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Speech by CE at HSBC breakfast meeting in São Paulo, Brazil (English only) (with photo)

     Following is the speech by the Chief Executive, Mr Donald Tsang, at HSBC breakfast meeting in São Paulo, Brazil, today (April 17, São Paulo time):

Distinguished guests, ladies and gentlemen,

     I am delighted to join you all this morning. It is wonderful to be here in Brazil.
     HSBC has its headquarters in London and branches in São Paulo and around the globe, while the bank's deepest roots are in Hong Kong.

     The company's founder Thomas Sutherland showed great vision when he established the first offices of the Hong Kong and Shanghai Banking Corporation in our city in 1865.

     Since then, the bank has been closely connected with Hong Kong's transformation from a small fishing village in the mid-19th century to a major manufacturing hub in the 1960s and '70s. More recently, Hong Kong has emerged as a leading international business and financial centre.

     Hong Kong is now ranked alongside London and New York as an international financial centre, while HSBC has become, in its own words, "the world's local bank".

     Given the growing links between South America and Asia and in particular with Mainland China, there is huge potential to grow our bilateral trade and investment.

     Hong Kong is the premier international gateway to the Mainland. Our city thrives on the rule of law, with free flows of capital, ideas and information. We have a low and simple tax regime with profits tax of 16.5 per cent and salaries tax capped at 15 per cent. There is no VAT or GST, no estate duties and no capital gains tax. Only income sourced in Hong Kong is taxed in Hong Kong.

     Our regulators at the Securities and Futures Commission and the Hong Kong Monetary Authority work hard to maintain a highly transparent and effective regulatory environment.

     All this has provided a solid foundation for our growth and prosperity over the years. Today, Hong Kong is home to about 7 000 companies from Mainland China and around the world. They can take full advantage of our free and open economy as well as our proximity to, and close integration with, the Mainland.

     Allow me to highlight three areas that illustrate Hong Kong's strengths as an international business hub and as China's global financial centre.

     First, cross-boundary collaboration with our immediate neighbours in the Mainland province of Guangdong has been increasing. Guangdong Province alone has a population of over 100 million people, which is about half that of Brazil.

     In 2010, we signed a Framework Agreement on Hong Kong/Guangdong Co-operation. This reflects our shared commitment to break down barriers to trade and investment across the boundary. The Framework Agreement reaffirms Hong Kong's status as a global centre for finance, trade and logistics.

     By combining our city's strengths with those of Guangdong, we aim to establish the Pearl River Delta (PRD) region as one of the most competitive regions in the world by 2020.

     Second, as China's global financial centre, Hong Kong is fully engaged with the Central Government in the liberalisation of the Mainland currency, the Renminbi.

     We bring to the table what no other Chinese city has íV a freely convertible currency and free flows of capital and information. Our financial system is highly transparent and fully aligned with international best practice. We also have an efficient multi-currency, real-time gross settlement system. This makes it possible to handle massive volumes of currency transactions safely and efficiently.

     Offshore Renminbi banking in Hong Kong has been gathering momentum since its launch in 2004. Currently some 130 authorised institutions in Hong Kong offer Renminbi services including deposits, remittances, credit cards and checking accounts. Total Renminbi deposits in Hong Kong at the end of January were around RMB576 billion. That is equivalent to about 166 billion Brazilian Real.

     The Central Government also introduced a Renminbi trade settlement pilot scheme in 2009. Last year, the scheme was expanded to cover the whole of China. This scheme has been a game changer in the internationalisation of the Renminbi. Since last August, Brazilian companies and firms around the world have been able to settle trade using Renminbi with their business partners in each and every Mainland province.

     Since the launch of the scheme, banks in Hong Kong have handled over RMB2.4 trillion worth of trade settlement, representing more than 80 per cent of the total value of trade settled in Renminbi. One thing I have to highlight is the pace of development in this respect. Back in 2009, the total amount of Renminbi trade settlement conducted through banks in Hong Kong was just RMB1.9 billion. In just two years' time, the figure jumped to RMB1.9 trillion, i.e. a growth of more than a thousand times. Brazilian firms settling their trade in Renminbi can reduce exchange rate risks and costs and become more attractive to Mainland buyers and suppliers.

     The third strength íV after cross-boundary connectivity and Renminbi liberalisation íV is Hong Kong's position as a capital-raising platform.

     A growing number of foreign firms are raising Renminbi capital in Hong Kong to finance their operations in Mainland China. Fast-food giant McDonald's Corporation became the first non-financial overseas company to issue a Renminbi corporate bond in Hong Kong in 2010. This opened up a whole new funding channel for overseas companies operating in the Mainland.

     Up to the end of February this year, there have been 134 Renminbi bond issues in Hong Kong with a combined value of RMB198 billion or around 57 billion Real.

     Another attractive option is to list on our stock market. The Hong Kong Exchanges and Clearing Limited, or HKEx, is the sixth largest exchange in the world and second largest in Asia by market capitalisation. The market cap is around US$2.5 trillion, which is larger than Korea, Singapore and Malaysia combined. Situated in the Asian time zone íV midway between European and American markets íV Hong Kong is a key player in the 24-hour global trading cycle.

     Over 1 500 firms are listed in Hong Kong, with over 40 per cent of them being Mainland Chinese companies.

     I should also mention that companies engaged in the resources sector account for about 15 per cent of our stock market's total capitalisation. The Mainland's energy-hungry growth, combined with Hong Kong's experience in handling Mainland-related investments, makes our city an ideal listing platform.

     Brazilian firms wishing to raise capital in Hong Kong can launch initial public offerings (IPOs) or secondary listings or issue depository receipts.

     In 2010, Brazilian mining giant Vale SA became the first ever foreign company to issue Hong Kong depository receipts.

     The HKEx recently updated its Listing Rules for mineral and exploration companies. This provides more clarity and aligns our Listing Rules with international standards. I hope it will also encourage more resources companies from Brazil to consider taking advantage of the capital-raising opportunities in Hong Kong.

     In addition to Vale SA, resources companies from Russia, Mongolia and Kazakhstan as well as Swiss-based commodities trading company Glencore are listed in Hong Kong.

     Beyond the resources sector, there are also opportunities for Brazil's top brands to gain more exposure in Asia by listing on our stock market. Prada of Italy, L'Occitane from France and US firm Samsonite have taken the plunge in the past couple of years. I hope we will see Brazil's leading brands leveraging on our city's financial services to reach investors and consumers in our region.

     For each of the past three years, Hong Kong has led the world in terms of IPO funds raised. Last year alone total IPO funds raised in Hong Kong exceeded US$33 billion. HSBC is a leading player in our IPO market. According to figures from Bloomberg, HSBC's share of Hong Kong's IPO market reached 7.7 per cent last year.

     Significantly, Brazil and China are members of the BRICS group of major emerging economies, together with Russia, India and South Africa.

     Given the uncertain economic situation in developed markets in the West, investors are increasingly looking to emerging economies in Asia and here in South America for growth potential.

     In October last year, five stock exchanges from the BRICS group forged an alliance to promote investment. The HKEx and the BM&FBOVESPA here in São Paulo are part of this alliance. 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 in, and exposure to, investment opportunities in our dynamic markets.

     Ladies and gentlemen, I have mentioned some of the ways that Brazil and Hong Kong can further deepen our business and financial links. This is a great time to foster closer relations and take full advantage of the shifting focus of the global economy.

     I see huge opportunities for our investors and our companies from closer ties between Brazil and Hong Kong. We will continue working towards this goal.

     Thank you very much and I wish you all every success in the years ahead.

Ends/Wednesday, April 18, 2012
Issued at HKT 00:44


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