ENG-2001 — Page 129

FINANCIAL AND MONETARY AFFAIRS

It needs to have a workforce that is adaptable and well-equipped to meet the challenges ahead and to reap the benefits offered by new opportunities. The Advisory Committee on Human Resources Development in the Financial Services Sector was established in June 2000, tasked with the mission to develop a vision on the human resources development in the financial services sector. The Advisory Committee submitted its first report to the Government in January, recommending a series of measures, such as improvement of students' soft skills and an expansion of the internship programme. Moreover, as a short-term measure, talented foreign professionals should be brought in to meet demand. In June, it organised a Forum on Human Resources Development to promote direct exchange of views among the industry, universities and students.

Hong Kong Dollar Debt Market

The Hong Kong dollar debt market continued to grow in 2001. Outstanding Hong Kong dollar debt increased by 5 per cent to $494 billion at the end of 2001. The Exchange Fund accounted for about 23 per cent of the total outstanding debt. Other issuers included authorised institutions, statutory bodies or government- owned corporations, multilateral development banks (MDBs), non-MDB overseas borrowers and local corporates.

New issuance of Exchange Fund paper amounted to $234 billion in 2001, accounting for over 60 per cent of total new issuance. This was 15 per cent less than in 2000 because of a shift away from short-dated issues. Demand for Exchange Fund Notes remained strong, with an average over-subscription rate at over four times in 2001. In line with the movement of the 10-year US Treasury yield, the yield of 10-year Exchange Fund Notes declined to 6.2 per cent at the end of 2001 from 6.5 per cent in 2000. The yield spread tightened to about 119 basis points in 2001, compared with 135 basis points in 2000. The daily turnover of Exchange Fund paper in 2001 averaged $21 billion,

Issuance activities of non-Exchange Fund paper slowed down in the year amid economic downturn and a poor external environment. A total of $152 billion Hong Kong dollar debt issues were launched in 2001, compared with $181 billion in 2000. Of this amount, $58 billion or 38 per cent was issued by authorised institutions, $57 billion or 37 per cent was issued by non-MDB overseas borrowers, and $24 billion or 16 per cent was issued by statutory bodies or government-owned corporations. Notwithstanding the slackened issuance activity, the market saw an increase in product variety and strong retail interest in debt securities. Fixed-rate debt continued to dominate the market and constituted about 70 per cent of total new issues in 2001. The average maturity profile of all outstanding fixed-rate debt at the end of 2001 increased slightly compared with 2000.

The various measures implemented by the HKMA in 2000 have contributed to greater transparency and liquidity in the Exchange Fund paper market. In 2001, the performance of market makers improved in both the primary and secondary markets in terms of allotment as well as market turnover, as a result of the regular review of market makers against benchmark criteria. The replacement of short-dated Exchange Fund paper by longer-dated paper and the publication of an advance quarterly issuance schedule of Exchange Fund paper were well received by the market.

With a view to ensuring strict adherence to currency board principles, the HKMA ceased to be the arranger of the Note Issuance Programmes (NIPS) for the Airport

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