Hong Kong as an international financial center - PowerPoint PPT Presentation

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Hong Kong as an international financial center


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Title: Hong Kong as an international financial center

Hong Kong as an international financial center
Linked Exchange Rate in Hong Kong
  • 100 backup
  • Linked with USD
  • Have two exchange system a. Linked Exchange

  • b. Market Exchange Rate
  • Linked Exchange Rate Fixed 1 USD 7.8 HKD
  • Issue
    Bank Foreign Exchange Fund
  • Market Exchange Rate Demand / Supply
  • Exchange
    Branch, Bank
  • Low
    floating rate

Linked Exchange Rate
Why Hong Kong choose Linked Exchange Rate System
  • USD ( High Liquidity, High Credibility , High
  • Financial Crisis (1983)--- Political Factor
  • High Stability (Hong Kong was a Colony)
  • Mainly focusing on service industry
  • ( Less affection from unfavorable balance of
  • Price of Land is very High
  • Maintain the regulation of financial system

Automatic Stabilizer
  • Sell HKD ( Large amount)
  • Supply of HKD? Interest Rate ?
  • HKMA Buy HKD back
  • USD Supply ?
  • Interest Rate of HKD?
  • (even higher then USD)
  • Demand of HKD ? Exchange Rate ?

  • Cannot reflect the economic performance
  • Monetary policy become very inelastic
  • Less Competitive
  • Balance of payment
  • Re-export
  • Logistic
  • Exchange Rate will ceaselessly drop until it
    reach EQ

  • Average inflation rate 1983-1986
  • Hong Kong 7.79
  • USA 3.35
  • Space of HKD to be appreciated was very large

Financial Crisis (1998)
  • Countries among Asia region depreciate their
    currency to adapt the economic
  • down turn
  • Highly affect Hong Kong re-export industry
  • 1999 s gross export volume dropped 12.7,
    reaching 13979 billions

Competition from Singapore
  • Another financial centre in the same region
  • Operate in the same market segment
  • Being geographically close to each other
  • Belonging to the same time zone

  • HK and Singapore have been rivals for the title
    of the second largest financial centre in the
    Asia-Pacific region (the largest is Tokyo)
  • Singapores long term objective
  • ?To replace HK after 1997 as the second largest
    IFC in the region

Similarities between HK and Singapore
  • Both are free ports
  • Both are small open economies
  • Both have a background of British rule
  • Both use the English legal system
  • Both use the English language
  • ?the challenge from Singapore is much more
    immediate and direct

HK vs Singapore
  • The Monetary Authority of Singapore( MAS) was
    established in 1971
  • Abolition of the interest rate cartel among banks
    was completed in 1975
  • The Hong Kong Monetary Authority (HKMA) was
    established in 1993
  • Only recently in HK

HK vs Singapore
  • Singapores second board, SESDAQ, was established
    in 1987
  • MAS launched the revamped government securities
    market in 1987 as one of the measures to develop
    a domestic bond market
  • More than a decade of HKs GEM
  • HK started its Exchange Fund bills programme in

HK vs Singapore
  • HKs exchange may be switching to longer trading
    hours and lower brokerage fees
  • Singapore implemented these long ago
  • Their propaganda emphasize the same thing
  • -time zone advantage
  • -excellent infrastructure
  • -political stability
  • -a strong and stable currency

  • Facing the challenge from Singapore,
  • However, HK keeps its competitive power
  • Can be proved by three released reports
  • Economic Freedom of the World 2005 Annual Report
  • The 2005 Index of Economic Freedom
  • The Capital Access Index 2005

Economic Freedom of the World 2005 Annual Report
  • HK has consecutively retained its top ranking in
    the Economic Freedom of the World for 9 years
  • Scoring 8.7 out of 10
  • Closely followed by Singapores 8.5
  • New Zealand, Switzerland and the US tied for
    third with ratings of 8.2
  • HK was also voted the best area of freedom to
    trade internationally and regulation of credit,
    labour and business and second in size of

The 2005 Index of Economic Freedom
  • HK has consecutively ranked the worlds freest
    economy, scoring 1.35
  • again ,the second is Singapore, scoring 1.6
  • The Luxembourg ranked the third, scoring 1.63

The Capital Access Index 2005
  • The Top 10 markets (with 2004 ranking)
  • 1. United Kingdom (3) 2. Hong Kong (1)3.
    Singapore (2)4. United States (6)5. Sweden
    (4)6. Denmark (9)7. Australia (7)8. Norway
    (13)9. Finland (5)10. (tie) Canada (10)10.
    (tie) Ireland (11)

  • It seems that HK is still leading Singapore at
    the moment
  • Singapore may follow HK closely enough to
    overtake HK someday !

Enchancing our Position as an IFC
  • Hong Kong ranked 1st in Asia and 3rd in the world
    last year in terms of capital raised,
  • with total Initial Public Offering (IPO) and
    post-IPO equity funds reaching some 265 billion,
  • out-performing the London and Tokyo Stock

  • 2. 2004
  • a total of 304 Mainland enterprises
  • compare with 2003
  • ? 22
  • ? Over ¼ of the total no of listed companies
  • ? 30 of total stock market capitalisation
  • ? half of our total market turnover

  1. Market capitalisation also hit a new high of
    about 6,650 billion, nearly 50 above the
    pre-reunification level
  2. gt 70 of their trading is conducted in Hong Kong

Reinforcing our Renminbi Business
  • 1st place outside the Mainland to conduct
    personal Renminbi (RMB) business, including
  • deposit-taking,
  • currency exchange,
  • remittances
  • credit cards
  • ?total of 38 Hong Kong retail banks
  • ? first three services

Three strategic directions will be indicated
  • exploring the diversification of the RMB assets
    and liabilities of Hong Kong banks particularly
    on the liability side, diversification to
    non-residents and non-individuals of deposits now
    restricted to resident individuals.

Three strategic directions will be indicated
  • exploring the provision of appropriate RMB
    banking services for trade and other current
    account transactions between Hong Kong and the

Three strategic directions will be indicated
  • exploring the feasibility of establishing a RMB
    debt issuance mechanism in Hong Kong.

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Promoting the Bond Market
  • e.g. 5 tunnels and 1 bridges.
  • a 6 billion securitisation bond was issued
  • the largest-ever securitisation bond offering in
    Hong Kong
  • 1st made available to retail investors.

  • e.g. In July last year, the Government launched
    its 20 billion global bond offering.
  • This was the largest multi-tranche offering from
    the region, available to both retail and
    institutional investors.
  • the largest subscription and issue amounts for a
    retail bond.

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