ENG-2007 — Page 124

84 Financial and Monetary Affairs

there were 14 SFC authorised funds with significant exposure to the A-share market on the Mainland. These included the first equity fund that directly invests in A-shares via the fund manager's own Qualified Foreign Institutional Investors (QFII) quota and an ETF that tracks the A-share market, funds that invest indirectly in A-shares via equity-linked investments issued by QFII, and guaranteed funds with their upside potential returns linked to the A-share market performance.

Renminbi Business in Hong Kong

Since its launch in early 2004, renminbi business in Hong Kong had developed in a steady and orderly manner and had expanded further in 2005 and 2007. By year- end, outstanding renminbi deposits in Hong Kong had exceeded RMB 33 billion.

On January 10, 2007, the State Council announced its agreement to a further expansion of renminbi business in Hong Kong. Financial institutions on the Mainland, upon obtaining approval, can issue renminbi financial bonds in Hong Kong. On July 12, 2007, the first renminbi bond was successfully launched in Hong Kong by the China Development Bank. The Export-Import Bank of China and the Bank of China later issued the second and third RMB bonds in Hong Kong on August 24, 2007 and September 28, 2007 respectively. The three renminbi bonds had a total issuance size of RMB 10 billion. Responses from investors were encouraging.

Capital Formation Centre and Global Investment Platform for the Mainland

Hong Kong's fundamental strengths, including high market liquidity, a robust regulatory system, efficient information flow, a rich pool of financial professionals and proximity to the Mainland market, mean that it is well placed to provide excellent services to Mainland enterprises seeking listing in an international financial centre.

The rapidly expanding Mainland market provides abundant opportunities. The presence of Mainland issuers has increased both the breadth and depth of Hong Kong's securities and futures markets. Hong Kong's equity market has evolved from one with a high concentration of property and finance businesses into a market with a great diversity of constituent stocks and a wide range of products.

Hong Kong has become the premier international fund-raising centre for Mainland enterprises. At year-end, 439 Mainland enterprises were listed in Hong Kong, raising a total of $1,849.5 billion since 1993. The 10 largest IPOs of all enterprises listed on the SEHK were all from the Mainland.

Apart from the equity market, Mainland enterprises raise capital in Hong Kong through the issuance of bonds, project financing and loan syndication. Mainland enterprises also have easy access in Hong Kong to investment banking services for mergers and acquisitions, and consultancy on restructuring.

Hong Kong, with its financial facilities, experts and first-rate regulatory regime, already has all the right ingredients to develop its asset management business even further. In April 2006, the Mainland authorities announced measures to allow investment in overseas financial markets by Mainland companies and individuals through qualified institutional investors covering commercial banks, securities firms and insurance institutions. The measures, commonly referred to as the Qualified