A research report released by Guotai Haitong Securities Co., Ltd. indicates that the total business opportunities for securities firms in Hong Kong are projected to surpass HK$350 billion by 2028. The firm expresses optimism about the increasing penetration of mainland-backed brokerages in the Hong Kong market, which is expected to accelerate the growth of their international operations.

The report estimates that the international business space for Hong Kong brokerages will reach HK$354.4 billion by 2028, representing a compound annual growth rate (CAGR) of 12% from 2025 to 2028. Furthermore, if mainland brokerages' international subsidiaries achieve a 47% market share, their corresponding international business revenue could see a CAGR of 31% during the same period, with net profit projected to grow at a CAGR of 50%. In terms of investment recommendations, the report favors the growth prospects of leading securities firms, recommending those with advanced international business layouts.

Where the expansive opportunities lie

Looking ahead to 2028, the report forecasts that the business space for securities firms in Hong Kong will exceed HK$350 billion. Serving as the primary gateway for mainland brokerages to conduct international business, the scope of their operations in Hong Kong has been continuously widening in recent years. The research house is optimistic that the rising penetration rate of mainland brokerages in Hong Kong will fuel the accelerated expansion of their international business. The projected HK$354.4 billion international business space by 2028 translates to a 12% CAGR from 2025 to 2028. If mainland firms' international arms capture a 47% market share, it would correspond to a 31% CAGR in international business revenue and a 50% CAGR in net profit over the same forecast period.

Asset-light ventures thriving in a robust market

In the brokerage segment, recent years have seen a resurgence in Hong Kong equity market turnover, growing demand for overseas trading, and an expansion of product offerings, all of which have propelled rapid growth. The market space for Hong Kong brokerage services is projected to reach HK$53.5 billion by 2028, marking a 6% CAGR from 2025 to 2028. However, the market share of mainland brokerages' overseas subsidiaries in Hong Kong stock trading has fluctuated between 5% and 7% in recent years, without establishing a sustained upward trend.

Regarding investment banking, mainland brokerages have solidified their leading position in Hong Kong's IPO market, commanding a market share exceeding 60%. They are also progressively expanding into refinancing and Asian bond underwriting, where their current shares stand at 34% and 11%, respectively. Given expectations that the high level of equity financing activity in Hong Kong will persist, the market space for investment banking is expected to hit HK$22.8 billion by 2028, also reflecting a 6% CAGR from 2025 to 2028.

In the asset management sector, as demand for global asset allocation among domestic and international investors is unleashed, Hong Kong's stature as a cross-border wealth management hub remains robust. The market space for Hong Kong brokerage asset management is forecast to reach HK$63.5 billion by 2028, a 9% CAGR from 2025 to 2028. Currently, the Hong Kong asset and wealth management landscape is dominated by large asset management institutions, with mainland entities holding a mere 9% market share.

Balance sheet expansion and business diversification driving heavy-asset growth

In credit services, buoyed by the recent market recovery in Hong Kong and improved risk appetite, the credit market space is projected to reach HK$28.1 billion by 2028. Mainland brokerages are shifting their Hong Kong credit business from contraction to expansion, with their current margin financing market share at 28%, leaving ample room for increase.

For exchange-traded derivatives, product expansion and active trading are set to drive the market space to HK$9.5 billion by 2028, a 6% CAGR from 2025 to 2028. While leading mainland brokerages have already established a presence in market-making for certain products, their issuance market share for callable bull/bear contracts and derivative warrants stands at 10% and 25%, respectively.

In the OTC derivatives arena, growing demand for overseas asset allocation is expected to fuel market expansion. The report projects that cross-border OTC derivatives business space for mainland brokerages will reach HK$26.7 billion, while the overall OTC derivatives revenue space in Hong Kong is estimated at HK$62.9 billion, reflecting an 11% CAGR from 2025 to 2028. Mainland firms are primarily concentrating on cross-border businesses, with their penetration in Hong Kong's local OTC derivatives market remaining relatively low.

Within FICC operations, Hong Kong's bond market offers considerable scale, and ongoing connectivity schemes and RMB internationalization are generating sustained trading opportunities in bonds and foreign exchange. The FICC market space is projected to hit HK$20.6 billion by 2028, an 8% CAGR from 2025 to 2028. Currently, mainland brokerages' involvement in this area is limited, with related business models still under exploration.

Top picks for international expansion

The report concludes that the international business landscape presents a vast blue ocean, with leading securities firms poised for superior growth. It recommends CITIC Securities, GF Securities, China International Capital Corporation Limited (H shares), and Huatai Securities for their advanced international business layouts.

Key risks include potential errors in calculation assumptions, significant volatility in capital markets, and geopolitical risks.