The Monetary Authority of Macao is studying the feasibility of launching a securities market in Macau that might include a yuan-based stock exchange. But economists say the idea is an old one, and it is not any more likely to work today than when it was first raised decades ago.
The study comes as the government is considering new tactics in the drive to diversify Macau’s economy.
Diversification strategies in Macau have yielded generally poor results in recent years, notwithstanding a two-year contraction in gaming revenues. Since 2015, gambling and junket activities have directly accounted for approximately half of Macau’s gross domestic product. Other notable sectors in Macau – including the real estate, hotel, restaurant and retail sectors, which together account for more than one-fifth of the economy – are heavily dependent on the city’s casinos.
The next approach appears to be a reexamination of the potential for financial services. The city has started to develop financial leasing, wealth management and yuan clearing financial services, partly with a view to facilitating trade between China and Portuguese-speaking countries.
“Macau has a very strong position in promoting itself as the financial services platform between the mainland and Portuguese-speaking countries (PSCs),” the Monetary Authority of Macao said. “In this connection, the MSAR Government is seizing the [opportunity to] contact and communicate with the PSCs, driving the development of featured finance in Macau on all fronts – including financial leasing, RMB clearing between China and PSCs, and wealth management.”
Local economist Albano Martins, a former researcher at the Monetary Authority, shrugged off the proposal as mostly “theoretical.”
He said that the idea has been studied many times before, but that “there can be no securities market without proper accounting of companies.”
“Most companies in Macau don’t have accounting up to international standards,” he told the Times. “The majority of firms doing business with the Portuguese-speaking countries are also in this situation.”
“The proposal is possible,” he said, “but it will take at least 10 years [to become a reality].”
Representatives of financial institutions have been reluctant to comment since the news was made public earlier this month.
One anonymous source at a Chinese state-owned financial institution told Reuters that “plans to develop Macau’s financial markets are gimmicks,” citing a lack of necessary infrastructure to support such a market.
“BNU will always welcome all the government strategies to develop the financial environment of Macau, and will get involved in all projects that it is asked to,” Banco Nacional Ultramarino (BNU) Chief Executive Officer Carlos Cid Alvares told the Times when asked whether the institution was interested in the project.
BNU has played an important role in developing financial services in Macau since it opened its first branch in the city in 1902 and started to issue pataca bank notes. Representatives of the bank have stressed the need to meet the demand for financial services toward Macau’s transformation into a platform for trade and cooperation with Portuguese-speaking countries.
The Hong Kong Stock Exchange declined to comment on the proposal and what it might mean for financial markets in Hong Kong and Shenzhen.
Even the Monetary Authority of Macao cautioned the need to “keep an open mind about the direction of such studies.”
One obstacle is the shadow cast by nearby Hong Kong and Shenzhen. The cities’ financial services sectors are mature and attract professionals from all over the world.
“It is not really relevant to compare Macau’s market to Hong Kong,” said Kwan Fung, an assistant professor at the University of Macau’s Department of Economics, who disagrees with the notion that the two cities will find themselves in competition.
“The role of Macau is to bridge China and Portuguese-speaking countries. [Therefore, any stock market] will probably focus on fundraising for those interested in doing business and trade with the Portuguese-speaking countries.”
Instead, “a human resources shortage is one of the difficulties that we now face,” said Kwan. “Sourcing [talented personnel] could be achieved, step by step, but it will take a long time.”
“Right now, the government does not accept talented foreigners as they think that Macau locals already know everything,” agreed Martins. Even as, in his opinion, the talent shortage is not the most pressing problem, attitudes to foreign labor will need to change in order for a financial services sector to become viable in Macau, he said.