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FINANCIAL AND MONETARY AFFAIRS
year of assessment commencing April 1, 1989, are expected to help improve turnover in this market.
The stock market constitutes another important source of capital for local enterprises, attracting interest from both local and overseas investors. At the end of 1989, 298 public companies, with a total market capitalisation of $605 billion, were listed on the Hong Kong Stock Exchange. This made it the fourth-largest stock market in Asia, after Japan, Taiwan and South Korea. The average daily turnover in 1989 was $1,216 million.
The Hong Kong Futures Exchange offers contracts in sugar, soyabeans, gold and Hang Seng Index futures. A new contract in interest rate futures is being developed.
The Stock Exchange and Futures Exchange are making special efforts to establish themselves as effective self-regulatory organisations, the front-line regulators in a two-tier regulatory regime as recommended by the Securities Review Committee.
The Stock Exchange introduced new domestic listing rules in December 1989 to improve the regulation of listing activities and the supervision of listed companies in the discharge of their continuing duties to shareholders. The Hong Kong Securities Clearing Company was formed in May 1989 to implement and operate the proposed central clearing system for securities transactions.
Following the reconstitution of the Stock Exchange in 1988, the Futures Exchange has also successfully reconstituted itself in accordance with the Securities Review Committee recommendations. A more broadly-based and representative Board was formed in June 1989. The Hong Kong Clearing Corporation, a wholly-owned subsidiary of the exchange, took over and strengthened the clearing and guaranteeing functions in March 1989.
The Chinese Gold and Silver Exchange Society operates one of the four largest gold bullion markets in the world. Gold traded through the society is of 99 per cent fineness, weighed in taels (one tael equals approximately 1.2 troy ounces) and quoted in Hong Kong dollars. After allowing for exchange rate fluctuations, prices follow closely those of the major markets in London, Zurich and New York.
There is another active gold market in Hong Kong, in which the main participants are banks, major international bullion houses and gold-trading companies. It is commonly known as the loco-London gold market, with prices quoted in US dollars per troy ounce of gold of 99.95 per cent fineness and with delivery in London. Trading in this market has grown significantly in recent years.
Regulation of the Financial Sector
The authority for the prudential supervision of banks, and deposit-taking companies, collectively called authorised institutions, is vested in the Commissioner of Banking. His authority is derived from the present Banking Ordinance which was introduced in March 1986, replacing earlier Banking and Deposit-taking Companies Ordinances. The provisions of the ordinance relate to the regulation of banking business, particularly the business of taking deposits, and the supervision of authorised institutions, so as to provide a measure of protection to depositors and to promote the general stability and effective operation of the banking system.
The Commissioner's Office obtains regular returns from and sends examination teams to the authorised institutions, including the overseas branches of Hong Kong incorporated banks and deposit-taking companies. The principles of the revised concordat issued by the Committee on Banking Regulations and Supervisory Practices, which meets regularly at Basle in Switzerland, and the principles of worldwide supervision of banking groups based in Hong Kong, are accepted and practised.