To back up this assertion, he quoted figures which showed that the number of hedge funds in Asia had increased substantially from 160 in 2001 to about 1,240 in the first half of 2007.

Total assets under management had also increased by nine times, from US$16 billion to about US$167 billion during the same period, Professor Chan revealed.

He went on to quote AsiaHedge as revealing that:

"Hong Kong got the largest number of new Asia Pacific hedge funds launched in 2006 as well as in the first half of 2007, ahead of Singapore, Japan and Australia."

It has been suggested that overseas hedge-fund managers, especially the larger ones, prefer setting up in Hong Kong because of its proximity to Mainland China and Northern Asia.

In addition to this, it has also been suggested that a low and simple tax regime combined with a stable currency with no foreign-exchange control and a free economy are all additional qualities which attract investors to the Hong Kong market.

Detailing tax measures put in place by the Hong Kong authorities to increase the jurisdiction's attractiveness to the sector, Professor Chan explained that:

"We have adopted various tax measures to promote the growth of the industry. Since 2006, offshore funds have been exempted from profits tax. This brings us in line with other major financial centres such as New York and London. More importantly, the measure helps attract new offshore funds to come to Hong Kong and encourages existing offshore funds to continue to invest in Hong Kong."

"We have also abolished estate duty since last year to encourage local and overseas investors to invest in Hong Kong. To further enhance our competitiveness, the Chief Executive announced in his Policy Address in October this year that our profits tax will be reduced from 17.5% to 16.5% in 2008-09. Given our already low and simple tax regime, these measures will further enhance our attractiveness to overseas fund managers."