Following is the speech by the Secretary for Financial Services and the Treasury, Mr Frederick Ma, at the Lipper Fund Awards Hong Kong 2005 - "Hong Kong's Edges as the Preferred Asset Management Centre in Asia" today (February 23) (English only):
Distinguished Guests, Ladies and Gentlemen, good afternoon¡G
I am very pleased to be here today to share the joy with you on the outstanding performance of the fund management industry in the past year. First of all, may I take this opportunity to wish you all good health, great fortune and a prosperous Year of the Rooster!
In a recent district visit, I was asked by citizens questions like "Mr Ma, are there any hot tips?" "Which stock is worth buying?". I, for sure, do not wish to teach a fish how to swim here, yet I do have a sure-win tip for all: "Know your own investment needs, get hold of professional analysis and do not trust the so-called "hot tips" from nowhere". To this end, I believe what both retail investors and professional investors need is in fact market information for their consideration and analysis in order to arrive at an informed investment decision. Some years ago, there was advice from a very smart investor which impressed me very much: "Make your investment decision based on P/E (price-to-earnings ratio) and other relevant data, but not on P/C or P/D. I am sure that all of you wonder what P/C and P/D are. P/C refers to price-to-concepts and P/D means price-to-dreams.
Investors in Hong Kong are very blessed as various sources of investment information are at our fingertips. Relevant parties including today's organisers, the Hong Kong Economic Journal, the Metro Finance and the Lipper, have been working hard all these years to provide extensive financial news and information for the investment community. I would like to take this opportunity to pay my tribute to their efforts and contribution. The Lipper Fund Awards is one of the highlights of their contribution towards the development of the fund management industry in Hong Kong.
With these concerted efforts, Hong Kong has been a leading fund management centre in the region. In recent years, Asia's savings are high and economic prospects for the region are good. The investment community's demand for investment products has been increasing. It was against this backdrop that the asset management industry has been booming in the past years. According to the Fund Management Activities Survey 2003 conducted by the Securities and Futures Commission (SFC), total assets in the fund management business, which included asset management business, advisory business and other private banking business, amounted to HKD$2,947 billion in 2003. In the asset management field, HKD$1,194 billion worth of assets were managed in Hong Kong. In view of the vast development potential of the fund management industry, the Chief Executive has emphasised in this year's Policy Address the importance to further promote Hong Kong's fund management industry and capitalise on the growing opportunities in the Mainland. Indeed, we are equipped with the following edges enabling further development in the local fund management industry.
Firstly, given the close proximity and unique historical background, Hong Kong is closely tied to the Mainland. The merging of our economic developments is unparalleled. In recent years, Mainland's economy has been growing rapidly which results in the keen demand for investment products and talents in the financial sector. On top of this, the Mainland Government has started to introduce policies with a view to seeking investment opportunities overseas, these all add up to bring unprecedented opportunities to Hong Kong's development as Mainland's preferred asset management and capital formation centre.
The "Temporary Measures on Overseas Use of Foreign Exchange Insurance Funds" announced on August 18 last year allows qualified Mainland insurance companies to invest 80% of their remaining foreign exchange insurance funds in the previous year. According to the figures released by the China Insurance Regulatory Commission, the insurance industry on the Mainland has been growing at an average rate of more than 30% per year since 1980. Its total assets exceeded RMB1,000 billion last year. In June, 2004, the insurance industry had more than US$9.7 billion (about HK$76 billion) foreign exchange funds in total. This represents an extraordinary opportunity for the Hong Kong fund management industry.
Besides, according to the survey conducted by the SFC, of the HKD$1,194 billion worth of assets managed in Hong Kong, 73% or $878 billion was invested in Asia, including $481 billion in Hong Kong and Mainland China. The substantial investments in the Asian markets reflected not only the attractiveness of these markets in 2003, but also the expertise that the fund management industry in Hong Kong has developed over the years in investing in Asia. Such skills have been and will continue to be vital to Hong Kong's ability to attract overseas funds for management and to maintain its role as the platform for overseas investors looking for investment opportunities in the Mainland.
