Financial and Monetary Affairs | 97
Group has been working with the fund managers and relevant regulators in preparing for the public offering of the nine funds. By the end of 2005, the PAIF and three single-market funds in Hong Kong, Malaysia and Singapore had been listed. The ABF Hong Kong Bond Index Fund and the PAIF were listed on the SEHK in June and July 2005 respectively. The remaining five single-market funds will be launched in the first half of 2006.
The long-term development of the bond market is promising. Hong Kong's free and open financial markets, with free flow of capital, help create a large international investor base and will continue to fuel the growth of Hong Kong's bond market. Other positive factors contributing to higher demand for bond investments include the vast amount of Hong Kong dollar time deposits, the growing retirement funds in Hong Kong for the aging population, and capital from the Mainland as a result of gradual liberalisation of the capital account.
Development of a Secondary Mortgage Market
A well-developed secondary mortgage market plays a useful role in channelling long-term funds, such as insurance and pension funds, to meet demand for long- term home financing. To develop this market, the Government established the HKMC in October 1997 with these core missions:
⚫ to promote the development of the secondary mortgage market in Hong Kong.
⚫ to improve banking and monetary stability
to facilitate the development of the local debt market
• to promote wider home ownership.
Mortgage Purchase Programme
The HKMC started business with its Mortgage Purchase Programme to acquire mortgage loans for its own portfolio. The HKMC's readiness to purchase mortgage loans from banks facilitates their risk and balance sheet management. Over the years, the HKMC has become a key player in the secondary mortgage market. The HKMC's current mortgage portfolio consists of 72 999 loans with a total outstanding principal balance of $28.3 billion at year-end.
Mortgage Insurance Programme
The Mortgage Insurance Programme (MIP) was launched in 1999 to provide mortgage insurance cover to banks in respect of loans advanced by them for the purchase of residential property. The maximum insurance cover is up to 25 per cent of the value of the mortgaged property, which enables the banks to lend home mortgage loans above the 70 per cent loan-to-value ceiling set by the HKMA.
The MIP has steadily gained acceptance by homebuyers and has promoted home ownership through product diversification and improvements to servicing standards. Between 1999 and the end of 2005, over 68 000 applications had been received, out of which a total of $130 billion in mortgage loans were approved. This represented a market penetration rate of 20 per cent. About 94 per cent of MIP loans are for
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