ENG-1995 — Page 111

FINANCIAL AND MONETARY AFFAIRS

expatriate staff further contribute to the development of financial markets in Hong Kong.

Hong Kong has a very strong presence of international financial institutions. At the end of the year, there were 154 foreign incorporated banks. Of the world's top 100 banks in terms of monetary assets, 85 have operations in the territory. In addition, 150 subsidiaries or related companies of banks operate as restricted-licence banks and deposit-taking companies.

Equally well established is the interbank money market. Wholesale deposits are traded actively both among local authorised institutions, and between local and overseas institutions, with an average daily turnover of $155 billion in 1995. The interbank money market is mainly for short-term money, with maturities ranging from overnight to 12 months, for both Hong Kong dollars and US dollars.

The traditional lenders of Hong Kong dollars are mostly the locally-incorporated banks, while the major borrowers are foreign banks without a strong Hong Kong dollar deposit base. At the end of the year, the Hong Kong interbank market accounted for 21 per cent of the Hong Kong dollar liabilities of the banking sector.

The territory also has a mature and active foreign exchange market, which forms an integral part of the global market. The link with other overseas centres enables foreign exchange dealing to continue 24 hours a day around the world. Based on the latest survey conducted by the Bank for International Settlements, the daily average foreign exchange turnover in Hong Kong in April 1995 was US$91 billion, which represented six per cent of the world total. Hong Kong overtook Switzerland to clinch fifth position in the world, after the United Kingdom, the United States, Japan, and Singapore.

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Hong Kong's derivatives market is among Asia's largest, reflecting the increased sophistication of its financial markets. Currency derivatives contracts (including forwards, currency swaps, options and futures) registered an average daily turnover of US$56 billion in April 1995 and the outstanding contracts amounted to US$970 billion. Interest rate derivatives recorded a turnover of US$18 billion per day and the outstanding amounts stood at US$666 billion. Derivatives on stocks and commodities are less frequently used, with the outstanding amount at US$8 billion.

The local stock market was on a generally upward trend during 1995. The Hang Seng Index closed at 10 073.39 at the end of 1995, 23 per cent above the closing of 8 191.04 at the end of 1994. Average daily turnover in the local stock market was $3.3 billion in 1995, compared with $4.6 billion in 1994.

At the end of the year, 542 public companies were listed on the Stock Exchange of Hong Kong Limited. With a total market capitalisation of $2,348 billion, the Hong Kong stock market ranked eighth in the world and second in Asia. The 26 newly- listed companies raised a total of $7.7 billion. Among them were two state-owned enterprises of the People's Republic of China. They attracted particular market attention. The listing of these enterprises in Hong Kong has been one of the most important market development initiatives in recent years. The process started in July 1993 and 17 enterprises have been listed in Hong Kong so far, together raising $20 billion of capital. Besides new share issues, funds were tapped through rights issues ($1.3 billion) and private placements ($7.2 billion).

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