ENG-2008 — Page 133

Financial and Monetary Affairs 89

corporations, Als, multilateral development banks (MDBs), non-MDB overseas borrowers and local corporations. New EFBN issues amounted to $286 billion and accounted for around 67 per cent of the total new Hong Kong dollar debt issuance in 2008.

Excluding the Exchange Fund papers, new issuance of Hong Kong dollar debt totalled $138 billion in 2008. Non-MDB overseas borrowers continued to be the most active, taking up nearly 37 per cent of all new issues. Issuance by statutory bodies and government-owned corporations, local corporations and authorised institutions remained stable in 2008.

Excluding EFBNs, fixed rate debt constituted about 82 per cent of total new issues in 2008.

Following its study to assess the potential of developing an Islamic bond market in 2007, the HKMA introduced in 2008 enhancements in the clearing and settlement systems to facilitate Islamic-related transactions.

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. Hong Kong's vast amount of Hong Kong dollar time deposits, its growing retirement funds and capital from the Mainland are other factors contributing to the higher demand for bond investment.

Debt Issuance

Through its debt-issuing activities, the Hong Kong Mortgage Corporation (HKMC) plays a part in promoting the development of the Hong Kong dollar debt market. By the end of 2008, it had $42.8 billion of debt securities outstanding with a tenor of up to 15 years.

The HKMC has pioneered the development of Hong Kong's retail bond market since 2001. In 2008, it launched a new retail bond issue with four series of notes totalling HK$540 million. The amount of retail bonds outstanding at the end of the year was $3.1 billion.

In 2008, the HKMC issued debut foreign currency (including the US dollar, the Japanese yen and the Singapore dollar) corporate debts to diversify its investor base and funding sources in the international bond market, raising a total of HK$4.7 billion equivalent under its US$3 billion Medium Term Note Programme.

HKMC's local and foreign currency issues continued to be rated as triple-A by Moody's, enhancing its ability to promote the development of the local and regional debt and securitisation markets.

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All EFBNs were fixed rate debt instruments.