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Hong Kong: The Facts - Financial Services - Gov

Hong Kong is a major international Financial centre, comprising an integrated network of institutions and markets which provide a wide range of products and Services to local and international customers and investors. Hong Kong s Financial markets operate under effective and transparent regulations that are in line with international standards. Another feature is high liquidity in the markets. The Government of the Hong Kong Special Administrative Region (HKSAR) abides by the principle of keeping intervention into the way in which the market operates to a minimum and has endeavoured to provide a favourable environment in which business operates. Its policy of low and simple taxation allows maximum room for business initiatives and innovation. There is a strong emphasis on the rule of law and fair market. There are no barriers of access to the market by foreign businesses, with free flow of capital and information.

time zone location. Links with overseas centres enable foreign exchange dealing to continue 24 hours a day around the world. According to a triennial global survey conducted by the Bank for International Settlements in 2019, Hong Kong was the world’s fourth largest foreign exchange market in terms of turnover.

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Transcription of Hong Kong: The Facts - Financial Services - Gov

1 Hong Kong is a major international Financial centre, comprising an integrated network of institutions and markets which provide a wide range of products and Services to local and international customers and investors. Hong Kong s Financial markets operate under effective and transparent regulations that are in line with international standards. Another feature is high liquidity in the markets. The Government of the Hong Kong Special Administrative Region (HKSAR) abides by the principle of keeping intervention into the way in which the market operates to a minimum and has endeavoured to provide a favourable environment in which business operates. Its policy of low and simple taxation allows maximum room for business initiatives and innovation. There is a strong emphasis on the rule of law and fair market. There are no barriers of access to the market by foreign businesses, with free flow of capital and information.

2 There are also no exchange controls. The Financial Markets: In the banking sector, at end May 2020, there were 163 licensed banks, 17 restricted licence banks and 13 deposit-taking companies in Hong Kong, together with 42 local representative offices of overseas banking institutions. These institutions come from 34 economies and include 78 of the world s largest 100 banks. Together they operated a comprehensive network of about 1 245 local branches, excluding their principal place of business in Hong Kong. Banks in Hong Kong engage in a wide range of retail and wholesale banking business. Hong Kong has a mature and active foreign exchange market, the development of which has been stimulated by the absence of exchange controls in Hong Kong and its favourable time zone location. Links with overseas centres enable foreign exchange dealing to continue 24 hours a day around the world.

3 According to a triennial global survey conducted by the bank for International Settlements in 2019, Hong Kong was the world s fourth largest foreign exchange market in terms of turnover. The Hong Kong money market consists primarily of the interbank market with the Hong Kong Interbank Offer Rate (HIBOR) being an important indicator of the price of short-term funds in Hong Kong. The daily turnover in the Hong Kong interbank market averaged HK$ billion in 2019. Hong Kong s stock market was the fifth largest in the world and the third largest in Asia in terms of market capitalisation as at end April 2020*. Hong Kong was the most active market for raising initial public offering (IPO) funds in 2019, with US$ billion raised. Hong Kong ranked first for IPO funds raised seven times since 2009. A wide variety of products are traded in the stock market, ranging from ordinary shares to options, warrants, Callable Bull Bear Contracts (CBBCs), Exchange Traded Funds (ETFs), Real Estate Investment Trusts (REITs), units trusts and debt securities.

4 As at end May 2020, 2 482 companies were listed on the Stock Exchange of Hong Kong (SEHK), with a market capitalisation of HK$33, billion. Among them, 1 261 were Mainland enterprises which have together raised around HK$6,740 billion in terms of total equity funds from 1993 to May 2020. For the derivatives market, the Hong Kong Futures Exchange (HKFE) and the SEHK offer a wide range of futures and options products, including index futures, stock futures, interest rate futures, bond futures, gold futures, index options and stock options. The transactions on the two exchanges are cleared and settled through their three associated clearing houses, namely, the Hong Kong Securities Clearing Company Limited (HKSCC), the Stock Exchange of Hong Kong Options Clearing House Limited (SEOCH) and the Hong Kong Futures Exchange Clearing Corporation Limited (HKCC).

