Hong Kong is well-positioned to forge closer financial ties with economies across Southeast Asia. The latest is with Malaysia, a win-win arrangement signalling similar pacts to follow. Given the vast pools of capital, stock exchange operators in both places are ready to join hands in developing a range of services and products, from dual listings and exchange-traded funds (ETFs) to Islamic finance.

Hong Kong offers plenty of opportunities for Malaysia, a growing economy with a population of about 36.4 million, to access mainland Chinese capital. At the same time, developing expertise in Islamic finance will also help the city reach out to more Muslim countries, especially those with vast wealth but now needing to recover from the war in the Middle East. Malaysia’s Islamic capital market is worth roughly 2.79 trillion ringgit (US$706 billion), representing 63 per cent of the country’s total capital market.

An immediate product of the new collaboration will be an ETF tracking large-cap stocks in Hong Kong and Malaysia. It’s a good offer providing diversification for investors interested in regional exposure; mainland punters can also access it via the ETF Connect scheme.

Dual listings are another area for cooperation, enabling firms from both sides to list in the other’s bourse. About 30 Malaysian companies are listed in Hong Kong, accounting for almost a third of 103 Southeast Asian issuers. The biggest player is the Guoco Group, which is under the Malaysian conglomerate Hong Leong Group.

Malaysian companies listed in their own country can now seek a secondary listing in Hong Kong. Hong Kong Exchanges and Clearing already has agreements with 20 other exchanges worldwide for the dual listings of stocks and bonds, and more are expected.

Arguably the world’s most dynamic economic region, Asia is producing the next generation of enterprises in cutting-edge fields such as green energy, digital banks and advanced manufacturing. The region currently faces headwinds amid the war in the Middle East and the ensuing energy supply shock, which is increasing inflation and weakening external balances. But the energy shock is expected to be temporary, and the International Monetary Fund is hopeful about Asia’s resilience. China and India are expected to contribute 70 per cent of the region’s growth.