Secondly, Hong Kong is a highly internationalised city. We have one of the most open economies which is always lauded as fair, advanced, efficient and transparent. Indeed, for the 11th consecutive year we rank first among more than 100 places as the freest economy in the world by the Index of Economic Freedom published jointly by the Heritage Foundation and the Wall Street Journal. These strengths greatly enhance international investors' and financial talents' confidence in Hong Kong which, in return, vastly accelerate our 'financial globalisation'.
Again, according to the above mentioned survey, in 2003, of the total assets in the fund management business which amounted to HKD$2,947 billion, funds sourced from overseas investors amounted to HKD$1,860 billion, or 63% of the total assets. More than 80 international fund houses from the US, UK, Japan, Singapore, Switzerland, France and other parts of the world have operations here. From the vitality of the stock market and the ever-increasing number of investment products, it is evident that Hong Kong's 'financial globalisation' has brought about high liquidity and expedited the development of our financial market, these will help the market attract more funds from overseas.
Apart from the characteristics mentioned, Hong Kong has more to offer as the preferred asset management centre in Asia. Hong Kong's legal regime, living standard and readiness in accepting different languages and cultures are to its advantage to attract and keep talents. These competitive edges are important to the development of the financial sector which depends largely upon the professional skills and knowledge of the talents. Moreover, Hong Kong places no restriction on the capital flow which is appealing to overseas investors as they can allocate their assets freely the way they wish. The Government will continue its efforts in upgrading market quality, enhancing market infrastructure and promoting market development so as to create a conducive business environment with a view to further promoting Hong Kong's development as the preferred asset management centre in the region.
Although we are equipped with the edges mentioned above, it is imperative for us to take active measures to capitalise on the opportunities.
Firstly, we need to tap on the growing Mainland market by way of enhancing mutual exchange in fund management experience. In November, 2004, I led a 120-strong delegation to Beijing to participate in the Forum on Management of Insurance Funds organised by the Financial Services and the Treasury Bureau. The forum aimed at helping the exchange of experience in managing funds between the Mainland insurance industry and Hong Kong's financial services sector, in particular the asset management industry. It also provided an opportunity for Hong Kong to promote its strengths in serving as a global investment platform for the Mainland. The forum was completed successfully, with some 270 Mainland and Hong Kong participants. We believe this was a good start and we will co-operate with the industry in continuing the efforts on this front.
Secondly, to upkeep the competitiveness of our fund management industry, we need to constantly review the related policies by reference to the views of the stake-holders and practices in other countries. As far as our tax regime is concerned, we have all along been committed to facilitating market development and ensuring our policies are up to international standard. I have noted that other financial centres in the region have been aggressive in providing tax incentives in order to attract overseas investment and the industry has suggested that Hong Kong should follow suit so as not to lose out. In this respect, I want to emphasize two points. Firstly, when compared with our regional competitors, Hong Kong has more to offer to attract overseas fund for management, such as our free economy, efficient and transparent market, world-class financial infrastructure and the rapid financial globalisation with Mainland as our backyard. Given our continuous efforts, I am confident that we would not lose out.
Secondly, the Government fully appreciates that tax is one of the major factors in fund managers' consideration. To remove the uncertainty of the fund management industry, the Administration announced in the 2003-04 Budget to exempt offshore funds from Profits Tax to keep our regime in line with other major financial centres such as New York and London. We have consulted the industry and the public on the proposed legislative amendments required to effect the exemption and are now studying carefully submissions from various bodies and members of the public. We plan to introduce the amendment bill to the Legislative Council this legislative year. In taking forward the proposals, we will try our best to balance the interests of different sectors with a view to coming up with a proposal that would be the most beneficial to Hong Kong as a whole. On the other hand, the Government has also completed the public consultation on the review of estate duty, and we note that the fund management industry is in support of the abolition. The Financial Secretary is considering views expressed by all relevant stakeholders and will announce the way forward in his coming budget speech.
The Government is well aware of the rapid development of the fund management industry. We are committed to engaging the industry to further promote its development. May I take this opportunity to appeal to you, the best of the best in the industry, to continue working with the Government to maintain Hong Kong's role as the most preferred asset management centre in Asia. I also wish to congratulate all award winners again for your well-recognised achievements and your hard work in the past year being paid off today at this awards ceremony.
Last but not least, I wish you all good health and every success in your career. Thank you.
Ends/Wednesday, February 23, 2005