Market improvements key for HK - Finance - Brief Article

Business Asia, June, 2002

Continuing infrastructure improvements will be a key plank in Hong Kong's attempts to remain a leading Asian financial centre, Hong Kong Special Administrative Region Secretary for Financial Services Stephen Ip says.

Ip, who was in Australia recently to take part in the Asia Australia Investment Conference and Expo, says that Hong Kong will continue to position itself at the top of the financial tree in Asia--which means improving the finance sector's framework and streamlining procedures.

"(We want) to position ourselves as the highest quality market in the region with the highest potential to grow. Quality attracts quality. Liquidity begets liquidity," he said.

"Our strategy is quite simple--to let the market function at its best. The public sector's role is to provide the framework within which that can happen by simplifying procedures, encouraging flexibility and innovation, setting clear rules that are administered fairly and firmly, and by developing efficient, safe and reliable hard and soft infrastructure."

Changes

Ip says Hong Kong has been busy with the task of improving their financial markets, starting with the demutualisation and merger of their two exchanges and their three clearing houses in March 2000.

"Parallel efforts have been made to increase the depth and breadth of the market. I chair a task force on financial market development to look at ways to increase the user friendliness of our regime, and facilitate the development of new products and services including banking, debt market, equity, insurance and the fund industry," Ip said.

"In Hong Kong we have taken a conscious step to fully review the debt issuing mechanism and simplify procedures for issuing retail debt. Archaic prospectus requirements are being eliminated without affecting the quality of disclosure to investors. On the equity side, we have streamlined issuance procedures for derivative warrants and lowered administrative fees and charges. The banking industry has also undergone liberalisation and reform.

"Just a few months ago, our legislature passed a new Securities and Futures Ordinance that will put our regulatory regime on par with the best international standards."

Keeping ahead

Hong Kong faces increasing competition for regional financial prominence from the likes of Sydney, Singapore, and even Shanghai. Ip, however, says Hong Kong still has the runs on the board and can easily claim to be No1 in the region.

"I do not believe Hong Kong and Shanghai will compete with another, but rather they will complement one another," he said. "China's market over the next 10 or 20 years will become so big that Hong Kong and Shanghai will become the centres of their own massive regional economies."

While the relationship with Singapore and Sydney will always be competitive in some extent, Ip says there are plenty of areas where economies like Australia and Hong Kong can cooperate.

"I think it is always useful to share experiences with fellow regulators, because there are many similarities between Hong Kong and Australia," he said.

One avenue of cooperation unveiled by Ip was a new agreement on the mutual recognition of mutual fund managers from Australia and Hong Kong. "This means that Australian fund managers licensed by ASIC to operate schemes which meet the requirements of our Unit Trusts Code will be able to manage schemes authorised by our Securities and Futures Commission," Ip said.

"While on the one hand we compete with each other, on the other hand we cooperate with each other as well. If we can achieve a win-win situation--like with the funds management industry, then why not? In the end it creates a bigger market."