ENG-1988 — Page 74

THE ECONOMY

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financial services, including securities business, fund management, investment advice and insurance.

Dealers in securities, investment advisers, commodity dealers and commodity trading advisers and their representatives are required to be registered with the Office of the Commissioner for Securities and Commodities Trading. At the end of 1988, there were 6 892 persons so registered. In addition, 268 persons had been granted exempt status under the Securities Ordinance.

Only members of the Stock Exchange of Hong Kong Limited are permitted to trade on the Stock Exchange. At the end of 1988, the Stock Exchange had 739 corporate and individual members. Only shareholders who have applied for and been granted member- ship of the Hong Kong Futures Exchange Limited can trade on the Futures Exchange. At the end of 1988, the Futures Exchange had 83 members and 151 shareholders.

Insurance companies are authorised by the Insurance Authority to transact insurance business in Hong Kong. At the end of 1988, there were 276 authorised insurance com- panies. Of these, 149 were overseas companies from 29 countries.

Financial Markets

Hong Kong has a mature and active foreign exchange market, which forms an integral part of the corresponding global market. The link with other major overseas centres enables foreign exchange dealing to continue 24 hours a day round the globe. The major currencies traded on the local market include the US dollar, Deutschemark, Yen, Sterling, Swiss franc, the Canadian dollar, the Australian dollar and the Hong Kong dollar. Banks and deposit-taking companies also participate in the Hong Kong dollar forward market, which has become increasingly active since the introduction in February 1987 of standard terms and conditions by the Hong Kong Association of Banks. As a market in foreign exchange, Hong Kong is favoured by its time zone location, by its large volume of trade and of other external transactions with the resulting demand for and supply of foreign currencies, by the presence of a large number of international banks with experience in foreign exchange transactions, by the absence of exchange controls, and by a highly advanced telecommunications system.

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Equally well-established and active is the interbank money market, in which wholesale Hong Kong dollar deposits and foreign currency deposits (mainly in US dollars) are traded both between authorised institutions in Hong Kong, and between local and overseas institutions. This market is mainly for short-term money with maturities ranging from overnight to six months for Hong Kong dollars and to twelve months for US dollars. The traditional lenders of Hong Kong dollars in the market tend to be the locally-incorporated banks, while the major borrowers are those foreign banks without a strong Hong Kong dollar deposit base in Hong Kong. As an indication of the size of the market, at the end of 1988, interbank liabilities accounted for 35 per cent of the total Hong Kong dollar liabilities of the banking sector; the corresponding share for foreign currency interbank liabilities was 78

per cent.

The term 'capital market' as commonly used in Hong Kong refers to the market in private sector negotiable debt instruments. (The only government debt instrument out- standing in the market is the $1 billion negotiable five-year bond issued in 1984, which, however, is virtually locked up by investors as a long-term investment and seldom traded.) The two main types of debt instruments traded in the market are certificates of deposit issued by authorised institutions and commercial paper issued by other types of companies. This market has developed rapidly over the past few years or so, gaining momentum from