48
THE ECONOMY
centres in Europe and North America are closed. Third, the continuous requirements of local industry and commerce in relation to their transactions with the rest of the world have ensured active trading in the local currency.
There is also a well-developed interbank money market, in which wholesale Hong Kong dollar deposits are traded among the deposit-taking institutions. Trading in short-term financial instruments is, however, less than in other centres, partly because the government does not issue such instruments and is not engaged in open market operations in them. Nevertheless, markets in locally-issued certificates of deposit and commercial paper have been growing in significance.
The stock market provides an important source of capital to local enterprises and has continued to attract significant interest from overseas investors. The year 1986 was an important year for the securities industry. The Stock Exchange of Hong Kong Limited, formed by merging the former Far East Stock Exchange, Hong Kong Stock Exchange, Kam Ngan Stock Exchange and Kowloon Stock Exchange, commenced trading on April 2, 1986 after 10 years of planning and preparation. With its modern computerised trading system and efficient management, this new unified stock exchange has opened up a new era in share dealings in Hong Kong. Its formal opening took place on October 6, and was attended by representatives of many overseas stock exchanges.
At the end of 1986, the Stock Exchange had 151 corporate members and 708 individual members, who trade as brokers in partnership with other members of the Stock Exchange, or with non-members. A total of 253 public companies had their securities listed on the Stock Exchange. Their total market capitalisation by the end of the year was $419 billion.
The Hong Kong Commodity Exchange Limited, established in 1977 and licensed as the sole company permitted to operate an exchange trading in futures contracts, was reorgan- ised and renamed as the Hong Kong Futures Exchange Limited in 1985. The Futures Exchange has five markets offering contracts in cotton (but no trading in cotton has taken place in recent years), sugar, soyabeans, gold, and more recently, the Hang Seng Index Futures. Trading in the Hang Seng Index Futures contracts, which started on May 6, 1986, has rapidly become a very active market. It allows investors to hedge their share portfolios against adverse price fluctuations. It is now the most active stock index futures market outside the United States. At the end of 1986, the Futures Exchange had 106 members.
The Chinese Gold and Silver Exchange Society operates a gold bullion market which is among the most active in the world. Gold traded through the society is of 99 per cent fineness, and is measured in taels (a Chinese measure of weight, of approximately 1.2 troy ounces) and quoted in Hong Kong dollars. After allowing for exchange rate fluctuations, prices follow closely those in the major markets in London, Zurich and New York. Membership of the society remains closed at 193 member firms.
There is another active gold market in Hong Kong, in which the main participants are the major international gold trading companies. It is commonly known as the loco-London gold market. Trading in this market has grown significantly in recent years. Dealings principally take place in US dollars per troy ounce of gold of 99.95 per cent fineness, with delivery in London.
The Commissioner for Securities and Commodities Trading exercises prudential supervi- sion of the securities and commodities futures industry in Hong Kong by administering the Securities Ordinance, the Protection of Investors Ordinance and the Commodities Trading Ordinance.
The Securities Ordinance provides a regulatory framework within which the Stock Exchange operates, requiring registration of dealers, dealing partnerships, investment