ENG-2006 — Page 96

68 Financial and Monetary Affairs

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continuing to be one of the most open insurance markets in the world and achieving an annual growth in premium of 16 per cent for the last five years.

⚫ the market capitalisation of Real Estate Investment Trusts (REITs) rising to

$53 billion by year-end;

⚫ the enactment of the Financial Reporting Council Ordinance, further strengthening the regulatory regime of the accountancy profession and upgrading the quality of corporate financial reporting.

Hong Kong as an International Financial Centre

A favourable geographical position, bridging the time gap between North America and Europe; strong links with the Mainland and other economies in Southeast Asia and excellent communications with the rest of the world; the rule of law; a level playing field and 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 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 regulations, which are in line with international standards. A highly educated workforce and ease of entry for professionals from outside Hong Kong also contribute to the development of its financial markets.

International financial institutions maintain a strong presence in the city. Of the world's top 100 banks, 69 have operations in Hong Kong. At the end of 2006, there were 181 foreign-owned authorised institutions, which included 127 licensed banks, 31 restricted licence banks and 23 deposit-taking companies. A further 84 foreign banks have established local representative offices in Hong Kong.

The interbank money market is well established. Wholesale deposits are traded actively among local authorised institutions (Als), and between local and overseas institutions, with an average daily turnover of $298 billion in 2006.

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 dealing to continue 24 hours a day with the rest of the world. The last triennial survey coordinated by the Bank for International Settlements in April 2004 shows that the daily average foreign exchange turnover

exchange turnover in Hong Kong is US$102 billion, which represents 4 per cent of the world's total transactions and makes Hong Kong the world's sixth largest foreign exchange market.

With a total market capitalisation of about $13,338 billion at year-end, the Hong Kong stock market ranked sixth in the world and second in Asia, following Japan'. The daily turnover averaged $33.9 billion in 2006. At year-end, 1 173 public companies were listed on the Stock Exchange of Hong Kong (SEHK). The 62 newly

1 Source: World Federation of Exchanges.