ENG-2006 — Page 121

Financial and Monetary Affairs | 93

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.

Debt issuance

Through its debt-issuing activities, the HKMC is able to promote the development of the Hong Kong dollar debt market. In 2006, the HKMC successfully launched 49 debt issues totalling $12.1 billion under its Debt Issuance Programme, making it the most active corporate issuer of Hong Kong dollar debt securities in Hong Kong for the sixth consecutive year. By the end of 2006, the HKMC had $28.7 billion of debt securities outstanding.

The HKMC has pioneered the development of retail bond market in Hong Kong since 2001. The HKMC has issued retail bonds totalling over $12 billion, with $1.3 billion issued in 2006, including issuing the 10-year retail zero-coupon bond for the first time.

With an upgrade of the HKMC's local currency issuer rating to triple-A by Moody's in October 2006, the HKMC became the first triple-A institution in Hong Kong, enhancing its ability to promote the development of the debt and securitisation markets in Hong Kong.

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:

• 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

Under the Mortgage Purchase Programme, the HKMC purchases mortgage loans from banks to facilitate their risk and balance sheet management. The HKMC is a key player in the secondary mortgage market. Its current mortgage portfolio consists of 73 652 loans with a total outstanding principal balance of $26.8 billion at the end of November 2006.