ENG-2011 — Page 84

48 The Economy

per cent from the peak in June, but still rose by a rather notable 11 per cent year- on-year due to the hefty gain in the early part of 2011.

Staying mindful of the risk of a property market bubble, the Government has introduced a series of measures since early 2010 to ensure the healthy and stable development of the property market, and further stepped up its efforts throughout 2011. The various measures have achieved notable results in increasing land supply, curbing speculative activities, preventing excessive growth of mortgage lending and increasing transparency of the property market.

The local stock market underwent sharp volatilities and drifted markedly lower during 2011. The correction was mainly induced by market worries over the worsening debt situation in Europe since the second quarter as well as the increasingly bleak global economic outlook. With the sharp intensification of the euro debt crisis and heightened contagion risks in the ensuing months, the Hang Seng Index (HSI) hit a low of 16 250 on October 4, 2011, the level last seen in May 2009. With some subsequent rebound as a result of the co-ordinated efforts taken by the European governments and major central banks to tackle the crisis and stabilise the global financial situation, the HSI closed the year at 18 434, still 20 per cent lower than at end-2010. Against the market corrections worldwide and shifting market sentiments, fund-raising activities turned visibly quieter in the second half of the year. For 2011 as a whole, total IPO funds raised amounted to $258.9 billion, 42 per cent down from 2010. Yet Hong Kong still ranked as the world's top IPO centre in 2011, the third year in a row.

As part of a region-wide phenomenon, inflation went up visibly during most of 2011, driven by the feed-through of domestic cost pressures as well as higher imported inflation. Yet with the ease-back of global food and commodity prices. since early 2011 and slower local economic growth, inflation stabilised towards the year-end. In 2011, underlying inflation averaged at 5.3 per cent, up from 1.7 per cent in 2010.

Structure and Development of the Economy

Hong Kong is a global centre for world trade, finance, business and telecommunications, strategically located at the doorstep of the Mainland's vast thriving economy. Hong Kong is currently the world's 10th largest trading entity. It operates one of the world's busiest container ports in terms of container throughput, as well as one of the world's busiest airports in terms of number of international passengers and volume of international air cargo handled. Hong Kong is also the world's 10th largest banking centre in terms of gross external positions of banks, and the sixth largest foreign exchange trading centre. Its stock market is the third largest in Asia in terms of market capitalisation.

As an international business hub, Hong

business hub, Hong Kong has a business-friendly environment with the rule of law, free trade and free flow of information, open and fair competition, a well-established and comprehensive financial network, superb transport and communications infrastructure, sophisticated support services, and a flexible labour market with a well-educated workforce and a pool of efficient and