What is the HKIC and why is it so important for Hong Kong's economic development?

The government-owned Hong Kong Investment Corporation (HKIC), which manages HK$62 billion (US$8 billion) of funds, has embarked on its investment journey, forming partnerships with key players to foster innovation and technology in the city.

The HKIC on June 24 struck a deal with Beijing-based Biomap - a biotechnology firm launched by Chinese internet giant Baidu's founder Robin Li Yanhong - to set up an accelerator called BioMap InnoHub to support more than 50 early stage research projects in life sciences.

This came a week after the fund's first partnership with home-grown artificial intelligence (AI) unicorn SmartMore, enlisting the firm to use Hong Kong as a development base and to make the city's stock market its first choice if it goes public.

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More deals will be made by the HKIC every quarter, CEO Clara Chan Ka-chai said in an interview earlier in June.

Here is what you need to know about the fund:

Clara Chan, CEO of Hong Kong Investment Corp. Photo: Enoch Yiu alt=Clara Chan, CEO of Hong Kong Investment Corp. Photo: Enoch Yiu>

What is the Hong Kong Investment Corporation?

Chief Executive John Lee Ka-chiu in his 2022 policy address announced the establishment of the HKIC using the government's reserves to boost Hong Kong's economy and industries.

The HKIC manages four funds. The aim of the HK$30 billion Co-Investment Fund is to attract companies to the city through investments in their businesses; the HK$32 billion Hong Kong Growth Portfolio includes a HK$5 billion Strategic Tech Fund and a HK$5 billion Greater Bay Area Investment Fund. The focus of the latter is on investment opportunities in the development area, which comprises Hong Kong, Macau and nine mainland Chinese cities in the southern Guangdong province.

It will soon have a fifth fund formed by pooling funds from successful applicants of the government's Capital Investment Entrant Scheme (CIES) launched in March. Commonly known as the investment ­migration scheme, CIES offers a faster route to Hong Kong residency for people who invest at least HK$30 million in the stock market, bonds or non-residential property. The government has approved 40 of the 251 CIES applications received by the end of May.

The government's mandate requires 10 per cent of each investment, or HK$3 million, to be pooled together for the HKIC to invest in start-ups. The finer details of the fund will be announced later this year, Chan said.

Chan said HKIC has a dual mandate: one is to invest in companies that have the potential to deliver decent returns for the government, and the other is to leverage the capital to encourage technology companies to use Hong Kong as their development base.

Chan and her team, which will eventually number 50, have identified three major investment themes. The first is hardware technologies such as AI, semiconductors and RISC-V. The second is biotech, mainly development of drugs and medical diagnostics, and the third is new energy and green technologies.

While the HKIC is a Hong Kong government-owned investment arm, the fund's sole aim is not just about generating returns, according to Chan.

"We aim to use the government funds to support home-grown start-ups and to attract international technology and innovative companies to use Hong Kong as a hub," she said.

Sovereign funds such as Singapore Temasek and others from South Korea, Norway, the United Arab Emirates and Australia invest almost entirely outside their own countries, according to Benjamin Quinlan, CEO and managing partner of Quinlan & Associates, a Hong Kong-based consultancy. The sovereign funds also invest in a range of assets such as bonds and private equity.

"The HKIC's goals are primarily policy-oriented, with a strong focus on supporting the domestic market," he said. "The emphasis is on projects that can enhance the city's economic growth and to support start-ups in designated sectors."

Financial Secretary Paul Chan (centre) with SmartMore founder and chairman Jia Jiaya (left) and HKIC CEO Clara Chan at the strategic partnership signing ceremony on June 12. Photo: Sun Yeung alt=Financial Secretary Paul Chan (centre) with SmartMore founder and chairman Jia Jiaya (left) and HKIC CEO Clara Chan at the strategic partnership signing ceremony on June 12. Photo: Sun Yeung>

The partnership with SmartMore is a case in point. It requires the start-up to opt for the Hong Kong stock exchange as its first choice when it decides to go public in future.

Quinlan said the HKIC has some similarities with ADQ, the investment arm of the Abu Dhabi government, which has a mandate to invest domestically to accelerate the transformation of the UAE into a globally competitive economy.

Singapore's Temasek and Norway's Norges Bank Investment Management make their investments based on the recommendations of their in-house teams and invest in a wide range of assets to generate returns and spread their risks.

Market observers welcomed the HKIC's investment approach.

The HKIC is establishing itself as a key player in Hong Kong's financial ecosystem by focusing on substantial and impactful investments, said David Chang, founder and CEO of MindWorks, a start-up focused venture-capital company.

"The HKIC is poised to play a critical role in promoting Hong Kong as a technology and green finance hub," he added.

Tom Chan Pak-lam, permanent honorary president of the Institute of Securities Dealers, believes the HKIC's investments will benefit the local stock market.

"The many investments and partnerships of HKIC will encourage more technology companies to list in Hong Kong," he said. "This will enhance the city's role as an international financial centre."

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

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