ENG-1999 — Page 99

FINANCIAL AND MONETARY AFFAIRS

standards. A highly educated workforce and ease of entry for professional staff from overseas 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 1999, there were 141 foreign-owned banks. Of the world's top 100 banks, 78 have operations in Hong Kong, while 112 subsidiaries or related companies of foreign banks operate as restricted licence banks and deposit-taking companies. A further 127 foreign banks have local representative offices.

The interbank money market is well established. Wholesale deposits are traded actively among local authorised institutions, and between local and overseas institutions, with an average daily turnover of $160.7 billion in 1999. The interbank money market is mainly for short-term money, with maturities ranging mostly from overnight to 12 months, for both Hong Kong dollars and foreign currencies.

The traditional lenders of Hong Kong dollars are mostly the locally incorporated banks. The major borrowers are foreign banks without a strong Hong Kong dollar deposit base. At the end of December, the Hong Kong interbank money market accounted for 13 per cent of the gross Hong Kong dollar liabilities of the banking

sector.

Hong Kong 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. The latest triennial survey co-ordinated by the BIS shows the daily average foreign exchange turnover in Hong Kong in April 1998 was US$78.6 billion, which represented 4 per cent of the world total and the world's seventh largest.

Hong Kong's derivatives market is among Asia's largest, reflecting the increased sophistication of its financial markets. Currency derivatives contracts (including currency swaps, options and other over-the-counter derivatives) registered an average daily turnover of US$1.4 billion in April 1998, compared with US$0.7 billion in April 1995, according to the BIS. In addition, foreign exchange forward transactions (including outright forwards and foreign exchange swaps) amounted to US$47.6 billion per day in April 1998, or 3.9 per cent of the world total. Interest rate derivatives recorded an average daily turnover of US$2.4 billion in April 1998, compared with US$3.5 billion in April 1995.

The year of 1999 was a promising year for many Asian financial markets as the recovery from the financial turmoil experienced in the region in the last two years has accelerated and continued. Hong Kong's stock market remains one of the world's largest in terms of market capitalisation and the second largest in Asia. The Hang Seng Index reached 16 962 at the end of the year, or about 69 per cent higher than in 1998. Average daily turnover in the local stock market increased to $7.8 billion in 1999, compared to $6.9 billion in 1998. The average daily value of stocks sold short was $259 million in 1999, representing a decline of 14 per cent from that of 1998.

At the end of the year, 701 public companies were listed on the Stock Exchange of Hong Kong Ltd (SEHK). With a total market capitalisation of $4,727 billion, the Hong Kong stock market ranked tenth in the world and second in Asia. The 31 newly listed companies raised a total of $15.6 billion of capital. Besides new share issues, funds were also tapped through rights issues ($19.9 billion) and private placements (provisionally $67 billion).

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