ENG-2007 — Page 131

Financial and Monetary Affairs 91

In addition, the HKMA launched an electronic trading platform for EFBNs in December 2007.

At the end of 2007, the total amount of Hong Kong dollar debts outstanding exceeded $750 billion. Issuers included the Exchange Fund, statutory bodies or government-owned corporations, Als, multilateral development banks (MDBs), non- MDB overseas borrowers and local corporations. New issues of EFBNs amounted to $223.5 billion and accounted for around 50 per cent of total new debt issuance in 2007.

Excluding the Exchange Fund papers, new issuance of Hong Kong dollar debt totalled $221.3 billion in 2007, comparable to the previous year. Of this total, non- MDB overseas borrowers remained the most active, accounting for nearly 56 per cent of the new issues. Issuance by statutory bodies and government-owned corporations, local corporations and authorised institutions remained stable in 2007 as compared with 2006.

Excluding EFBNs, fixed rate debt constituted about 75 per cent of total new issues in 2007, comparable to 2006.

During the year, the HKMA offered three issues of retail Exchange Fund Notes, worth $587 million. The Hong Kong Mortgage Corporation (HKMC) also issued four series of retail bonds to the public, worth a total of $925 million.

In 2007, the HKMA conducted a study to assess the market potential and identify hurdles to the development of an Islamic bond market in Hong Kong, and made recommendations on changes in the taxation, legal and regulatory framework.

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 its capital account.

Debt issuance

Through its debt-issuing activities, the Hong Kong Mortgage Corporation plays its part in promoting the development of the Hong Kong dollar debt market. By the end of 2007, the HKMC had $33.3 billion of debt securities outstanding with tenor up to 15 years.

The HKMC has pioneered the development of retail bond market in Hong Kong since 2001. At the end of 2007, the amount of retail bonds outstanding issued by the HKMC was $4.7 billion.

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All EFBNs were fixed rate debt instruments.

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These issues followed the introduction of the refined Retail Exchange Fund Programme under which investors could purchase Exchange Fund Notes through a larger distribution network and at lower prices.