-
8 -
Describing Hong Kong's debt market as a rising star of the Asia Pacific capital markets, Mr Tsang said the market had seen very rapid growth and would continue to do so.
"The expansion has been phenomenal. From a very low base of about $27 billion at the end of 1989, the size of the Hong Kong dollar debt market increased to $214 billion at the end of March 1996, of which $154 billion were private sector debt issues," he said.
He said the growth of Hong Kong's debt market had so far thrived largely on private sector initiatives, although the Government did take a very active role in facilitating such initiatives, including the launch of the Exchange Fund Bills and Notes Programmes in 1990.
"We have also encouraged multilateral agencies with good credit ratings to tap the local debt market. We grant them profits tax exemption on the Hong Kong dollar papers they issue.
"To encourage the issue of quality long-term debt securities in Hong Kong, I announced in my last Budget the introduction of a concessionary tax rate equal to 50 per cent of the standard profits tax rate to the interest income and trading profits derived from qualified debt instruments issued in Hong Kong," said Mr Tsang.
He said two further new government initiatives the Mandatory Provident Fund (MPF) and the proposed Mortgage Corporation would immensely benefit Hong
-
Kong's debt market despite their different primary objects.
The MPF system would cover more than two million people in the workforce and was expected to generate a significant increase to the retirement reserves, he said.
"This large pool of reserves will filter into demand for debt and other financial instruments. The estimated annual contributions under the System will amount to about HK$30-40 billion," he added.
He said assuming that the retirement scheme investments adopt a balanced portfolio between equities and bonds, the introduction of the MPF System would boost the development of both the equity and bond markets.
Mr Tsang said the proposed Mortgage Corporation would stimulate market development by providing high quality debt paper for investments and widening the range of financial products being offered, including unsecured paper and mortgaged- backed securities (MBS).
Page 10Page 11