96 Financial and Monetary Affairs
As interest rates were expected to remain on an upward trend in the US over the course of 2005, fixed-rate debt dominated the market. Excluding EFBNs5, fixed rate debt constituted about 74 per cent of total new issues in 2005, down from 78 per cent in 2004. The average maturity was broadly stable at around four years.
During the year, there was a growing interest in bond offerings at the retail level. The HKMA offered two issues of retail Exchange Fund Notes, totalling $500 million.6 The Hong Kong Mortgage Corporation (HKMC) also issued four series of retail bonds. to the public, comprising two series of Hong Kong dollar bonds amounting to $100 million and two series of US dollar bonds totalling US$10 million. All these HKMA and HKMC issues were well received and oversubscribed.
To improve access to the bond market by retail investors, the HKMA planned to launch a Bond Price Bulletin website (www.cmu.org.hk) in January 2006 to provide retail investors with convenient online access to indicative bond prices quoted by individual banks.
The Government is implementing measures to review the existing regulatory framework for offers of shares and debentures in phases. The first phase involved the publication of various guidelines by the SFC in February 2003, of the second phase was the introduction of the prospectus-related provisions in the Companies (Amendment) Ordinance 2004 in December 2004, the SFC in the third phase issued a consultation paper on possible reforms to the prospectus regime in the CO in August 2005. The consultation ended in December 2005 and the SFC is analysing the submissions received (see 'Recent Developments' under Securities and Futures Sector).
The Government continues its efforts to develop the domestic and regional bond markets through active participation in ongoing international and regional initiatives. The HKMA, through its chairmanship of the EMEAP Working Group on Financial Markets, played a pivotal role in the launch of the domestic currency-denominated ABF2 in 2005.
During the year, the HKMA, worked with the other 10 member central banks. and monetary authorities of the EMEAP Group in implementing the ABF2 Initiative. All 11 members of the EMEAP Group have invested a total of US$2 billion in ABF2, which invests in domestic currency bonds issued by all EMEAP economies except Australia, Japan and New Zealand. ABF2 consists of an ABF Pan-Asian Bond Index Fund (PAIF) and eight single-market funds. The PAIF is a single bond fund investing in domestic currency bonds issued by sovereign and quasi-sovereign issuers in the eight EMEAP economies, whereas the eight single-market funds will each invest in the same type of bonds issued in the respective markets. In May 2005, EMEAP announced the completion of funding of ABF2 and the appointment of the fund managers and master custodian of the nine ABF2 funds. Since then, the EMEAP
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All EFBNs were fixed rate debt instruments.
These issues followed the introduction of the refined Retail Exchange Fund Programme under which investors could purchase Exchange Fund Notes through a larger distribution network and at lower prices.