HK Aspires to Be Leading Investment Window in Asia

Hong Kong is determined to be the leading investment window in Asia by developing the debt markets of Hong Kong and the region as a whole, said a Hong Kong Special Administrative Region (SAR) senior official on Friday.

Addressing at Joint Financial Markets Luncheon on Friday, the HKSAR's Financial Secretary, Donald Tsang, said an important step has been taken to develop a multi-currency capital market in Hong Kong.

"The first stage will be the introduction of a U.S. Dollar-denominated capital market, " said Tsang.

He added that in order to make that possible, a reliable and efficient U.S. dollar clearing system would be introduced in phases beginning next month. This would facilitate transactions of U.S.-dollar denominated securities, including debt securities, in Hong Kong to be settled within the Asian time zone. The system would help reduce settlement risk and increase settlement efficiency.

"When the system is fully operational, hopefully by the end of the year, we will be able to build a new capital market that offers local and global investors access to a full range of U.S.- dollar denominated products. This will make Hong Kong the leading investment window in Asia."

Tsang noted that the mainland of China was playing a positive role as part of this development. The Ministry of Finance has been actively tapping U.S.-dollar funding from the world debt market. Eight U.S.-dollar issues have been listed on the Hong Kong Stock Exchange in parallel with other major markets.

"This is a welcome development and we would like to see the Mainland making even more active use of Hong Kong as the center for these U.S.-dollar funds. In fact, the cost-effectiveness of such fund-raising activity by the Mainland should increase with the introduction of the U.S.-dollar clearing system," said the Financial Secretary.

Over the past decade, Hong Kong has put in place the infrastructure and provided various initiatives to kick start market development. The debt market in Hong Kong has grown considerably, particularly in the past few years. The total outstanding public and private sector debt issues jumped 60 percent from 279 billion HK dollars (about 35.77 billion U.S. dollars) at the end of 1996 to more than 440 billion HK dollars ( about 56.41 billion U.S. dollars) today.

"But more needs to be done if we are to develop a mature debt market in Hong Kong. As part of this push, we are strengthening our efforts to attract companies outside Hong Kong, especially Mainland enterprises, to issue debt papers. This will increase the breadth and depth of our market," he said.

"We need to establish links with more central clearing and depository systems outside Hong Kong. So far, direct clearing, settlement and payment linkages have been established with Australia, New Zealand and South Korea, as well as Cedel and Euroclear. But we have to build on this excellent basis and reach out further to other jurisdictions.

"Our overall program is designed to keep us ahead of our competitors and to further enhance our claim as Asia's premier financial center," Tsang said.



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