FINANCIAL AND MONETARY AFFAIRS
maturity spectrum of the government debt market. Longer-term bonds may be issued later, having regard to the government's requirements and the development of the bond programme. At the end of 1992, outstanding value of the bonds stood at $3.0 billion. Unlike the Exchange Fund Bills which are issued for the purposes of creating an additional money market instrument to assist in maintaining exchange rates stability, the bonds are issued for the purposes of financing capital expenditure incurred by the government. The bond proceeds therefore are credited to the Capital Investment Fund and Capital Works Reserve Fund.
The local capital markets are also an important source of finance for corporate borrowers. The two main types of negotiable debt instruments traded in the market are certificates of deposit issued by authorised institutions and commercial paper issued by other organisations and companies. Although the majority of issuers are locally-based institutions, a number of non-resident institutions have also come to tap the local capital markets. Some examples were the four issues of Hong Kong dollar bonds issued by the World Bank during 1989 to 1991; the Hong Kong dollar and US dollar bonds issued by the Asian Development Bank in November 1991, May 1992 and October 1992, as well as the Hong Kong dollar bonds issued by the International Finance Corporation in August 1992. All these issues have been well received by the market.
The stock market provides another important source of capital for local enterprises. It attracts both local and overseas investors. At the end of 1992, 413 public companies, with a total market capitalisation of $1,332 billion, were listed on the Stock Exchange of Hong Kong Limited. This has made Hong Kong the second largest stock market in Asia after Japan.
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The Hong Kong Futures Exchange has offered futures contracts in sugar, soya beans, gold, Hang Seng Index and Sub-Indices and interbank interest rate. Trading in each of the Hang Seng Sub-Indices, Commerce and Industry, Properties, Finance and Utilities commenced in the second half of 1991. Helped by the active local stock market, trading in Hang Seng Index futures increased markedly during the year. Trading in soya beans futures and sugar futures ceased on March 1, and October 1, 1992 respectively. The Hong Kong Futures Exchange introduced trading in stock index options on March 5, 1993.
The Chinese Gold and Silver Exchange Society operates one of the 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. Prices follow closely those in the other major gold 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 expanded in recent years.
Regulation of the Financial Sector
The government has consistently worked towards providing a favourable environment in the financial sector, with sufficient regulation to ensure as far as possible sound business standards and confidence in the institutional framework, but without unnecessary impediments of a bureaucratic or fiscal nature.
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