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Following is a speech by the Secretary for Financial Services and the Treasury, Mr Frederick Ma, at the CFA Charter Award Ceremony and Forecast Dinner 2006 today (November 18):
Karl, Dr Jan Squires, distinguished guests, ladies and gentlemen,
It gives me great pleasure to join you all at this CFA Charter Award Ceremony and Forecast Dinner. First and foremost, may I congratulate those of you who have successfully completed your CFA examinations this year. And for others who are awarded CFA Charters this evening, I would also like to congratulate you on this achievement and honour. I am sure this globally recognised and respected qualification marks the beginning of a most fulfilling career for all of you.
I understand that some market experts will share their forecasts on market indexes and other developments in the investment industry this evening. It would be an opportune time for me to give you an update of the latest developments of Hong Kong's stock market and asset management business. I hope this would help you make your own forecasts for the coming year.
Hong Kong's Stock Market
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The Hang Sang Index reached 19,000 points for the first time in history early this month. With the successful listing of the largest Mainland bank, the Industrial and Commercial Bank of China (ICBC) on the Hong Kong Stock Exchange, the total market capitalisation of our stock market reached HK$11.4 trillion at the end of October, which stands for a 40% increase over the past 10 months. According to market estimates, our stock market is likely to move one rank higher to 7th worldwide in terms of market capitalisation, surpassing Deutsche Borse - the German Stock Exchange very soon. The turnover of our stock market this year has also been very active. The average daily turnover in the first 10 months this year has exceeded HK$30 billion, compared with just HK$18 billion in 2005, and HK$16 billion in 2004.
The listing of ICBC in Hong Kong did not only carry our stock market to new heights, it is indeed a milestone IPO - the listing model it adopted is the first ever dual listing of A-shares and H-shares concurrently in the Mainland and Hong Kong. This has fully demonstrated investors' confidence in our regulatory regime and the efficiency of our financial infrastructure. I believe "A + H" listing is going to be a new trend for Mainland enterprises seeking listings.
Talking about Hong Kong's capital raising capability, I am sure most of you have read about Michael Bloomberg's recent article in the Wall Street Journal, which mentioned his comments on how Hong Kong is competing with London and New York as an international capital formation centre. With the mega listings of Mainland enterprises in Hong Kong this year, we have already surpassed New York as World Number 2 in terms of IPO funds raised this year. Since 1993, when the first H-share company was listed on our exchange, we have so far raised nearly HK$1,400 billion for Mainland enterprises. Out of 1,160 companies listed in Hong Kong at the end of October, 355 are Mainland enterprises, accounting for 31% of the total. Altogether, Mainland enterprises have provided about 46% of the total market capitalisation. Getting listed in Hong Kong does not only provide a Mainland enterprise with efficient access to capital from international investors, but would also help enhance the company's corporate governance. With more and more state-owned enterprises undergoing restructuring, I believe Hong Kong will continue to act as an important springboard for Mainland enterprises to enter the world market. I look forward to seeing more and more Mainland enterprises joining our stock market in the coming year.
The facts and figures which I have just highlighted have showcased the standing of our stock market in the world. Nevertheless, there is no room for complacency. Maintaining a competitive edge for Hong Kong in the fast changing global financial landscape is of utmost importance. In this connection, the Government has continuously sought to enhance and consolidate our position as an international financial centre. For instance, some of you may notice that the existing Listing Rules of the Hong Kong Stock Exchange are silent on the listing requirements for companies incorporated outside certain specified jurisdictions. Due to such regulatory uncertainties, some overseas companies may not be keen to apply for listing on our Stock Exchange. To improve the situation, the regulators are now studying how to amend the Listing Rules to facilitate well-established and qualified foreign enterprises from different parts of the world to list in Hong Kong.
Hong Kong as a major asset management centre
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Let me now turn to asset management. I am glad to share with you that the outlook of our asset management industry is very favourable and promising. According to the Fund Management Activities Survey conducted by the Securities and Futures Commission, Hong Kong's combined fund management business have reached HK$4,526 billion last year, which stands for an increase of 25% compared with 2004. The fact that 63% of funds were sourced from overseas investors provides a clear illustration of the attractiveness of our financial markets to international fund managers. And with almost 80% of the assets managed in Hong Kong invested in Asia last year, our expertise in managing investments in Asia is also widely recognised.
The Government will continue our efforts to promote Hong Kong's asset management industry, with a view to enhancing Hong Kong's position as a major asset management centre in Asia. We are committed to providing a conducive environment for its further development. To this end, we have abolished estate duty and exempted offshore funds from profit tax. These tax concessions create a win-win situation for Hong Kong's asset management business as well as for foreign investors who are looking for effective investment means and professional asset management services.
With Hong Kong's prime location at the heart of Asia and the doorstep of Mainland, we are well placed to tap into the huge amount of savings in the region and strengthen our position as a leading asset management centre. The fact that Hong Kong has become an attractive destination for investment capital is further proven when the United Nations World Investment Report 2006 published last month has once again ranked Hong Kong as the second most preferred destination for foreign investment in Asia (after the Mainland), for the 5th consecutive year. The report also reflects Hong Kong's unique position as the two-way platform for overseas investors accessing the Mainland and rest of the region - and for Mainland companies to expand in the international markets. Indeed, the rapid economic growth in the Mainland has resulted in greater accumulation of personal savings, thereby creating a huge demand for investment and wealth management services. This has presented immense opportunities for the further development of Hong Kong's asset management business. I am confident that Hong Kong has the potential to take a larger share of the region's asset management market, which has tremendous prospect for further growth.
The CFA profession
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The success of Hong Kong's financial markets is no coincidence or sheer luck. It is a combination of factors which bring us to where we are today, to name a few - the rule of law, a robust and effective regulatory regime, absence of capital and foreign exchange control and being the world's freest economy. Above all, our people are the key to our success. Hong Kong is blessed with a broad and deep pool of financial talents, which include many of you sitting here today. According to a survey conducted by the SFC in September this year, we have the 4th largest number of CFAs in the world after the US, Canada and the UK. We also have the largest number of CFAs in Asia. In fact, I understand that the number of CFAs in Hong Kong has increased by 15-folds, from about 200 in 1995 to around 3,000 at present. In this connection, I would like to congratulate the HKSFA for doing an excellent job in grooming financial talents for Hong Kong since its establishment in 1992. I count on the continued support of HKSFA in promoting excellence in the CFA profession, and in our endeavours to further develop Hong Kong as an International Financial Centre.
Concluding remarks
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Ladies and gentlemen, with our unique strengths, coupled with the strenuous efforts made by the Government in promoting the development of our financial markets, I am confident that Hong Kong will continue to be a leading international financial centre in Asia by any measures in the years to come. Thank you very much.
Ends/Saturday, November 18, 2006
Issued at HKT 20:30
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