52
FINANCIAL SYSTEM AND ECONOMY
certificates of deposit, started in 1980, became more frequent in 1981 when the total value of outstanding US dollar certificates of deposit issued by banks and deposit-taking com- panies in Hong Kong rose from the equivalent of $892 million at the end of 1980 to $2,735 million at the end of 1981.
Stock Market
The Stock Exchanges Unification Ordinance was brought into operation on February 1, 1981 and all members of the four existing stock exchanges were invited to apply for membership of the Exchange Company, The Stock Exchange of Hong Kong Limited. To be eligible for membership, applicants were required to demonstrate that their financial position was such as to enable them to comply with the capital requirements under the Unification Ordinance. By the year-end 241 people had been admitted as members of the Exchange Company and three as associate members. The ordinance provides that the unified exchange will come into operation not later than February 1, 1984.
In the meantime, trading continues on the existing exchanges. The turnover for 1981 was: Far East Exchange, $50,804.4 million; Hong Kong Stock Exchange, $17,450.8 million; Kam Ngan Stock Exchange, $37,545.4 million; and Kowloon Stock Exchange, $185.3 million. The total of $105,985.9 million was an increase of 10.8 per cent over the 1980 figure of $95,684.70 million. The Hang Seng Index stood at 1 405.82 on December 31, 1981 (July 31, 1964=100), down from 1 473.59 on December 31, 1980.
Staff of the office of the Commissioner for Securities continued to monitor financial transactions concerning securities, and to scrutinise unusual movements in individual prices. One of the functions of the office is to investigate possible instances of insider dealing in securities and to establish whether there is a prima facie case to be examined by the Insider Dealing Tribunal. In July 1980, the tribunal started formal hearings of an inquiry into possible insider dealings in the shares of Hutchison Whampoa Ltd. at some time prior to September 26, 1979.
On January 26, 1981 the Securities Commission, upon the recommendation of the Committee on Takeovers and Mergers, announced that there should be introduced into the Hong Kong Code on Takeovers and Mergers the concept of a 'trigger-point' at which the acquisition of a percentage of the share capital of a public company would oblige the acquirer to make a general offer to the other shareholders of the company. The commission concluded that the appropriate percentage for this purpose would be 35 per cent of the issued share capital, and that the acquisition of shares between 35 per cent and 50
per cent should be limited to three per cent in any 12 month period if the acquirer was not to be obliged to make a general offer. After further consultation with the industry, the three per cent was raised to five per cent in early July. A revised edition of the code was introduced in October. In 1981, there were 17 instances of completed takeovers and four further instances of minority shareholders being bought out.
In order to give a wider representation of the different interests involved in the securities industry, the Securities (Amendment) Ordinance 1981 was enacted in July, 1981 to remove the restriction on the number of appointed members on the Securities Commission.
During 1981, the Commissioner for Securities continued to administer the Hong Kong Code on Unit Trusts and Mutual Funds. The number of unit trusts and mutual funds which received authorisation under the Securities Ordinance was 12, while no unit trusts authorised prior to the establishment of the code had their authorisation withdrawn. In the light of operational experience, a revised Hong Kong Code on Unit Trusts and Mutual