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Following is the speech by the Chief Executive, Mr Donald Tsang, at a business luncheon co-organised by the Indian Banks' Association and the Indian Chamber of Commerce in Mumbai, India today (October 29):
Distinguished guests, ladies and gentlemen,
How time flies! This is the last full day of my visit to India.
First, I would like to thank you for your warm hospitality. I am also grateful to the Indian Banks' Association and the Indian Chamber of Commerce Hong Kong for organising this luncheon.
In the past few days I have experienced some of the joys of India, the warm friendship of its people and, of course, plenty of great Indian cuisine. During meetings with government officials and business leaders in New Delhi and here in Mumbai, I have been encouraged by our mutual appetite for stronger bilateral relations between India and Hong Kong.
I am sure that our closer co-operation will add up to a win-win for both sides.
The great thinker Albert Einstein once said that "We owe a lot to the Indians, who taught us how to count, without which no worthwhile scientific discovery would have been made."
I should admit from the outset, that bankers generally know a lot more about counting than politicians. But when it comes to discovering what makes an international financial centre, I am sure that we are all on the same page.
Hong Kong in New Financial Order
This latest global financial crisis has transformed the international economic landscape. The centre of economic gravity has shifted from traditional markets in the West towards Asia – and particularly toward India and China.
Our two nations are widely predicted to provide a twin-engine for global economic growth in the next decade. You don't have to be Albert Einstein to understand how closer links between us will give both of our economies a turbo boost.
Hong Kong not only enjoys a reputation as an international business and financial centre, our city is also China's most important centre for global finance.
Under the principle of "One Country, Two Systems" Hong Kong nurtures all the key ingredients for a successful banking and financial hub.
We have a free flow of information, ideas and capital as well as a highly transparent regulatory regime. Our low and simple tax systems mean that companies pay no more than 16.5 per cent profits tax and salaries tax is just 15 per cent. There is no VAT, no GST, no capital gains tax and no death duty in Hong Kong.
Our common law legal system is based on the English system and underpinned by an independent judiciary.
Hong Kong's financial services sector has evolved steadily by adopting international standards and adhering to international best practices. In turn, this has helped to attract overseas financial institutions aiming to harness the business potential in the region.
Since 2005, the Hong Kong Monetary Authority has granted banking licences to eight Indian banks. Currently, no less than 13 Indian authorised financial institutions operate in Hong Kong.
Overall, about 70 of the world's largest 100 banks have operations in Hong Kong.
What sets Hong Kong apart in the region is its ability to converge the unique "China advantages" and "global advantages" and generate an ever changing range of new products and services that has benefited not only Hong Kong and the Mainland of China, but also the rest of the world. This reinforces Hong Kong's status as the preferred platform to carry out both China-related activities in the global financial arena, and also global operations in the Greater China market.
We make full use of our competitive advantages in areas such as asset management, offshore Renminbi business and capital formation functions, attracting and anchoring capital and talent from within and outside the country.
What does this mean for Indian investors?
HK as a capital raising platform
Hong Kong has a strong and growing reputation as a capital raising centre with access to fast-growing capital markets and a first-class reputation for handling Initial Public Offerings or IPOs of all sizes.
In July, the Agricultural Bank of China staged a dual listing in Hong Kong and Shanghai that raised a world record US$22 billion.
Last year, Hong Kong ranked number one in the world for IPO funds raised. Total funds raised in Hong Kong through IPOs exceeded US$31 billion in 2009.
Hong Kong is a relatively small place geographically, and our population of seven million is about half that of Mumbai. Nevertheless, we consistently rank alongside London and New York as an international financial centre. And the latest Global Financial Centres Index shows Hong Kong gaining ground on London and New York.
The Hong Kong stock market is the seventh largest in the world and third largest in Asia by market capitalisation. Market cap stood at US$2.3 trillion at end-September.
Hong Kong's suitability as a capital-raising centre for Indian firms is supported by our market liquidity, attractive valuations and access to investors in Mainland China and throughout Asia.
The Stock Exchange of Hong Kong continuously strives to streamline the listing process, without compromising our market quality.
To better cater for market needs, improve transparency and enhance corporate governance, our Stock Exchange recently updated the listing rules for minerals and exploration companies. This helped to put our regulatory framework with respect to these companies on a par with international standards.
I believe there are huge advantages for companies, especially those from the so-called "BRIC" group of emerging economies, namely, Brazil, Russia, India and China.
More than one third of companies listed in Hong Kong are Mainland Chinese firms and the first Russian corporation was listed in Hong Kong earlier this year. Other Russian listings are in the pipeline.
I hope companies from India will also test the water for a listing in Hong Kong.
HK as a RMB Biz Centre
Turning to another area of great potential for Hong Kong - Renminbi business.
Earlier this year, the Central Government in Beijing gave the green light for companies around the world, including Indian companies, to settle trade with the Mainland using Renminbi.
Here we have a good head-start on other financial centres.
Since 2004, Hong Kong banks have been able to offer a growing range of Renminbi services. Today, these services include Renminbi deposit-taking, currency exchange, remittances, credit and debit cards, cheques, corporate loans, bond issuance and trading, and trade settlement and related services.
And in 2007 Hong Kong became the first, and only, place outside the Mainland to have a Renminbi bond market.
At end-August this year, our total Renminbi deposits amounted to more than RMB130 billion. Please remember that this is just the start of a potentially huge area of business for us.
I hope Indian firms will take advantage of Hong Kong financial infrastructure and experience in this area by settling their Mainland trade transactions in Renminbi.
HK as an Asset Management Centre
Hong Kong has already established itself as a major asset management centre in Asia. There were some 2,000 authorised unit trust and mutual funds in Hong Kong and their Assets Under Management amounted to around US$1 trillion in 2009, a 45 per cent surge from 2008.
Following the global financial crisis, Mainland China's robust economy has helped drive the overall economic recovery of Asia. This has created exciting investment opportunities in the region and opened the door to new markets.
More institutional investors are giving greater weight to Asia in their investment portfolios and choosing to establish footholds in Asia as the platform for their investment.
Equipped with world-class hard and soft infrastructure, including a strong asset management foundation, and benefiting from a huge demand for wealth and asset management services in the Mainland, Hong Kong is well placed to be Asia's premier asset management centre.
We welcome more Indian companies and investors to leverage on Hong Kong's asset management services to capture the opportunities presented by the reshuffling of the global financial order.
Closing
Ladies and gentlemen, India, with its robust economic growth, rapidly increasing middle class and entrepreneurial spirit, has grabbed the limelight of emerging markets in recent years.
China too is drawing attention because of its huge growth potential, liquid markets and the liberalisation of its currency.
As a global business and financial centre, Hong Kong provides a stable and dynamic bridge linking our two nations.
Although I am coming to the end of my trip to India, I am confident that the post-financial crisis era marks the start of a new and strong relationship between India and Hong Kong.
Thank you very much.
Ends/Friday, October 29, 2010
Issued at HKT 17:08
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