Hong Kong Makes Hay
Tuesday, March 09, 2010

Secretary for Financial Services & the Treasury Professor KC Chan said in New York at the weekend that Hong Kong's favourable policies for the offshore fund industry reinforces its position as Asia's premier asset management centre.

Speaking at the New York Stock Exchange during his five-day visit to the US and Canada, Prof Chan observed that Hong Kong, with its world class financial market, can benefit from the huge demand for wealth and asset management services in mainland China.

He said the rise and liberalization of renminbi (RMB) business continues to offer new opportunities and entrenches Hong Kong's position as the Mainland's offshore renminbi centre.

"Given our cultural affinities, robust risk management systems and close economic ties with the Mainland, Hong Kong is best placed to serve as a testing ground for the development of renminbi business outside the Mainland," he said.

Chan added that the government has been working with Mainland authorities, financial regulators and the industry to attract more renminbi liquidity to Hong Kong and build a market offering a broad range of products and services.　

"There has been significant progress in the development of renminbi business in Hong Kong. The renminbi trade settlement pilot scheme, which commenced operation last July, is offering enterprises an option to settle trade transactions in the Mainland currency. We believe the settlement volume will continue to increase," he said.

"We are confident we will see a broad range of renminbi related investment products being offered in Hong Kong, keeping up with the pace of the liberalization of the currency," Chan added.

While no financial centre has esacped the ravages of the global financial crisis completey unscathed, Hong Kong, thanks to its position as China's financial engine, has emerged from the crisis in a strong position.

"Given the Central Government’s measures to enhance the role of the RMB in international trade and finance, our cultural affinities, strong risk management systems and close economic ties with the Mainland are key contributing factors that can position Hong Kong as a robust and reliable testing ground for the development of RMB business outside the Mainland,"Hong Kong Stock Exchange chairman Ronald Joseph Acrulli wrote in his statement on HKEx's 2009 results. "We are fully supportive of the Hong Kong government’s effort to elaborate on the current choices of RMB-related investment product in alignment with the progressing liberalization of the RMB."

Last week, the Hong Kong Stock Exchange (HKEx) announced that it delivered "solid" returns to its shareholders in 2009 despite the impact of the financial crisis. HKEx revenue and other income fell by 7% to about HKD7bn (USD902m) and the profit attributable to shareholders declined by 8% to HKD4.7bn as compared to that for 2008. 

In 2009, the average daily turnover value on the Stock Exchange decreased about 14% to HKD62.3bn, and the average daily turnover of derivatives contracts and stock options contracts dropped marginally to 206,458 contracts and 15% to 191,676 contracts respectively.

While Acrulli expects that the global economic recovery will continue slowly, Asia, he said, is currently "rebounding from the depths of the global crisis" driven by robust growth in China.

"China has been the engine of economic growth in Asia, and its influence in the global arena is increasing," Acrulli noted. "The International Monetary Fund forecast that the Mainland’s gross domestic product will continue growing between 9.5 and 10% annually in the coming 5 years."

China's ongoing need for capital to fund its growth and development means that Hong Kong remains in a healthy position to oil the wheels of Chinese commerce, he said.

"Our continuous Mainland focus resulted in the majority of listing applicants coming from the Mainland to raise capital funds for their development and growth," Acrulli observed. "In 2009, funds raised by Mainland enterprises accounted for over 82% of IPO funds raised. Although there is no certainty regarding the timing of new issues, the pipeline of new IPO applicants appears promising for 2010."