************************************************************
Following is the speech by the Financial Secretary, Mr John C Tsang, at the 2nd Annual Emerging Markets Conference held by Renaissance Capital this morning (November 29):
Stephen (Jennings, CEO Renaissance Group), Jeremy (Sparrow, CEO Renaissance HK), Ashley (Alder, Chief Executive Officer of Securities and Futures Commission), distinguished guests, ladies and gentlemen,
Good morning.
I am delighted to join you all again this morning. I had the pleasure of speaking at the first Conference last year and it is indeed great to be back. Congratulations to Renaissance Capital on staging your second Annual Emerging Markets Conference here in Hong Kong.
This time last year, traditional markets in the West, including Europe and the US, were in the doldrums, but there was some light at the end of the tunnel. Today, if the light is still visible, it can at best be described as flickering. Financial instability in the Eurozone has turned into political instability in some countries, while high unemployment remains a great concern in the US.
Given the general uncertainty in developed markets, the focus continues to shift towards emerging and developing economies around the world.
Don't just take my word for it. In its growth forecast in September, the IMF predicted emerging economies to grow by a healthy 6.4 per cent this year and 6.1 per cent next year. This would account for over three-quarters of global economic growth in total.
By comparison, the IMF growth forecast for advanced economies is 1.6 per cent next year, with fiscal consolidation and high unemployment rates expected to drag growth down further.
Speaking at the APEC CEO Summit in the US earlier this month, President Hu Jintao said, and I quote, "The new global economic governance structure should reflect changes of the world economic landscape, follow the principles of mutual respect and collective decision-making and increase the representation and voice of emerging markets and developing nations." End quote.
There is much room for emerging economies to take up a bigger role in jointly promoting balanced, inclusive, innovative, sustainable and safe growth in the global economy.
As China's global financial centre and as the premier international gateway to the Mainland, Hong Kong has an important role to play in this changing economic landscape.
To fortify linkages with the emerging economies, Hong Kong will continue to further strengthen its trade and investment co-operation with these new partners.
This will also help our entrepreneurs to achieve a more diversified business portfolio, rather than being overly reliant on our traditional developed markets in the West.
In October the Hong Kong stock exchange, the HKEx, together with exchanges in Brazil, Russia, South Africa and India, announced an initiative to cross-list our respective benchmark equity index derivatives.
The idea is to develop products that track the exchanges in the so-called BRICS group of emerging economies and strengthen the financial links between us.
I have had the privilege of visiting each one of the original BRIC group of emerging economies in recent years, namely, Brazil, Russia, India and China. I will complete the new five-member set next month when I shall be leading a business delegation to visit the newest member of BRICS, South Africa.
During my contacts with counterparts in various emerging markets, I have been encouraged by the collective consensus that we are all in the state of economic weakness together; we must recover together and we must move forward together.
So what does Hong Kong bring to the table? This question brings me to the main theme of my talk today. That theme is: "The rapid growth of Hong Kong as a dominant financial centre".
In 2009 and 2010, Hong Kong led the world in total funds raised through IPOs. The situation this year seems to have been greatly affected by the current less than satisfactory global stock market performance. But despite the current market volatility, more IPOs are coming on stream, and we still have a sizeable queue.
Hong Kong is also the leading centre for burgeoning offshore Renminbi business and a frontrunner for asset management business in Asia. In its October edition, Banker magazine named Hong Kong as the "financial centre with best prospects".
We also remain in the top three, alongside London and New York, in the Global Financial Centres Index.
Our robust regulatory and legal frameworks, simple and transparent tax system and access to global clients and markets underpin our position as a leading financial hub.
Importantly, we have the full backing of the Central Government in Beijing to develop Hong Kong into China's global financial centre.
The National 12th Five-Year Plan adopted in March specifically supports Hong Kong's development as an offshore Renminbi business centre and an international asset management centre.
During his visit to Hong Kong in August this year, Vice-Premier Li Keqiang announced a range of measures to propel the growth of local financial markets and institutions. We are working very closely with relevant Mainland authorities, our financial regulators and the markets for early implementation of these measures.
A common factor among BRICS economies is natural resources - in terms of both demand and supply. I am pleased to see some friends here today who represent resource companies that are listed in Hong Kong.
Our efforts in attracting mineral company listings have been well received. Last year, Mr Robert Friedland, Executive Chairman of Ivanhoe Mines, predicted that Hong Kong would "become the largest mining finance market in the world." I mention this because Mr Friedland will be one of the panellists in the first discussion session this morning. I am sure that it will be an interesting one.
In June last year, HKEx introduced new listing rules for resource companies. Our aim is to strengthen the role of HKEx as the key international capital market for mining and natural resource firms.
The response has been positive indeed. Overseas companies listing here in the past couple of years include UC Rusal of Russia, SouthGobi Resources which is owned by Canada's Ivanhoe Mines, Mongolian Mining, and Kazakhmys of Kazakhstan.
Last December, Brazilian mining company Vale SA became the first foreign company to issue depository receipts in Hong Kong.
As at the end of September, 169 companies listed in Hong Kong were pure metals and mining or energy companies. Companies listed in HKEx engaged in the mining and resource sectors account for about 17 per cent of total market capitalisation, which is about US$2.1 trillion.
To broaden the source of listings, HKEx is reviewing all requirements for overseas companies, including those seeking secondary listings in Hong Kong. We will further assist overseas companies to list in Hong Kong, without compromising the standard for listing, particularly with regard to investor protection.
Finally, allow me to switch gears and talk a bit about our offshore Renminbi business.
This is an exciting development in Hong Kong's positioning as a leading international financial centre. Hong Kong is a testing ground and firewall for many financial reforms in Mainland China, including in the internationalisation of the Renminbi.
There has been significant progress in developing offshore Renminbi business this year. Total Renminbi deposits in Hong Kong have almost doubled since the beginning of this year. The amount currently exceeds 620 billion Renminbi.
Hong Kong is also the first and only place outside the Mainland to have a Renminbi bond market. Over 70 batches of Renminbi bonds, valued at around 93 billion Renminbi, were issued during the January to October period this year.
Most recently, Hong Kong has also become the premier centre for Renminbi cross-border trade settlement. In the first nine months of this year, Hong Kong banks handled over 1.3 trillion Renminbi of trade settlement. That accounts for over 80 per cent of all trade settled in Renminbi. To put this in perspective, about 10 per cent of trade in China is now settled in RMB, rising from almost zero about a year ago
Recent developments using Renminbi in foreign direct investment and bond issuance by non-financial Mainland companies will add further momentum to our offshore Renminbi market.
Just last week, the People's Bank of China increased by 100 per cent its currency swap arrangement with Hong Kong to 400 billion Renminbi. This will help provide ample liquidity and maintain stability in our offshore Renminbi market.
We will continue to promote the use and circulation of Renminbi funds. We will also strengthen our links with the onshore Renminbi market in the Mainland through the three "bridges" of trade, direct investment and portfolio investment.
Ladies and gentlemen, with free flows of capital, talent, information and ideas; with our close integration with the Mainland of China; with strong links to the emerging markets; and with a strong commitment to connect the Mainland's rapidly developing economy to the rest of the world, Hong Kong is the perfect location for this conference and for the companies represented here.
I wish you all a successful Emerging Markets Conference and an enjoyable stay here in Hong Kong.
Thank you very much.
Ends/Tuesday, November 29, 2011
Issued at HKT 11:24
NNNN
Windows Media format
Flash format