5 As at end March 2020, 54 overseas market operators were authorised as automated trading Services providers to offer their trading and/or clearingservices to institutions in Hong Kong. Apart from the stock market and the futures market, there is also an active over-the-counter (OTC) market which is mainly operated and used by professional institutions and trades swaps, forwards and options in relation to equities, interest rates and currencies. OTC Clearing Hong Kong Limited (OTC Clear), a subsidiary of the Hong Kong Exchanges and Clearing Limited (HKEX), commenced operation in November 2013 to provide clearing Services for certain types of OTC derivative products. It now offers clearing Services for inter-dealer interest rate swaps, non-deliverable currency forwards and cross currency swaps. Hong Kong s debt market has developed into one of the most liquid markets in the region.

6 The Central Moneymarkets Unit (CMU) Service, established in 1990, is operated by the Hong Kong Monetary Authority (HKMA) to provide a clearing, settlement and custodian system for Exchange Fund Bills and Notes (EFBNs), Hong Kong Government Bonds and other private debt securities. The outstanding amount of the EFBNs was about HK$1, billion at end March 2020, with an average daily turnover in these papers of HK$ billion in 2019. A total of HK$790 billion Hong Kong dollar debt securities other than the EFBNs were issued in 2019. The Chinese Gold and Silver Exchange Society has provided a platform for gold trading in Hong Kong since the early 20th Century. In 2011, it launched the Renminbi Kilobar Gold. In 2013, it launched the platform for Loco Hong Kong Silver, quoted and settled in Hong Kong Dollar.

7 Hong Kong is one of the most open insurance centres in the world. As at end May 2020, there were 165 authorised insurers, 95 of which were incorporated in Hong Kong and the remaining 70 were incorporated in the Mainland and 20 overseas countries, with Bermuda, the United Kingdom and the United States of America taking the lead. In recent years, Hong Kong s insurance market has shown considerable growth. Financial Services During the past 5 years, the overall Hong Kong insurance industry achieved an average annual growth of The total gross premiums of Hong Kong insurance industry in 2019 amounted to HK$ billion. As one of the largest asset management centres in Asia, Hong Kong continued to attract international investors to use it as the platform for investing in the region. The asset under management of Hong Kong asset and wealth management business amounted to HK$23,955 billion as at the end of 2018.

8 Hong Kong is also the regional centre for portfolio management activity, including Hong Kong authorised unit trusts and mutual funds and, on a larger scale, institutional fund management. As at end May 2020, there were 2 143 authorised unit trusts and mutual funds in Hong Kong and the net asset value of authorised unit trusts and mutual funds totalled around US$1,678 billion as at end 2019. To streamline the processing of investment fund transactions in order to make fund order routing and settlement safer and more efficient, the HKMA launched the CMU Fund Order Routing and Settlement Service in August 2009. This was enhanced in June 2013 to support money settlement of investment fund orders using the real-time-gross-settlement System (RTGS) in Hong Kong. The Fund Order Routing and Settlement service launched a new cross border linkage with the Mainland in July 2015 to provide order routing and settlement support to the Mainland-Hong Kong Mutual Recognition of Funds (MRF) initiative.

9 The introduction of the Mandatory Provident Fund (MPF) System since December 2000 has generated significant amounts of retirement assets, adding impetus to the further development of the Financial markets. MPF is a long-term investment. Hence, apart from creating new and additional demands for investment products, MPF also contributes to greater stability in the Financial markets. As at end April 2020, the aggregate net asset value of all MPF schemes has reached HK$ billion (US$ billion). Offshore Renminbi (RMB) Business in Hong Kong: Hong Kong is the world s largest offshore RMB business hub, with the world s largest offshore pool of RMB liquidity. As at end April 2020, RMB deposits and outstanding RMB certificates of deposits totalled billion. With the development of RMB bonds, loans and equity products, Hong Kong has become the largest centre for conducting offshore RMB financing activities.

10 As at end May 2020, outstanding RMB bonds issued in Hong Kong amounted to billion. Hong Kong also serves as a platform for enterprises and Financial institutions all over the world to conduct RMB trade settlement, payments, financing and investments. In 2019, total RMB trade settlement conducted through banks in Hong Kong reached RMB5, billion. Hong Kong maintained its lead as the largest offshore RMB foreign exchange market, with the average daily turnover of RMB foreign exchange transactions increasing by to US$ billion in April 2019 compared with that preceding three years. The RMB clearing platform in Hong Kong is also supporting banks from all over the world to conduct their RMB transactions. As at end April 2020, there were a total of 205 banks participating in the RMB clearing platform in Hong Kong, of which 172 were branches and subsidiaries of foreign banks and overseas presence of banks in Mainland China.


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