ENG-1999 — Page 117

FINANCIAL AND MONETARY AFFAIRS

formulation of contingency plans by the SFC and the exchanges and clearing houses. A number of sector-wide contingency drills were successfully conducted in the second half of 1999. To ensure that all the major shared financial systems operated by the exchanges and clearing houses were able to operate normally on January 3, 2000, being the first business day, an industry-wide Year 2000 rollover test was conducted on January 1, 2000.

As for listed companies, they were required by the SEHK to disclose their Year 2000 compliance status to the market. The SEHK also maintained a list of non- compliant listed companies on its web site.

To prepare for the actual rollover and to co-ordinate the efforts of the industry to deal with any contingency matters, command centres were set up by the SFC, the exchanges and clearing houses. Moreover, under the co-ordination of the FSB, close contact was also maintained between the command centres of the securities and futures industry and those of the banking industry.

After all the preparatory work, the industry made the transition successfully and maintained its smooth operation without encountering any major Year 2000-related problems.

The insurance industry has also moved smoothly through the transition into the new millennium. Reports submitted to the Insurance Authority showed that all insurers and insurance brokers had become Year 2000 compliant by June 30 and September 30 respectively.

The Hong Kong Dollar Debt Market

The Hong Kong dollar debt market continued to grow in 1999 amid a reviving local economy. The amount of Hong Kong dollar debt instruments outstanding at end- 1999 was HK$416.3 billion, up by 6.7 per cent from $390.1 billion at end-1998. This is equivalent to 33 per cent of GDP in 1999. Exchange Fund Bills and Notes accounted for 24 per cent of the market, with the remainder composed of debt instruments such as negotiable certificates of deposit, bonds, floating rate notes and asset-backed securities, issued by statutory bodies, multilateral agencies, local corporates and authorised institutions.

The total outstanding amount of Exchange Fund Bills and Notes was $101.9 billion at end-1999, registering a slight increase of $4.4 billion from $97.5 billion at end-1998. There was no new issue of Exchange Fund Bills and Notes for the period from September 1998 to March 1999. As part of the measures to strengthen the currency board arrangements, with effect from September 7, 1998, new Exchange Fund paper will only be issued when there is an inflow of funds enabling the additional paper to be fully backed by foreign reserves. Existing issues of Exchange Fund paper, which are already backed by foreign reserves, will be rolled over as and when they mature. This measure is to ensure that the repo of Exchange Fund paper through the Discount Window does not involve any departure from the discipline of the currency board system. However, issuance of Exchange Fund paper was resumed in May, after the EFAC approved in April the issuance of new Exchange Fund paper in line with interest payments on existing Exchange Fund paper. The size of Exchange Fund paper has since been allowed to grow gradually. Demand for Exchange Fund paper remains strong. The average over-subscription rate for the Note issues was about 2.9 times in 1999. At end-1999, the yield of 10-year Exchange Fund Notes stood at 7.74

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