40 and also to help the overall market trading and liquidity.
04:43 Interesting, I think I've been covering this
04:45 in my news show at CNBC with the latest development Anita.
04:50 And another thing I was covering also on CNBC
04:53 is the growth of the IPOs that we have seen in Abu Dhabi
04:57 over the past two years.
04:59 But the big question was for,
05:01 I think that this is not my question,
05:03 but for so many investors,
05:05 can we sustain this amount of IPOs
05:08 that have been coming to ADX?
05:12 I think it's a great question.
05:14 And maybe I take a quick step back and reflect on the IPOs.
05:18 So first and foremost, to put things into perspective,
05:22 the IPOs we had over the last two years
05:24 were on average 50 times oversubscribed.
05:28 They were trading 30% up on the first day of trading
05:31 and continue to trade on that level.
05:34 And we see huge demand from international investors
05:37 to participate.
05:38 And the reason why the performance is so good
05:43 is because the underlying assets
05:46 that the government, the leadership,
05:49 and part of the sovereign wealth funds brings here
05:52 is the quality of the asset on a wide range.
05:55 So to answer your question,
05:57 I think we are very positive and bullish
06:01 about the years to come.
06:03 We have a strong pipeline.
06:05 And in order to keep the momentum going,
06:09 it is to come back to Anita's point,
06:11 a key point is and will be to connect ADX,
06:16 Abu Dhabi Capital Market, to the world,
06:19 to other global investors
06:22 in order to keep that strong demand.
06:24 We know that on the supply side,
06:27 there is a continuous strong pipeline coming in Abu Dhabi.
06:32 Just on this point,
06:33 does it mean that we're going to see more of dual listings?
06:36 Yes, we will see dual listings for sure.
06:41 You might have seen very recently
06:43 that we entered an agreement a month ago,
06:47 one and a half months ago with Boney Mellon.
06:49 Boney Mellon is the largest custodian in the world.
06:52 This gives us the ability to pretty much
06:55 anywhere in the world have a dual listing.
06:58 We see very strong demand,
07:00 particularly from the East,
07:03 to dual list and tap the capital markets.
07:06 And since we have now the technology in place,
07:08 we will push for this.
07:11 Awesome.
07:12 Anita, back to you, and this time on FinTech.
07:16 I think things have been moving so fast.
07:20 Over the past two weeks,
07:21 we were very busy covering OpenAI and Chad GPT
07:24 and what have been happening at the firm over there.
07:27 But now we want to know how are you implementing
07:30 and innovating your core engineer at the Hang Seng Indices?
07:35 I think in short, I would say technology nowadays is king.
07:39 So I think in the past few years,
07:41 even that's the pandemic time,
07:43 we never stopped investing in our IT
07:45 and also never stopped investing in our infrastructure.
07:48 First thing is that actually this year,
07:50 we started to have the cloud-first strategy.
07:54 That means we move our index system as well
07:56 to the cloud-native environment.
07:58 And the other thing is in terms of the database,
08:01 we actually also trying to use the cloud technology
08:04 to consolidate the scattered database into one database
08:08 to lower the cost, enhance the efficiency and everything.
08:13 And other than the cloud, we actually also using the AI,
08:17 especially we use the NLP,
08:19 that is the Natural Language Processing Algorithm technology.
08:23 So this technology is very powerful
08:25 and also helpful to the index company,
08:27 especially when we need to do the thematic index.
08:31 So probably share with you some figures,
08:32 is that in terms of the main name ETF market,
08:35 they have more than 800 ETFs already.
08:38 And the key trend that what they are doing
08:40 in terms of the product development
08:42 is to have the thematic index.
08:44 So once we have the NLP, this kind of AI technology,
08:47 we can actually quicker to identify the theme
08:50 so that you have the market
08:52 to provide the better thematic solutions
08:54 to help their product development.
08:56 And the other area is that we also work closely
08:59 with the fintech, say for example,
09:01 for the smart beta indexes,
09:02 we need a lot of the core model
09:04 to have this kind of the backtesting technology.
09:07 So I think we also work very closely with the fintech.
09:10 Nowadays, I think finance company
09:12 need to have a lot of the technology elements.
09:15 Otherwise, I think the business model
09:16 may not be sustainable.
