ENG-2000 — Page 111

FINANCIAL AND MONETARY AFFAIRS

applications, which was about 12 per cent of the total number of applications. This built a strong foundation for future electronic IPOs.

The Growth Enterprise Market (GEM) launched by the SEHK in November 1999 continued to develop over the year. At year-end, there were 54 companies listed with a total market capitalisation of $67.3 billion, raising an aggregate of $17.2 billion. Average daily turnover was $341 million. The SEHK introduced on March 20 the Growth Enterprise Index (GEI) to provide investors with a benchmark indicator to assess the movement of the GEM. The GEI was a market-value weighted index with the market capitalisation of all GEM stocks taken into account. The base value of the GEI was set at 1000 index points on March 17. At year-end, the GEI closed at 309 points. To improve the operation of this new market and its competitiveness, a review on the GEM listing rules was conducted by the SEHK in consultation with the market in June. The proposed changes to the GEM listing rules would be implemented in 2001.

On the futures side, the HKFE migrated in June the trading of the HSI futures and options contracts from the open outcry system to the HKATS (Automated Trading System). Trading on the HKATS offers numerous advantages including greater transparency, ease of accessibility and lower operating cost. It strengthens Hong Kong's financial infrastructure and enhances its role as an international financial centre. On October 9, the HKFE launched the Mini-Hang Seng Index futures contract. The value of the mini contract is one-fifth of that of the Hang Seng Index futures contract. It was introduced to provide retail investors with a more affordable trading and hedging alternative to the Hang Seng Index futures contract, which has appreciated considerably in value over the past few years.

The Hong Kong Securities Clearing Company (HKSCC), a wholly owned subsidiary of the HKEx, operates the Central Clearing and Settlement System (CCASS) for securities trading at the SEHK. The CCASS is one of the most important reforms to the risk management system introduced after the 1987 market crash. It is an automated book-entry system that handles the settlement of securities. In addition to brokers and custodians, CCASS services are also available to retail investors. In 1999, the HKSCC expanded its systems to cover a wider range of financial instruments including the Exchange Fund Notes (EFN) and Hong Kong Mortgage Corporation (HKMC) Notes. Making such notes accessible to retail investors is conducive to the development of Hong Kong's bond market.

Regulation of the Financial Sector

The Government has consistently worked towards providing a favourable environment in the financial sector, with adequate regulation to ensure sound business standards and confidence in the institutional framework, but without unnecessary impediments of a bureaucratic or fiscal nature.

The Hong Kong Monetary Authority

The Hong Kong Monetary Authority (HKMA) was established in April 1993 by merging the Office of the Exchange Fund with the Office of the Commissioner of Banking. The Exchange Fund (Amendment) Ordinance 1992 provides for the establishment of the HKMA.

The HKMA's policy objectives are to maintain currency stability, within the framework of the Linked Exchange Rate System, through sound management of the

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