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THURSDAY, APRIL 27, 1989
TURNING TO THE PROSPECTS FOR EXPANSION OF OUR CAPITAL MARKETS, MR NENDICK SAID THE COMPLETE ABOLITION OF INTEREST TAX WITH EFFECT FROM THE YEAR OF ASSESSMENT COMMENCING APRIL 1, 1989 WAS LIKELY TO DECREASE THE COST OF BORROWING BY NON-FINANCIAL INSTITUTIONS.
"IT IS REASONABLE, THEREFORE, то EXPECT A HIGHER LEVEL OF ACTIVITY IN HONG KONG DOLLAR COMMERCIAL PAPER IN FUTURE, HE SAID.
HOWEVER, HE SAID THAT WHETHER THE ABOLITION OF INTEREST TAX WOULD OF ITSELF SPUR MORE DEBT ISSUES IN HONG KONG'S CAPITAL MARKET WAS NOT FOR THE GOVERNMENT TO SAY.
DEVELOPMENT
MR NENDICK SAID THE GOVERNMENT'S STANCE TOWARDS THE FINANCIAL MARKETS HAD ALWAYS BEEN TO LEAVE THE INITIATIVE OF MARKET TO THOSE WHO OPERATED IN THE MARKET.
"WE BELIEVE THAT MARKET PLAYERS ARE IN THE BEST DECIDE WHAT THEY WANT TO DO. NO ONE SHOULD THEREFORE GOVERNMENT TO ACT AS THE PRIME MOVER IN DEVELOPING MARKETS.
POSITION то EXPECT THE
OUR CAPITAL
IDENTIFIED AS
"BUT WHERE FISCAL OR INSTITUTIONAL FACTORS ARE INHIBITING THE MARKET DEVELOPMENTS, THE GOVERNMENT WILL ALWAYS STAND READY TO CONSIDER RECTIFYING THE SITUATION IN THE OVERALL GOOD OF ITONG KONG.
"THE DECISION TO REMOVE THE INTEREST TAX IS A CASE IN POINT, AS WE SEE THIS IS PROVIDING A MORE 'LEVEL PLAYING FIELD' FOR COMPETING BORROWERS, HE SAID.
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MR NENDICK SAID THERE WERE OTHER FACTORS, TOO, WHICH WOULD HELP THE DEVELOPMENT OF MARKET ACTIVITY.
FOR EXAMPLE, HE SAID, THE MONETARY AFFAIRS BRANCH WAS NOW DEVELOPING A PROGRAMME FOR THE ISSUE OF EXCHANGE FUND BILLS.
LOW AND
"THESE BILLS, WHICH WILL BE DENOMINATED IN HONG KONG DOLLARS, WILL, I BELIEVE, BE SEEN AS PROVIDING FINANCIAL INSTITUTIONS WITH RISK, HIGHLY LIQUID ASSETS AND THUS AS PROVIDING GOOD INVESTMENT TRADING OPPORTUNITIES FOR OUR CAPITAL MARKETS," HE SAID.
"IF IT IS POSSIBLE TO INTRODUCE A HONG KONG DOLLAR INTEREST RATE FUTURES CONTRACT ON THE FUTURES EXCHANGE, THIS WILL PROVIDE ADDED OPPORTUNITIES FOR ARBITRAGE AND HEDGING, HE ADDED.
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