ENG-1999 — Page 98

CHAPTER 5

Financial and Monetary Affairs

68

Introduction

HONG KONG is an international financial centre with an integrated network of financial institutions and markets. The Government's policy is to maintain and develop an appropriate legal, regulatory, infrastructural and administrative framework with the aim of providing a level playing field for all market participants, maintaining the stability of the financial and monetary systems and enabling Hong Kong to compete effectively with other major financial centres.

Some 285 authorised institutions (including licensed banks, restricted licence banks and deposit-taking companies) and local representative offices of banks from more than 41 countries conduct business in Hong Kong. The banking sector's external assets are among the highest in the world. Hong Kong was the world's seventh largest centre for foreign exchange trading according to the 1998 triennial global survey conducted by the Bank for International Settlements (BIS).

Hong Kong's stock market is one of the world's largest in terms of market capitalisation. The Hang Seng Index closed at 16 962 points, or about 69 per cent higher than in 1998, which is in line with other major Asian markets.

The debt market has grown rapidly in recent years. The size of the debt market as measured by the outstanding amount of Hong Kong dollar debt securities was $416.3 billion at end-1999. Of this, Exchange Fund Bill and Notes amount to $101.9 billion.

On the monetary front, the Hong Kong dollar remained very stable in 1999, moving within a narrow range of $7.746-7.775 to US$1. The stable condition in 1999 reflected in part the successful implementation of the technical measures to improve the currency board system in September 1998.

Hong Kong as an International Financial Centre

A favourable geographical position, which bridges the time gap between North America and Europe, strong links with the Mainland and other economies in South- East Asia and excellent communications with the rest of the world, the high respect for the rule of law, a level playing field as well as a sound regulatory regime have helped Hong Kong to develop into an important international financial centre. The absence of any restrictions on capital flows into and out of Hong Kong is another important factor.

Hong Kong's financial markets are characterised by a high degree of liquidity. They operate under effective and transparent regulations, which meet international