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FINANCIAL AND MONETARY AFFAIRS
activities. Loans to other major sectors, including wholesale and retail trades, building, construction, property development and investment, transport, manufacturing and financial concerns, all showed some increases during the year.
Turning to the financial markets, the government borrowing programme facilitated the further development of the local capital markets. The Exchange Fund Bills market was expanded in February to include 364-day bills, in addition to the 91-day bills and 182-day bills introduced in 1990. The various types of bills were well received by the market. Bill tenders were invariably several times oversubscribed, with yields at around 30 to 70 basis points below the corresponding Hong Kong interbank offered rate, depending on the maturity of the bills. Daily turnover of the bills in the secondary market averaged $5.7 billion, in the last quarter, or about 41 per cent of the total amount of bills outstanding, at $14.0 billion at end-1991. In mid-November, the Government Bond Programme was launched with the issue of two-year bonds. The first issue was oversubscribed by 4.4 times.
New issue activity in respect of other debt instruments also picked up in 1991, helped by the maturity of many previous issues and the decline in local interest rates in the second half of the year. A total of 97 new issues of negotiable certificates of deposit were launched during 1991, of which 86 were denominated in Hong Kong dollars. Of these 86 issues, 82 were arranged on fixed-rate terms and the remaining four on floating-rate terms. At the end of 1991, the outstanding value of Hong Kong dollar-denominated negotiable certificates of deposit amounted to $23.2 billion, compared with $28 billion at end-1990. Fifty-seven per cent of them were held outside the local banking sector.
Of the six new issues of commercial paper and other debt instruments reported to the Securities and Futures Commission during 1991, four were denominated in Hong Kong dollars. Following three successful issues in 1989 and 1990, the World Bank launched a fourth issue of Hong Kong dollar bonds in September. The total issue size was $500 million. The Asian Development Bank also tapped the local capital markets for the first time with the placement of US dollar bonds in November.
In the local stock market, share prices were generally on an uptrend during the first four months of 1991, supported by an early settlement of the Gulf crisis. However, amid uncertainties over the airport talks and the US renewal of China's Most Favoured Nation status, local share prices eased somewhat in late May. Market sentiment improved again early in July with the announcement of the Sino-British Memorandum of Understanding regarding the new airport and related projects. The Hang Seng Index closed the year at a record high of 4 297. The gain in the Hang Seng Index during the year, of 42 per cent, was greater than those in many overseas stock markets. Daily turnover in the local stock market averaged $1.3 billion in 1991, compared with $1.2 billion in 1990.
The number of flotations increased markedly to 48 in 1991, raising a total of $5.4 billion. The more optimistic market sentiment as well as the reduction in the minimum requirements regarding issue capital and the length of track record by the Stock Exchange contributed to this increase. In addition to new share issues, funds were tapped through rights issues and open offers ($10 billion) and private placements ($2.8 billion).
The Hong Kong Futures Exchange launched futures contracts based on the four Hang Seng sub-indices (Commerce and Industry, Finance, Properties and Utilities) in the second half of 1991. Turnover in these contracts was moderate. Trading in Hang Seng Index futures was more active. Daily turnover averaged 2 006 contracts in 1991, compared with 951 contracts in the preceding year.