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Following is the speech by the Financial Secretary, Mr John C Tsang, at the Investec Bank Luncheon in Johannesburg, South Africa, today (December 7, South Africa time):
Distinguished Guest, Ladies and Gentlemen,
Good afternoon.
I am delighted to join you all for this luncheon.
First of all, thank you for your keen interest in Hong Kong and for warmly welcoming me and my delegation to South Africa.
South Africa is known around the world for its natural beauty, fantastic wildlife, great wines and diverse culture. It is, indeed, a "world in one country".
While Investec Bank was founded here in 1974, it has also been expanding its operations in Hong Kong, including moving into new office space in May in one of the most premium office space, IFC II. I also wish to congratulate you on the acquisition of Access Capital Limited earlier this year. All this is a sure sign of Investec's confidence in Hong Kong and commitment to our city's financial sector.
I can assure you that your bank's confidence in our city is well placed.
I have also learned that Investec is a great supporter of South African culture and, in particular, sport. Of course, South Africa is one of the world's great sporting nations, successfully hosting the Soccer World Cup last year and the Rugby World Cup in 1995. I recall emotional images of Nelson Mandela pulling on a Springbok rugby jersey during your team's victory celebrations in 1995. Materials that make great movies.
By sheer coincidence the South Africa Rugby Sevens takes place this weekend at Nelson Mandela Bay Stadium in Port Elizabeth. I mention this because the event is part of the World Sevens Series which was inspired by the success of the famous Hong Kong Rugby Sevens.
All this talk of sport also gives me a good reason to discuss Hong Kong's role as a team player in the financial world, and an excuse to throw in some iffy sporting puns as well.
So allow me to – dare I say – kick off with some of the strengths that Hong Kong brings to the world of finance.
First of all, we have a level playing field for business. I don't mean this as a sporting pun, but as a reality. All of our companies – large and small, local and foreign companies – are treated equally. That includes some 7,000 firms from Mainland China, South Africa and around the world that have operations in our city.
In Hong Kong, there is no restriction on the amount of capital companies can hold or its denomination. Our liberal immigration policies encourage a free flow of talent. All firms in Hong Kong are subject to the same rules and transparent regulations, and they pay the same levels of tax, which I should mention are set at extremely competitive rates. Profits tax is capped at 16.5 per cent and people pay no more than 15 per cent salaries tax. We have no capital gains tax, no inheritance tax, no VAT, no GST. We even have zero duties on wine imports.
These are some of the aspects that contribute to Hong Kong's ranking as the world's freest economy for the past 17 years.
Now … most rugby coaches will tell you that it is not the strength of individual players that counts, but how they work as a team.
Hong Kong is a full-fledged member of "Team China". As a city in China but outside the Mainland, Hong Kong has become the premier international gateway into and out of the Mainland. Not only is this the case for trade and finance, but also for new innovations, education collaboration and cultural exchange, among many other areas.
As a gateway for investment, Hong Kong provides a strong and reliable link for foreign companies to tap wealthy investors in Mainland China and across Asia. At the same time, Mainland firms listing in Hong Kong are able to reach international investors in their quest to "go global".
Our stock market, the Hong Kong Stock Exchange, the HKEx, is the seventh largest exchange in the world and third largest in Asia with market capitalisation of around US$2.1 trillion.
Currently almost 1,500 firms are listed in Hong Kong and the number is growing steadily. Over 40 per cent of Hong Kong listings are Mainland Chinese companies. Another interesting fact is that companies engaged in the resource sector account for about 15 per cent of our stock market's total capitalisation.
Given that South Africa is a mineral-rich country and the Mainland is a huge consumer of natural resources, I see significant opportunities for South African firms to raise capital in Hong Kong. They can launch IPOs or secondary listings or issue depository receipts.
In just the last couple of years, major resource companies from different corners of the globe have seized this chance to reach investors in our neck of the woods.
These include enterprises from Russia, Mongolia and Kazakhstan as well as Swiss-based company Glencore which is the world's largest commodities trading firm.
Last December, Brazilian mining giant Vale SA became the first company to issue Hong Kong depository receipts.
This trend is not a coincidence. It is the result of our new initiatives and various promotions targeting the international resource sector.
In June last year, the HKEx updated the Listing Rules for mineral and exploration companies to provide more clarity. Our Listing Rules are in line with international requirements, such as those adopted in South Africa as well as Canada and Australia.
I hope that it will also encourage resource companies from South Africa to consider taking advantage of the capital-raising opportunities in Hong Kong.
I also believe there are promising opportunities for South African brands to gain more exposure in Asia by listing on our stock market. Recently, famous names in fashion from Italy, France and the US have enjoyed successful listings in Hong Kong. As well as attractive valuations and international standards, a Hong Kong listing helps companies reach a potential market of 1.3 billion customers in Mainland China.
Hong Kong has ranked number one in the world for total IPO funds raised in each of the past two years.
Ladies and Gentlemen, as you know South Africa is a member of the BRICS group of major emerging economies, alongside Brazil, Russia, India and China. Given the uncertain economic situation in developed markets in the West, investors are increasingly looking to our emerging economies for maximum growth potential.
In October, we were pleased to forge an alliance with exchanges in other BRICS economies, including the Johannesburg Stock Exchange.
This is a joint initiative to cross-list our respective benchmark equity index derivatives. We also intend to develop products to track these BRICS exchanges. This will give investors more confidence and opportunity to invest in our dynamic markets.
My final topic today is another link-up between Hong Kong and the Mainland that is important to the global financial game plan.
Hong Kong is front and central in the rapid liberalisation of the Mainland currency, the Renminbi.
This involves three key areas of offshore Renminbi business, namely banking, capital-raising and trade settlement.
Since its launch in Hong Kong in 2004, Renminbi banking has really taken off. Today, Renminbi deposits in Hong Kong are around 620 billion Yuan. That is about double the amount at the start of this year. Some 130 authorised institutions are engaged in Renminbi business including deposits, remittances, credit cards and checking accounts.
In 2007, Hong Kong became the first and only place to have an offshore Renminbi bond market. This represents a new funding channel for foreign firms to finance their China operations. Multi-national companies, including McDonald's and Caterpillar were among the first foreign firms to issue these "dim sum" bonds as a brand new fund-raising vehicle. I encourage South African companies to consider exploring this option. In the first 10 months of this year, 71 issuances had raised a total of 92 billion Renminbi.
Ladies and Gentlemen, Hong Kong may not be the biggest player in the field of global finance. But, we are a fast-paced, open and nimble economy. This means that we can react quickly to new opportunities and provide world-class support for our partners in Mainland China and around the world, including here in South Africa.
Finally, I would like to wish Investec Bank continued prosperity in South Africa and in its operations in Hong Kong.
I also hope that you will come and visit us in Hong Kong soon. Perhaps you could come for the Hong Kong Rugby Sevens in March next year. I am sure that you will not be disappointed.
Thank you very much.
Ends/Wednesday, December 7, 2011
Issued at HKT 21:33
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