09:18 - Awesome.
09:19 Mateusz, so I need to just touch on ETFs.
09:23 And I think Abu Dhabi exchange
09:25 have also been keen in launching ETFs.
09:28 I would like to know how are these ETFs helping
09:32 or bringing in more maybe foreign direct investments
09:36 or liquidity into the market,
09:38 along with other products that you may be using as well
09:42 nowadays in order to allow investors
09:45 probably to hedge their portfolios
09:48 or to do something that were not possible before.
09:51 - Yes. Oh, thank you.
09:53 So ETF is an important part of our strategy
09:58 to broaden and deepen the market.
10:00 ETF goes together with a lot of other initiatives,
10:03 be it derivatives, stock lending, borrowing,
10:06 algo trading, and other initiatives.
10:10 Now, the ETF has been a great success.
10:13 44% of all ETFs in the GCC are listed on ADX.
10:18 We're also the most liquid.
10:19 What we have seen as well is,
10:22 because we are not as an advanced market as Hong Kong,
10:26 that key around ETF is education.
10:29 It is part of our role as an exchange
10:32 to educate the market participants.
10:34 How does an ETF work?
10:36 How to best use it?
10:38 But also to tell the story,
10:39 importantly, to the retail investors.
10:41 And we see further products being pushed next year,
10:46 but always, always together with strong educational aspect
10:51 around what these products mean and how to use them.
10:55 - Fantastic.
10:56 And Anita, when we come to regulatory issues,
11:01 China have been opening the market for so many years now,
11:04 and every year we learn about the new regulations.
11:08 What's next now?
11:09 - I think the Hong Kong market
11:11 and the China market is very dynamic.
11:14 They keep on evolving, actually.
11:16 I think echoing what you're asking,
11:18 I think three perspective I would like to share.
11:20 The first one is about the listing regimes.
11:23 So indeed, the Hong Kong exchange
11:24 keep on evolving their listing regimes.
11:27 I think they welcome nowadays for foreign companies,
11:30 secondary listed companies,
11:32 waiter voting rights, pre-revenue biotech,
11:34 so on and so forth.
11:35 So you can see they keep on evolving
11:37 to attract more IPO coming to Hong Kong.
11:39 So this is the listing regimes.
11:41 And the other one is about the Redmond B internationalization.
11:45 Actually, last week, the Hong Kong regulator, SFC,
11:47 announced that the China treasury-borne futures contract
11:52 is coming to Hong Kong,
11:53 and Hong Kong EX is working on that for now.
11:56 So this is one way to help the Redmond B internationalization.
11:59 And the other one is mid this year,
12:01 Hong Kong EX also launched
12:03 the kind of the Hong Kong dollar-Redmond B deal counter,
12:06 which means one stock listing in Hong Kong
12:08 can have two counter.
12:09 One is Hong Kong dollar, and one is Redmond B counter.
12:12 So this is still in the very early stage.
12:14 The Redmond B counter's liquidity is yet to build,
12:17 but I think that if the direction is correct,
12:20 then I think it takes time to build the liquidity,
12:22 and when the market is ready,
12:24 we can also launch these kind of indexes
12:26 to support the Redmond B internationalization.
12:29 And the last one I want to say is that in Hong Kong,
12:31 in terms of all the development,
12:33 connectivity is something very important.
12:36 So I think nowadays in Hong Kong,
12:37 we have the Stock Connect,
12:38 we have the ETF Connect, BORN Connect, Swap Connect,
12:41 actually various kind of Connect.
12:43 So for this kind of Connect program,
12:45 we actually, what we want to help
12:47 is to increase the accessibility of different market.
12:50 And the index compiler will try to play a role here
12:53 to facilitate all the Connects can be very efficient,
12:56 and also to help the expand the investor base.
12:59 I think this is something
13:00 the listed company wants the most.
13:02 - Awesome.
13:03 You know, I had so many other questions to bring,
13:07 but as I can see here, our time is over.
13:09 So maybe I'll take it to my CNBC show next
13:12 to have to continue this conversation,
13:13 but thank you very much, Anita, Mateus.
13:16 - Thank you. - Thank you so much.
13:16 - Thank you. - Thank you.
13:17 - Thank you. - Thank you.
13:18 - Thank you very much.
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