110. The second pillar industry is financial services. The World Economic Forum ranked Hong Kong first in its Financial Development Index announced in late 2011. Overtaking the US and the UK, Hong Kong becomes the first Asian financial centre to top the rankings. We shall keep up our efforts in maintaining Hong Kong’s edge in financial services.
111. Last year, Hong Kong further consolidated its position as an offshore renminbi (RMB) business centre. Since last August, cross-border trade settlement in RMB has been expanded to cover the entire nation. RMB trade settlement conducted through Hong Kong amounted to RMB 1,900 billion in 2011, which was five times the value of the whole year of 2010.
112. Hong Kong became the first place outside the Mainland to develop an RMB bond market. As at the end of last year, there were 116 RMB bond issuances with a total value approaching RMB 180 billion. As at the end of 2011, RMB deposits in Hong Kong amounted to nearly RMB 590 billion, representing an increase of nearly 90 per cent compared with the RMB 310 billion as at the end of 2010.
113. Last year, the Central Government announced a package of measures to support financial development in Hong Kong, of which eight are beneficial to the development of RMB business, such as allowing the use of RMB for direct investments in the Mainland and permitting investments in Mainland’s equity and bond markets through the RMB Qualified Foreign Institutional Investors (RQFII) Scheme. These measures have been implemented. Regarding the RQFII, the first batch of products was approved by the Securities and Futures Commission in December last year for public subscription.
114. As regards strengthening our role as a fund-raising platform, Hong Kong was ranked first worldwide for the third consecutive year in terms of the total amount of funds raised through initial public offering, which amounted to US$33 billion in 2011. Enterprises from the US, Switzerland, Kazakhstan and Italy came last year to list here for the first time.
115. On asset management, Hong Kong’s combined fund management business set another record high of over HK$10 trillion by the end of 2010, representing a year-on-year growth of almost 19 per cent. Two-thirds of the assets of the fund management business in Hong Kong were sourced from non-Hong Kong investors, indicating that Hong Kong was a preferred location for overseas fund managers to conduct asset management business.
116. We shall continue to consolidate our position as a global platform to raise capital. In collaboration with the Hong Kong Exchanges and Clearing Limited (HKEx), we shall strive to attract more overseas companies, especially those from emerging markets, to list in Hong Kong. While maintaining a high standard of regulation, the HKEx is also studying ways to further facilitate listing or secondary listing of overseas companies in Hong Kong, and accept companies incorporated in other jurisdictions to apply to list here.
117. On the development of Islamic finance, we are close to finalising the draft amendments to the relevant legislation with a view to levelling the playing field for common types of Islamic bonds (i.e. sukuk) vis-à-vis their conventional counterparts as far as profits tax, property tax and stamp duty are concerned. We plan to conduct market consultation in the first quarter of this year to gauge market views on our legislative proposals, and introduce the amendment bill into this Council in the next legislative session.
118. With regard to the bond market, the iBond we launched last year was well received. It has helped enhance retail investors’ understanding of and interest in bond investment, thereby fostering the development of the retail bond market in Hong Kong. It has also provided investors with another option for coping with inflation. As the interest rates in the market continue to stay at low levels, the attractiveness of conventional fixed-rate retail bonds to investors has been limited. To further promote the sustainable development of the retail bond market, another issuance of the iBond is a preferable option in the short term. I have to point out that this is a special measure taken at this time having regard to the current market situation. In the long run, we need to leave room for developing other kinds of bonds, including conventional fixed-rate bonds, for the development of a more mature bond market in Hong Kong.
119. We shall launch a further issuance of iBond worth not more than HK$10 billion under the Government Bond Programme. The iBond, with a maturity of three years, will target Hong Kong residents. Interest will be paid to bond holders once every six months at a rate linked to the inflation of the last half-year period. The HKMA will announce relevant details as soon as possible.