XN000022-1996-03-06 — Page 72

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"We have engaged the Federal National Mortgage Association, the United States' largest and most profitable mortgage corporation, to assist us in studying the business and technical issues involved. The Hong Kong Monetary Authority will then prepare a detailed proposal for consultation with the banking community, capital market participants and other relevant parties.

"Subject to the outcome of the consultations, I would hope that preparatory work for the actual setting up of such a corporation could commence as soon as possible," he said.

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Tax concessions in financial services

Two tax concessions to encourage the further development of financial services were announced by the Financial Secretary, Mr Donald Tsang, in his Budget speech in the Legislative Council today (Wednesday).

Firstly, he proposed that the interest income and trading profits derived from certain debt instruments be subject to a concessionary tax rate equivalent to 50 per cent of the normal Profits Tax rate.

"Instruments qualifying for this concession must be lodged with and cleared through the Hong Kong Monetary Authority, carry a suitable rating, have an original maturity of five years or more and a minimum denomination of $500,000.

"This concession should help to attract overseas issuers to Hong Kong, enlarge our debt market and enhance our competitiveness vis-a-vis other financial centres in the region," he said.

Secondly, Mr Tsang proposed to waive stamp duty for market makers on stock transactions for the purpose of hedging options transactions. This would help to increase trading volume, improve market liquidity and the quality of risk management, and reduce the underlying price volatility of stocks.

He estimated that these two measures would reduce revenue by $30 million in 1996-97 and $135 million up to 1999-2000. They would come into effect as soon as the necessary legislation had been put in place.