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Financial and Monetary Affairs | 105

properties in the secondary market, demonstrating that the MIP is particularly instrumental in promoting the liquidity of the secondary market.

Apart from contributing to banking stability and promoting home ownership, the HKMC also aims to promote the development of the MBS and bond market in Hong Kong. The HKMC launched a back-to-back MBS Programme in October 1999. The back-to-back structure allows banks to effectively repackage their mortgage portfolios into more liquid portfolios and to maintain the majority of the cash flow if they hold the MBS in their own investment portfolio. The HKMC's guarantee on the timely payment of interest and repayment of principal serves to make the MBS a safe and attractive investment for investors. A total of $2.8 billion of MBS has been issued since the inception of the back-to-back MBS Programme.

The HKMC also established a multi-currency MBS

MBS programme in the conventional bond style (the 'Bauhinia MBS Programme') in December 2001. Under the Bauhinia MBS Programme, the HKMC has securitised mortgage loans from its retained mortgage portfolio for an aggregate amount of $7.4 billion. Out of this. total, $2.4 billion were done in 2004, which included a portion of $900 million set aside in a $2 billion issue in November 2004 for retail investors. This MBS issue was the first ever offered to retail investors in Asia.

Debt issuance is the mainstay of the HKMC's funding sources. Through debt issuing activities, the HKMC is able to achieve the mission of promoting the development of the Hong Kong dollar debt market. In 2004, the HKMC successfully launched 43 debt issues for a total amount of $11.4 billion under its Debt Issuance Programme and through retail bond issuance, making it the most active corporate issuer of debt securities in Hong Kong. As at end-2004, the HKMC had 120 issues of debt securities with a total amount of $35.5 billion outstanding. The HKMC debt securities were well received by financial institutions, as well as institutional and retail investors.

To help develop the retail bond market, the HKMC pioneered the issue of retail bonds through banks as placing agents in October 2001. Since then the HKMC has issued 22 retail bonds for a total amount of over $10.3 billion. In view of the solid development of the retail bond market, the HKMC established a Retail Bond Issuance Programme in May 2004 and initiated a plain language approach to the drafting of prospectuses to facilitate investors' understanding of the prospectus contents. Under the Retail Bond Issuance Programme, the HKMC has issued three retail bonds for an aggregate amount of $1.7 billion.

Promoting Wealth Management Industry

The bulk of the world's savings is generated within Asia. This is expected to be a long-term trend. Located in the heart of Asia, Hong Kong is well positioned to further develop as an international wealth management centre. According to a survey conducted by the SFC, fund management business, which comprises asset management, advisory business and other private banking activities, amounted to $2,947 billion in 2003. About $1,194 billion worth of assets were managed in Hong

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