FINANCIAL AND MONETARY AFFAIRS
Many banks from Hong Kong have established a strong presence among businesses in the Mainland. A total of 18 locally incorporated banks had established 37 branches and 32 representative offices there by the end of 2000.
Portfolio investment in the form of 'China funds' has also become increasingly popular. By the end of 2000, 31 such funds had been authorised by the SFC to invest in B-shares listed on the Shanghai and Shenzhen stock exchanges as well as H-shares and red-chips listed on the SEHK.
Hong Kong is committed to making full use of the favourable conditions of the Hong Kong market, including higher liquidity, better research coverage, and closer proximity to the Mainland market to provide better services to Mainland enterprises seeking overseas listing.
At present, Hong Kong is the most important overseas listing market for Mainland enterprises. At the end of 2000, 50 Mainland-incorporated enterprises had been listed on the Stock Exchange of Hong Kong through the issuance of H-shares, raising a total of more than $52.4 billion.
In addition, as part of their restructuring for overseas listing, some Mainland state- owned enterprises have reincorporated in Hong Kong and listed on the SEHK.
In a bid to further strengthen communication and enhance co-operation, the SFC had regular meetings with the China Securities Regulatory Commission (CSRC), the two exchanges in Shanghai and Shenzhen, and the SEHK to discuss issues of mutual
concerns.
Enhancement of Financial Infrastructure
As one prong in the three-pronged strategy announced in his Budget Speech in March 1999 for reforming the securities and futures markets in Hong Kong, the Financial Secretary appointed a Steering Committee on the Enhancement of the Financial Infrastructure (SCEFI) to study and recommend the necessary improvements to the financial infrastructure in Hong Kong. The objective of the study is to enhance the competitiveness of Hong Kong as an international financial centre in terms of risk. mitigation, increased efficiency and cost reduction. The report of the committee was submitted to the Financial Secretary in October 1999. The Steering Committee recommended development of a single clearing arrangement for securities, stock options, futures and other exchange traded transactions, straight-through processing and a scripless securities market.
A number of short-term measures have been implemented. The Securities and Derivatives Communication Network (SDNet) that electronically links members of the securities and futures community was launched by the SFC in August as part of the blueprint envisaged by the SCEFI for upgrading the infrastructure of the financial market. Three applications were launched on the SDNet, including electronic submission of financial resources rules returns (e-FRRR), electronic IPO services (eIPO) and the electronic transmission of reports from the clearing houses to the SFC. Meanwhile, in response to the increasing popularity of on-line trading and to facilitate and promote initial public offering activities, the SFC developed a model for electronic initial public offering and released in July the Guidelines for Registered Persons using the Internet to Collect Applications for Securities in an Initial Public Offering.
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