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The Hong Kong Financial Markets

The Hong Kong Financial Markets. Professor Stephen Y.L. Cheung Department of Economics and Finance City University of Hong Kong. Content. 1. Hong Kong Financial Market Securities Market Banking 2. Currency Board System 3. Economic Situation of Hong Kong. Hong Kong Financial Market.

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The Hong Kong Financial Markets

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  1. The Hong Kong Financial Markets Professor Stephen Y.L. Cheung Department of Economics and Finance City University of Hong Kong

  2. Content 1. Hong Kong Financial Market • Securities Market • Banking 2. Currency Board System 3. Economic Situation of Hong Kong

  3. Hong Kong Financial Market A. Securities Market • Hong Kong Exchange and Clearing Co. • The Stock Exchange of Hong Kong • The Hong Kong Futures Exchange • The Hong Kong Clearing Ltd.

  4. Hong Kong Financial Market • Securities Market • Objectives of Merger • Cost efficiency • New financial innovations • Reduce overlapping of business • Market-oriented • Reduce overlapping of regulating structure

  5. Hong Kong Financial Market

  6. 1. Hong Kong Financial Market

  7. 1. Hong Kong Financial Market

  8. Hong Kong Financial Market • Securities Market • New Financial Product • Growth Enterprise Market (GEM)

  9. Growth Enterprise Market – Background • Established in November 1999 • Intention of becoming a centre of science and technology • Independent and alternative market, not a second tier market to the main board • For enterprises that have good business idea and growth potential, but unable to obtain a listing in the Main Broad.

  10. Performance of Growth Enterprise Market

  11. S&P / HKEx GEM Market

  12. Characteristics of GEM (I) • Target at growth companies, big and small • Reasonable prospect of significantly developing or expanding their business, such as telecom-related and Chinese IT firms • Non-telecom-related: Wah Sang Gas Holdings, Far Eastern Polychem Industries

  13. Characteristics of GEM (II) • Higher degree of investors awareness of risk • Risky market - more likelihood of business failure and insolvency • Future performance is less predictable • No proven profitable track record • No obligation to forecast future profitability • Target for sophisticated investors • Risk Disclosure Statement

  14. Characteristics of GEM (III) • Disclosure-based regime • Buyer-beware philosophy • Greater, more frequent and timely disclosure • Quarterly, half yearly and annual accounts • Half yearly comparison of the business progress with the business plan for the first 2 financial years • Sponsor scheme • Act as an adviser to assist the issuer to comply with the GEM Listing Rules • The principal channel of communication between the Exchange and the issuer

  15. Characteristics of the GEM (IV) • Strong corporate governance requirements • Reduce the risk of malpractice • Companies properly fulfill the listing obligations • Measures: • Appointment of a qualified accountant to supervise the finance and accounting functions • Designating an executive director as the compliance officer • 2 independent directors • An audit committee

  16. Hong Kong Financial Market • Banking • Interest rate agreement in 1964 • Three-tier system • Licensed banks • Restricted licensed banks • Deposit taking companies

  17. Hong Kong Financial Market • Difference • Minimum capital requirement • Ability to accept saving deposit • Restriction on maturity and amount • Deposit rate

  18. Hong Kong Financial Market • Reforms • Interest rate agreement abolished (July 01) • Deposit insurance scheme • Credit reference agency • Improvement on Corporate Governance • Transparency

  19. Currency Board System • Established in Oct. 1983 1 US dollar = 7.8 HK dollar • US dollars back the HK dollars

  20. Currency Board System • Advantages • Confidence • No exchange rate risk • Stable exchange rate

  21. Currency Board System • Disadvantages • Competitiveness • Macro-economic adjustment • US dollar appreciate → export↓ • US dollar depreciate → inflation↑

  22. Hong Kong Economic Situation • The GDP for 2003 is forecast to increase by 1.5% in real term • The unemployment rate is 8.7% • The inflation rate is -3.1%

  23. 3. Hong Kong Economic Situation Problems • Economic transformation • No confident in future • Weak consumption market • Asset market deflation in property market and stock market

  24. 4. Hong Kong Economic Situation- Future Development • Fund raising centre for Mainland enterprise • QDII • RMB off-shore centre

  25. Thank you

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