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CLSA Investors’ Forum “Focus on Hong Kong”

CLSA Investors’ Forum “Focus on Hong Kong”. Joseph Yam Chief Executive Hong Kong Monetary Authority 14 May 2001. Hong Kong as an International Financial Centre. What Hong Kong has to offer. Financial Products Financial Infrastructure. Financial Products.

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CLSA Investors’ Forum “Focus on Hong Kong”

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  1. CLSA Investors’ Forum“Focus on Hong Kong” Joseph Yam Chief Executive Hong Kong Monetary Authority 14 May 2001

  2. Hong Kong as an International Financial Centre

  3. What Hong Kong has to offer • Financial Products • Financial Infrastructure

  4. Financial Products • Financial Instruments- cash, debt and equity, and their derivatives • Currency Denomination- HKD, USD, RMB and other forex, and their derivatives • International Product Profile- products originating from major economies in different time zones

  5. Financial Infrastructure • Platforms for Transactions- exchange, OTC, cyberspace, etc. • Settlement- RTGS, DvP (HKD products), PvP (HKD vs USD) • Custody- integrated custodian services with international linkages

  6. Issues of Interest to Investors • Currency risk • Banking safety • Market liquidity • Opportunities relating to the Mainland

  7. Currency • Currency Board System • Events in 1998 • The Two-Corner Solution • Asian Monetary Co-operation

  8. Currency (HK$ per US$) 8.5 8.0 7.5 Mexican Crisis 7.0 (Jan 95) World Stock Market Crash ERM Turmoil 6.5 (Oct 87) (Sep 92) Asian Financial Turmoil (July 97) 6.0 Closure of BCC (HK) (Summer 91) 5.5 Floating Exchange 5.0 Rate System Fixed Exchange Rate System 4.5 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01

  9. Exchange rate (LHS) HK - US interest rate differential (1 month) (RHS) 2001 2000 1998 1999 Currency

  10. Banking System 199819992000 Growth of operating profit - 32.9% +15.2% +37.8% before tax (yoy % change) Capital Adequacy Ratio 18.5% 18.7% 17.9% Liquidity Ratio 45.7% 44.5% 51.4%

  11. Banking System 99 98 00

  12. Banking Reforms • Interest Rate Deregulation • Deposit Insurance Scheme • Risk-based Supervision • Commercial Credit Reference Agency • Consolidation

  13. Market Liquidity Equities 2000 HK US Singapore Japan Market Capitalisation (as percentage of GDP) 382 160 247 71 Turnover (as percentage of market capitalisation) 246 317 108 57

  14. Market Liquidity Debt (HK$ bn) Total outstanding amount of HK$ debt instruments 500 450 400 350 300 250 200 150 100 50 0 Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar 1996 1997 1998 1999 2000 2001

  15. Market Liquidity Banking 2000 HK US Singapore Japan Asset Size (as percentage of GDP) 159 524 62 216

  16. Mainland Opportunities Intermediation Customers Currency Location 2 2 3 4 RMB Mainland Banking Resident - individuals Resident - corporates Forex Overseas Debt Non-resident - individuals Equity Non-resident - corporates

  17. Mainland Opportunities Stages of Policy Change • Existing framework • After WTO • Full convertibility

  18. CLSA Investors’ Forum“Focus on Hong Kong” Joseph Yam Chief Executive Hong Kong Monetary Authority 14 May 2001

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