ENG-1980 — Page 75

FINANCIAL SYSTEM AND ECONOMY

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some difficulty in interpreting the exact meaning of this statement and, as the year ended, the committee was considering whether to introduce further amendments to the Code on Takeovers and Mergers. In 1980, there were six instances of completed takeovers and three further instances of minority shareholders being bought out.

During 1980, the Commissioner for Securities continued to administer the Hong Kong Code on Unit Trusts and Mutual Funds. The number of unit trusts and mutual funds which received authorisation under the Securities Ordinance was 15, while four unit trusts authorised prior to the establishment of the code had their authorisation withdrawn since these trusts are no longer marketed in Hong Kong. In the light of operational experience, a revised Hong Kong Code on Unit Trusts and Mutual Funds (together with Rules of Practice) is being prepared.

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The combined Stock Exchange Compensation Fund established to compensate those who suffer financial loss as a result of defaults by stockbrokers – amounted to $24.2 million on December 31, 1980. No payments were made from this fund during the year. Deposits lodged by dealers other than stockbrokers stood at $7.7 million. The purpose of these deposits is to give some protection to investors against a defaulting dealer who is not a member of a stock exchange. At the end of 1980, 2,342 people were registered under the Securities (Dealers, Investment Advisers and Representatives) Regulations 1974.

Commodity Exchange

The Hong Kong Commodity Exchange Limited is the only company licensed under the Commodities Trading Ordinance to operate a commodity exchange in futures contracts in Hong Kong. In addition to cotton, sugar and soybean, the Commodity Exchange began trading in gold on August 19, 1980. Prices on this market are quoted in United States dollars per troy ounce of 99.5 per cent fine gold, with delivery in London.

At the end of 1980, 1,228 people were registered under the Commodities Trading (Dealers, Commodity Trading Advisers and Representatives) Regulations 1976. The turnovers reported on the four markets for 1980 were: cotton market, 14,630 lots of 50 long tons each; sugar market, 17,969 lots of 50,000 lbs each; soybean market, 36,394 lots of 250 bags of 60 kg each and 134,088 lots of 500 bags of 60 kg each; gold market, 26,675 lots of 100 oz. each.

To give further protection to investors, the Commodities Trading Ordinance was amended in August, 1980, to tighten the control on fringe dealing activities in commodities, including gold.

The Commodity Exchange Compensation Fund, established to compensate those who suffer pecuniary loss as a result of default by shareholders of the exchange, amounted to $7.3 million at the end of the year. Deposits lodged by dealers, other than members of the Hong Kong Commodity Exchange, stood at $600,000. The purpose of the deposits is to give some protection to investors against any default by dealers who are not members of the Hong Kong Commodity Exchange.

Gold Markets

Trading in gold by the Chinese Gold and Silver Exchange Society was extremely active in 1980. Price movements paralleled developments in the other major markets of London, Zurich and New York.

Membership of the Chinese Gold and Silver Exchange Society remained closed at 195 member firms. The price of gold on the exchange rose from $3,088 per tael of 99 per cent fine gold at the end of 1979, to $3,592 at the end of 1980. One tael is equal to 37.429 grams.

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