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Following is the speech by the Financial Secretary, Mr John C Tsang, delivered at the First Annual Emerging Markets Investor Conference organised by Renaissance Capital in Mandarin Oriental this morning(November 15):
Distinguished Guests, Ladies and Gentlemen,
Good morning to you all, and a very warm welcome to our overseas visitors on this beautiful November day here in Hong Kong.
Congratulations also to Renaissance Capital on hosting its inaugural Investor Conference here in Asia¡¦s world city.
This conference is a sure sign that you are settling in well in your brand new offices here, and enjoying the vibrancy of Hong Kong life.
Emerging markets have been taking centre stage here in Hong Kong for some time. Russia is a great example of our growing interaction with members of the so-called BRIC group of emerging economies, which cover the most exciting growth stories in South America, Europe as well as in Asia.
On a personal note, I have had the great pleasure of visiting Russia on a couple of occasions over the past couple of years, once to the West and once to the Far East, and we have received many reciprocated visits since then.
I enjoy very much the work of promoting stronger links between Hong Kong and Russia and learning more about the Russian culture and lifestyle.
I am pleased that this conference not only brings many of the key players from Moscow to Hong Kong, but also those from Central Europe and Africa.
I hope you enjoy your stay here with us, and I certainly hope that you would do some early Christmas shopping too.
Timing is everything in the world of investment.
The global economy is emerging from the most severe financial crisis in a generation.
Although recovery is under way, its pace is not even. I think you will agree with me that we are not quite out of the danger zone just yet.
Nevertheless, developing economies, including those in the Commonwealth of Independent States (CIS), Africa and Asia, have shown remarkable resilience. Today, many of these economies are indeed driving global growth.
Our own nation, China, is among the key growth engines.
Hong Kong is also doing quite well. I have forecast GDP growth of between 5 and 6 per cent for our economy this year, and the upside looks very promising.
The potential for creating new opportunities, reaching new markets and for making new alliances among emerging economies is huge and indeed timely.
Allow me to tell you how Hong Kong can become a partner in opening up new markets and creating new opportunities around the world.
First of all, Hong Kong is a strong and dynamic platform for investors. We have sound fundamentals, we have a stable society, and we have a location that is in prime investor-territory.
We are right on the southeastern tip of China, the world's fastest growing large economy. As an international financial centre in the Asian time zone, we are also fully linked in to the global 24-hour trading day. This is particularly attractive to those who have insomnia.
This, together with a few added extras that I will mention later, has helped Hong Kong to become a leading capital-raising centre.
Last year, total equity funds raised through IPOs in Hong Kong exceeded US$31 billion, ranking us in first place globally. Already this year we have broken our own 2009 record.
Total IPO funds raised so far in 2010 exceed US$40 billion. I guess we must be doing something right!
In recent years, Hong Kong has handled some of the world's largest IPO deals. Last July, Agricultural Bank of China raised more than US$22 billion globally. And last month, AIA raised about US$20 billion through its Hong Kong IPO.
Naturally, we also attract smaller-scale IPOs that are equally important to our city, such as (French company) L'Occitane which raised some US$700 million in April while Mongolian Mining raised US$650 million through its IPO last month.
Hong Kong's experience in hosting successful deals of all sizes places us among the most competitive financial platforms anywhere.
This is particularly important for companies who may not be entirely familiar with the lie of the land in Hong Kong and in our region. And, we all know that intimate local knowledge can make or break a big investment.
In Hong Kong, we have all the world-class financial services at your finger tip to ensure a smooth listing, from legal services, insurance services, to banking, accounting and what not. Everything you would expect from an international financial hub.
In fact, Hong Kong consistently ranks third ¡V behind London and New York ¡V in the Global Financial Centres Index. The latest Index also indicates that we are improving and closing the gap on the big two.
This Index measures competitiveness in five key areas, namely: people, market access, business environment, infrastructure and general competitiveness. For a small city such as ours, these have come to represent our ¡§natural resources¡¨.
Hong Kong's large and liquid money markets are a congregation of global liquidity.
We are encouraging more overseas investors to participate in our stock market.
The contribution of overseas investors to total market turnover value remained high at more than 40 per cent, according to a Hong Kong Exchanges & Clearing Limited (HKEx) Survey for the last financial year.
At end-September 2010, market capitalisation of the Hong Kong stock market amounted to some US$2.5 trillion. It is the 6th largest bourse in the world by market capitalization and 2nd in Asia ¡V larger than Singapore, Korea and Taiwan put together.
Turning to Hong Kong's China factor.
Mainland China has enjoyed average annual economic growth of around 10 percent over the past two decades. The world has shared in this economic expansion by investing in China equities under international regulatory standards here in Hong Kong.
"H-shares" are shares of corporations incorporated in Mainland China that are traded in Hong Kong exchange. They mirror the "A-shares" of the same corporations that are traded on the Mainland's stock exchanges.
By issuing both A and H shares, Mainland enterprises gain additional sources of equity funding. Equally important, they also enjoy the international recognition of a listing in Hong Kong, with our stringent international regulatory standards.
The established market discipline in Hong Kong equips Mainland enterprises with international best practice standards in corporate governance, accounting, disclosure as well as management.
Through Hong Kong, enterprises can also gain exposure to intermediaries and investors around the world.
More than 520 Mainland companies are listed in Hong Kong. They account for more than half the total market capitalization of US$1.3 trillion and about 60 per cent of total market turnover.
