ENG-1993 — Page 98

FINANCIAL AND MONETARY AFFAIRS

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In May, the Hong Kong Securities Clearing Company successfully completed the phased admission of listed securities into the Central Clearing and Settlement System (CCASS). This is an automated book-entry system that handles the settlement of securities among brokers. The system was tested by the sharp increase in turnover during the last quarter of 1993 and proved capable and efficient in handling the large volume of transactions.

Both the stock exchange and futures exchange finalised codes of conduct for their members in 1993. In addition, the SFC will introduce a code of conduct that applies to all other persons registered under the Securities Ordinance and the Commodities Trading Ordinance in 1994. All these codes are based on the principles developed by the International Organisation of Securities Commissions, of which Hong Kong is a member.

The SFC is also rationalising and updating Hong Kong's securities and futures legislation into a coherent, well-organised and user-friendly corpus of securities law.

Transaction costs of securities trading decreased further during the year under review. The stamp duty and statutory levy were reduced from 0.2 per cent and 0.025 per cent to 0.15 per cent and 0.02 per cent, respectively, on the value of each purchase and sale of securities. The special levy on stock and futures transactions, which was introduced in 1987 to help repay the Lifeboat Loan made available after the market crash, was suspended with effect from August 16.

Hong Kong as an International Financial Centre

The favourable geographical position of Hong Kong, which provides a bridge in the time gap between North America and Europe, together with strong links with China and other economies in Southeast Asia and excellent communications with the rest of the world, have helped the territory to develop into an important international financial centre. The absence of any restrictions on capital flows into and out of the territory is also an important factor.

Foreign banks in Hong Kong tend to be the premier banks in their countries of incorporation and this is illustrated by the fact that 81 of the top 100 banks in the world in 1993 have operations in the territory. In addition, many merchant banks or invest- ment banks of world standing operate in Hong Kong. A substantial proportion of the transactions in the banking sector are international in nature: more than 60 per cent of the sector's aggregate assets and liabilities are external, spreading over more than 100 countries. The financial markets, particularly in foreign exchange and gold, form an integral part of the corresponding global markets. Moreover, Hong Kong serves as an important centre for the intermediation of international flows of savings and investment, particularly through the syndication of loans and international fund management. International investors play a significant and increasing role in the territory, and Hong Kong investment overseas is also believed to be considerable.

The Financial Scene

In respect of the liquidation of the Bank of Credit and Commerce (Hong Kong) Limited (BCCHK), two further dividends of 10 per cent and seven per cent were declared in April and October, respectively, to creditors with claims of over $100,000. This brought the total to 58 per cent, following the first payment of 41 per cent in September 1992 to creditors who were not covered by the court-sanctioned Scheme of Arrangement. Recovery of assets will continue and further dividend payment is expected.