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Following is the transcript of remarks (English portion) by the Financial Secretary, Mr John C Tsang, at a media session at the Central Government Offices, Main Wing, today (September 16):
In response to the impact caused by the bankruptcy application filed by Lehman Brothers and the capital problem facing AIG on local financial markets and investors, the Government has activated the co-ordination mechanism early this morning. The Secretary for Financial Services and the Treasury and his staff will keep in close contact with key monitoring agencies and keep a close eye on the developments. We have also requested all regulatory agencies to report market movements and related issues to us on a frequent basis, and to ensure that market transactions are operating smoothly and operating in an orderly manner.
This afternoon, I have also held meetings with the heads of regulatory agencies to keep abreast of the latest developments, as well as the contingency measures that are required. The aim is to ensure the stability of the Hong Kong monetary and financial systems.
The Hang Seng Index dropped 1,052 points today, about 5.4%, which was similar to the percentage drop of other Asian Pacific markets. Our market transactions were conducted in an orderly manner. Buying and selling were also conducted quite smoothly. It is estimated that there would still be turbulence in the market in the days ahead, so market participants must be prepared to deal with their own risk management.
The SFC today has issued restriction notices on four entities of Lehman Brothers in Hong Kong to protect the assets of clients and the interests of investors. The SFC pointed out that Lehman Brothers Securities Asia Ltd could still deliver securities to its clients for outstanding trades in the last two days. Before market close today, Lehman Brothers Futures Asia Ltd could still contact clients and conduct an orderly close out of their outstanding positions.
On the monetary front, the exchange rate of Hong Kong dollar remained stable. Operation and exchange market was normal. Interbank interest rates remained stable, and if necessary, the Hong Kong Monetary Authority will provide liquidity to ensure the orderly operation of the market.
Regarding problems caused to AIA HK because of the problems faced by AIG in the US, we are closely monitoring the situation.
At present, AIG is facing a global problem and AIG policy holders all over the world would be affected similarly.
Since the credit crunch problem surfaced in the US, the Insurance Authority has been in close touch with senior management of organisations that have connections with the US parent, as well as AIA (Bermuda) and AIA (HK), in order to assess the impact of the crisis on these companies and their ability to make debt repayments.
The Insurance Authority has a wide range of statutory powers to protect the interest of policy holders, and he will no doubt keep a close watch over the developments.
Hong Kong has a healthy insurance regulatory system and we should be able to handle the current situation.
We will definitely report again when there are new developments.
Ends/Tuesday, September 16, 2008
Issued at HKT 19:29
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