76 Financial and Monetary Affairs
playing field and a sound regulatory regime have all helped Hong Kong develop into both a leading international financial centre in the region and the premier capital formation centre for the Mainland. The absence of any restrictions on capital flows into and out of Hong Kong is another important strength.
Hong Kong's financial markets are characterised by a high degree of liquidity. They operate under effective and transparent regulation, which fully meets international standards. A highly educated workforce and ease of entry for professionals from outside Hong Kong further contribute to the development of financial markets in Hong Kong.
Hong Kong has a very strong presence of international financial institutions. Of the world's top 100 banks, 70 have operations in Hong Kong. As at December 2004, there were 121 foreign-owned licensed banks. Apart from these, some foreign institutions operate as restricted licence banks and deposit-taking companies through their subsidiaries, related companies or branches in Hong Kong. A further 85 foreign banks have local representative offices.
The interbank money market is well established. Wholesale deposits are traded actively among local authorised institutions (Als), and between local and overseas institutions, with an average daily turnover of $165 billion in 2004.
Hong Kong also has a mature and active foreign exchange market, which forms. an integral part of the global market. The link with overseas centres enables foreign exchange dealings to continue 24 hours a day with the rest of the world. The last triennial survey coordinated by the Bank for International Settlements (BIS) in April 2004 shows that the daily average foreign exchange turnover in Hong Kong is US$102 billion, which represents 4 per cent of the world's total transactions and makes Hong Kong the world's sixth largest foreign exchange market.
With a total market capitalisation of $6,695.9 billion as at year-end, the Hong Kong stock market ranked ninth in the world and second in Asia, following Japan1. The daily turnover averaged $16 billion in 2004. At year-end, 1 096 public companies were listed on the Stock Exchange of Hong Kong Limited (SEHK), a wholly owned subsidiary of the Hong Kong Exchanges and Clearing Limited (HKEX). The 70 newly listed companies raised a total of $95.8 billion from initial public offerings. Besides new share issues, funds were also raised in the secondary market, with a total amount of $175.1 billion. Funds raised by Mainland enterprises2 amounted to $110.4 billion, about 40 per cent of the total funds raised in the Hong Kong stock market during the year.
The stock market is an important fund-raising centre for Mainland enterprises. Of the 111 Mainland-incorporated enterprises listed outside the Mainland, 109 (H-shares) were quoted on the SEHK. As at end-2004, there were 304 Mainland enterprises listed on the SEHK. These Mainland enterprises include H-shares,
1 Source: World Federation of Exchanges.
2
Mainland enterprises include H-shares companies, red-chip companies and non-H-shares Mainland private enterprises.