Question

According to Thomson Reuters data, Hong Kong replaced New York in 2015 as the world's biggest initial public offering market by the amount of funds raised. The funds raised in Hong Kong accounted for more than a third of the total amount for the entire Asia Pacific region.

(a) Why Hong Kong has been able to attract foreign firms to raise funds here? Critically discuss four main attractions possessed by Hong Kong.

(b) Though Hong Kong is currently the biggest initial public offering market, its leading position is not secure. Critically evaluate four key challenges faced by Hong Kong.

Answer 1

(a) Why Hong Kong has been able to attract foreign firms to raise funds here? Critically discuss four main attractions possessed by Hong Kong. -

1. Hong Kong is the freest economy in the word. When we talk about free economy we need to think key parameters such as limited government intervention, rules or laws of the country, open markets, regulatory efficiency etc. In order to attract foreign investments in home country these factors are very important and presence of such factors which are critical for growth of any business will ensure attraction of for foreign investments.
2. Ease of doing business is another factor which helps attracting foreign firms in home country. Laudable position in ease of doing business survey helps home country to become a hub for foreign investors.
3. Strategic location of a country is another factor will improves the possibility of attracting foreign investors and / or firms in a home country. Strategically located markets helps the investors to connect with other markets in short span of time and without much delay.
4. Tax laws, simple tax system, simple immigration policies to attract foreign talent and / or foreign investors also helps a lot attracting foreign firms to raise the funds

(b) Though Hong Kong is currently the biggest initial public offering market, its leading position is not secure. Critically evaluate four key challenges faced by Hong Kong.

1. Economic factors need to be reviewed in order to ensure decent flow of foreign investments in home country. Low economic growth can hamper such foreign investment inflow.
2. Shift of consumer base can be another challenge making country’s position delicate in the market. If consumer preferences changes then accordingly demand coming from potential consumers will also change and it will affect country’s position in market.
3. Country needs to consider social factors as well to ensure new skills are inculcated into population so that they would be ready face challenges with proper solution making country’s position at high in the market.
4. Increasing ability of workforce also remain one of the key challenges in the country. Increased ability of workforce to meet the demand of potential consumers in market will ensure decent position of the country in market globally.