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FSTB Chief Highlights HK Strengths

by Mary Swire, LawAndTaxNews.com, Hong Kong

02 December 2009


In a speech to the Daiwa Investment Conference 2009, Professor KC Chan, Hong Kong’s Secretary for Financial Services and the Treasury, restated the jurisdiction's fundamental strengths as an offshore financial centre.

Firstly, he stated that Hong Kong was fortunate in being situated in the heart of Asia and halfway between New York and London, while at the same time being "a city in China".

With the continued growth of China’s economy, and with its large and increasingly affluent population and a high savings rate, the Mainland market has provided Hong Kong with immense opportunities to expand the scope of financial activities and service money coming out of the Mainland, Professor Chan noted.

As at end-October 2009, he disclosed, 1,297 companies were listed on Hong Kong Exchanges and Clearing Limited (HKEx), and the market capitalisation of the stock market ranked seventh in the world. In terms of initial public offerings in the first 10 months of this year, Hong Kong ranked first globally.

He emphasized, however, that HKEx would still look to improve, and revealed that it has been examining ongoing initiatives which would streamline the listing process for issuers but would not compromise the quality of its listed companies. Those initiatives have focused on shortening the listing timetable, lowering costs and reducing the paperwork burden.

Hong Kong, he said, is also committed to broadening the source of listed companies on its exchange. Since the publication by HKEx of a joint statement with the Securities and Futures Commission to clarify listing requirements for overseas companies, HKEx's listing committee has accepted a number of new jurisdictions as the issuers' place of incorporation.

They include Australia, Canada, Cyprus, Germany, Jersey, Luxembourg, Singapore and the UK, in addition to the four jurisdictions already recognised under the Listing Rules (Hong Kong, the Chinese Mainland, Bermuda and the Cayman Islands). HKEx will continue to admit new jurisdictions as an issuer's place of incorporation, as appropriate.

He disclosed that HKEx has also launched consultations on proposals to strengthen Hong Kong's role as an important listing centre for mineral and exploration companies.

The proposals are aimed at updating Hong Kong's regulatory framework for such companies, bringing the framework in line with international best practice and ensuring that investors will be provided with information that is both material and reliable.

Furthermore, in consultation with the Mainland authorities, he revealed that Hong Kong has been taking new opportunities arising from the rise and liberalization of renminbi (RMB) business. Hong Kong feels best placed to serve as a testing ground for the development of RMB business outside the Mainland, he stated.

Hong Kong has therefore been working to build a market offering a broad range of RMB products and services, and the FSTB chief announced that he was pleased to report that significant progress has been made.

The RMB trade settlement pilot scheme, which commenced operation in July, is offering eligible enterprises an option to settle trade transactions in RMB. In addition, Hong Kong banks with a presence on the Mainland are allowed to raise RMB by issuing RMB bonds in Hong Kong, and there was also the successful launch in September this year by China of its inaugural RMB sovereign bond issue.

Professor Chan reiterated that the measures taken to broaden the scope of the issuance of RMB bonds in Hong Kong can be seen as an encouraging start to Hong Kong's development into a dynamic offshore RMB centre for China. He expressed confidence that Hong Kong will be able to elaborate on the current choices of RMB-related investment products as the pace of the liberalization of the RMB hastens.

A comprehensive report in our Intelligence Report series giving a country-by-country analysis of offshore investment funds, stock exchanges and trusts, with an analysis of the US QI regime, is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report9.asp

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