Hong Kong's advantages as a fund-raising centre extend well beyond Mainland companies.
Investors around the world can benefit from our city's business-friendly environment, globalised markets and internationally benchmarked regulatory regime.
In 2007, we published a joint statement clarifying listing requirements for overseas firms. This provides a clear roadmap so that potential issuers know exactly what to expect.
After three decades of robust economic growth, China is now the world's leading trading entity. Many international corporations with global operations have an interest in the Mainland.
At end-2009, over 120 foreign companies were listed in Hong Kong. The HKEx constantly works with regulators and other stakeholders to streamline the listing process. We have a strong focus on improving market quality and practices, while maintaining our high standards and hard-won reputation.
To help spread the word, we are trying for the first time to launch an international promotion campaign. A conference is currently under way in London highlighting Hong Kong's strengths as China's global financial centre.
This is all part of a series of high level visits and events that are helping to raise Hong Kong's profile as a financial capital. This includes areas such as IPOs and merger-and-acquisition activities.
Russia is a good example of our engagement with international markets in recent years.
HKEx hosted its first large scale listing promotion event in Moscow in June 2008.
In January this year, UC Rusal became the first Russian firm to list in Hong Kong. The aluminium giant raised some US$2.2 billion (HK$17.3 billion) through its Hong Kong IPO.
Indications are that more Russian firms will follow suit, leveraging on our unique characteristics in Asia.
This brings me back to the "added extras" I mentioned earlier. With few natural resources in Hong Kong, we rely on these "added extras" to provide a cornerstone for success.
The first "added extra" is Hong Kong's freedoms. In fact, Hong Kong has been ranked as the world¡¦s freest economy for each of the past 16 years by the Heritage Foundation of the United States.
Our community thrives on a free flow of information and ideas. As a global financial centre, we have a free flow of capital and a fully convertible currency.
Our second "added extra" is our common law legal system. Under the principle of "One Country, Two Systems", Hong Kong maintains our own legal system, which is separate from the Mainland system and underpinned by an independent judiciary. This helps to ensure a secure environment for investors and a level playing field for business.
Point number three is a robust regulatory regime. Hong Kong has weathered many financial crises over the years. Each time our regulatory regime evolves predictably and consistently to meet the needs of a changing environment.
The fourth "added extra" is our low and simple tax system. In Hong Kong, there is no withholding tax on income distribution, no capital gains tax or VAT, and no estate duty. We also have a growing network of comprehensive double taxation agreements with major jurisdictions. These agreements give companies more tax certainty and serve to support their future business development and expansion strategies.
Ladies and Gentlemen, my final topic is Hong Kong's role in the internationalisation of the Renminbi, the Mainland¡¦s currency.
As the Central Government in Beijing maintains a closed capital account, Hong Kong ¡V with its freely convertible currency ¡V has an important part to play in the Renminbi's liberalisation.
At end-June 2010, the Mainland's official foreign currency reserve assets amounted to some US$2.5 trillion.
In recent years, Hong Kong has become a key testing ground for the Mainland¡¦s financial reforms. Today, international use of the Renminbi as a settlement, investment and funding currency is indeed in the spotlight.
In 2004, Hong Kong banks became the first institutions outside Mainland China to conduct Renminbi banking. The scope of services has now increased to include deposit-taking, currency exchange and remittances, credit card services as well as trade settlement.
Hong Kong is also the first and only place outside the Mainland to develop a Renminbi bond market. As of last month, there have been 18 Renminbi bond issues, with more in the pipeline.
Another area of great potential for us is Renminbi trade settlement. Since last June, Mainland enterprises in 20 provinces, and cities have been able to settle their international trade using Renminbi here in Hong Kong.
In the first half of this year, the amount of cross-border Renminbi trade was valued at 67 billion Renminbi, an 18-fold increase from the second half of 2009. Hong Kong now handles 75 per cent of the Mainland's global Renminbi trade.
Renminbi deposits in Hong Kong have grown rapidly as well, in line with the expansion of trade settlement. At the end-September 2010, the outstanding Renminbi deposits in Hong Kong totalled almost 150 billion Renminbi, which is an increase of 1.6 times from a year earlier.
Growing Renminbi liquidity is propelling the development of an emerging offshore Renminbi asset market. New products range from certificates of deposit and fixed income funds to insurance.
And this, I am sure, is just the beginning.
Ladies and Gentlemen, as emerging economies take centre stage with their strong economic fundamentals and growth prospects, more opportunities for financial co-operation are likely to emerge.
Hong Kong is well positioned to develop its markets on three fronts :
First, as an international capital formation centre.
Second, as a leading asset management centre.
Thirdly, Hong Kong will continue to pioneer offshore Renminbi business.
We will develop these areas, not as separate entities, but collectively so they would complement each other with great synergy, and bring maximum benefit to our financial services sector.
We have a rich pool of professional talent, efficient infrastructure and services and strong links to Mainland China. Above all, we facilitate the free flow of both financial and human capital into the Hong Kong market.
This ¡V together with our "added extras" of a free economy, trusted legal system, transparent regulation and low taxes ¡V is Hong Kong¡¦s global advantage.
Finally, we are delighted to have Renaissance Capital as part of our financial "family". I encourage investors from emerging markets around the world to take advantage of Hong Kong¡¦s position as China¡¦s global financial centre.
I wish you all a very successful conference and a great stay in Hong Kong. And don't forget, shop a lot.
Thank you very much.
Ends/Monday, November 15, 2010
Issued at HKT 11:14
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