FINANCIAL AND MONETARY AFFAIRS
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Under the Insurance Companies Ordinance, insurance companies are authorised by the Insurance Authority to transact business in Hong Kong. At the end of 1992, there were 233 authorised companies. Of these, 127 were overseas companies from 29 countries.
Financial Markets
Hong Kong has a mature and active foreign exchange market, which forms an integral part of the corresponding global market. The link with other major overseas centres enables foreign exchange dealing to continue 24 hours a day round the world. With an average daily turnover of around US$61 billion in April 1992, Hong Kong is among the largest markets in Asia, along with Tokyo and Singapore. Besides the Hong Kong dollar, most major currencies are actively traded in Hong Kong, including the US dollar, Deutschemark, Yen, Sterling, Swiss franc, Australian dollar and Canadian dollar. As a market in foreign exchange, Hong Kong is favoured by a host of factors such as a favourable time zone location, a large volume of trade and other external transactions, the presence of a large number of international banks with experience in foreign exchange transactions, the absence of exchange controls, and a highly advanced telecommunications system.
Equally well established and active is the interbank money market which had an average daily turnover of HK$38 billion in November 1991. Wholesale Hong Kong dollar deposits and foreign currency deposits (mainly in US dollars) are traded both among authorised institutions in Hong Kong, and between local and overseas institutions. The interbank money market is mainly for short-term money, with maturities ranging from overnight to 12 months for both Hong Kong dollars and US dollars. The traditional lenders of Hong Kong dollars in the market tend to be the locally-incorporated banks, while the major borrowers are those foreign banks without a strong Hong Kong dollar deposit base. As an indication of the size of the market, at the end of 1992, Hong Kong dollar interbank liabilities accounted for 33 per cent of the total Hong Kong dollar liabilities of the banking sector and foreign currency interbank liabilities accounted for 77 per cent of total foreign currency liabilities of the banking sector.
The launch of the Exchange Fund Bills programme in March 1990 has invigorated the local capital markets. Commencing with the weekly issue of 91-day bills, the programme was expanded to include fortnightly issues of 182-day bills in October 1990 and issues of 364-day bills every four weeks in February 1991. The bills are issued in paperless form for the account of the Exchange Fund and are used as a monetary market instrument. They are available in minimum denominations of HK$500,000 and are issued on a discount basis by tenders which are open to recognised dealers selected from institutions authorised under the Banking Ordinance. To promote secondary market activity, 22 recognised dealers have additionally been appointed as market makers. One of their obligations is to quote two-way yields for the bills during normal money market trading hours. At the end of 1992, outstanding issues of 91-day, 182-day and 364-day bills amounted to $12.5 billion, $4.5 billion and $3.4 billion respectively.
The Government Bond Programme launched in mid-November 1991 marked another significant development in the local capital markets. As with the Exchange Fund Bills Programme, both recognised dealers and market makers have been appointed under the bond programme. The bonds are available in minimum denominations of HK$50,000. They are issued in paperless form through tenders which are open to recognised dealers and market makers. Initially, two-year bonds have been introduced to provide continuity in the
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