ENG-2002 — Page 106

FINANCIAL AND MONETARY AFFAIRS

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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 all helped Hong Kong develop into both a leading international financial centre in the region and the premier capital formation centre for the Mainland. The absence of any restrictions on capital flows into and out of Hong Kong is another important strength.

Hong Kong's financial markets are characterised by a high degree of liquidity. They operate under effective and transparent regulation which fully meets international standards. A highly educated workforce and ease of entry for professionals from outside Hong Kong further contribute to the development of financial markets in Hong Kong.

Hong Kong has a very strong presence of international financial institutions. At year-end, there were 121 foreign-owned licensed banks. Of the world's top 100 banks, 73 have operations in Hong Kong. Apart from licensed banks, these foreign institutions operate as restricted licence banks and deposit-taking companies through their subsidiaries, related companies or branches in Hong Kong. A further 94 foreign banks have local representative offices.

The interbank money market is well established. Wholesale deposits are traded actively among local authorised institutions (AIs), and between local and overseas institutions, with an average daily turnover of $172 billion in 2002.

Hong Kong also has a mature and active foreign exchange market, which forms an integral part of the global market. The link with overseas centres enables foreign exchange dealings to continue 24 hours a day with the rest of the world. The last triennial survey coordinated by the Bank for International Settlements (BIS) in April 2001 shows that the daily average foreign exchange turnover in Hong Kong is US$66.8 billion, which represents 4 per cent of the world's total transactions and makes Hong Kong the world's seventh largest foreign exchange market.

With a total market capitalisation of $3,611.3 billion as at year-end, the Hong Kong stock market ranked 10th in the world and third in Asia, following Japan and the Mainland (Shanghai and Shenzhen combined)'. The daily turnover averaged $6.7 billion (including $178 million on the Growth Enterprise Market) in 2002. At year- end, 978 public companies (including 166 on the Growth Enterprise Market) were listed on the Stock Exchange of Hong Kong Limited (SEHK), a wholly-owned subsidiary of the Hong Kong Exchanges and Clearing Limited (HKEx). The 117 (including 57 on the Growth Enterprise Market) newly-listed companies raised a total of $52.0 billion from initial public offerings (of which $7.0 billion was raised in the Growth Enterprise Market). Besides new share issues, funds were also raised in the secondary market, with a total amount of $58.5 billion. Funds raised in H-shares and red-chips markets amounted to $70.8 billion, some 64 per cent of the total funds raised in the Hong Kong market during the year.

As regards stock options, contracts in respect of a total of 33 stocks were traded in the market by year-end. The average daily turnover of stock options contracts was

15 203 in 2002.

The average daily turnover of Hang Seng Index Futures and Mini-HSI Futures traded on the Hong Kong Futures Exchange (HKFE) increased from 18 220 contracts

1 For the purpose of ranking, the market capitalisation of stock exchanges is aggregated on a per-jurisdiction. basis. This methodology is in line with the practice adopted by the International Finance Corporation and Standard & Poor's in their Annual Fact Book entitled Emerging Stock Markets.