Budget Speech by the Financial Secretary (6)

Financial Services

Cross-boundary Services

96. Hong Kong is the world's largest offshore RMB business hub, with the world's largest pool of RMB liquidity.  In 2015, RMB trade settlement conducted through Hong Kong banks totalled RMB 6.8 trillion, representing a nine per cent increase over 2014.  RMB lending business also continued to grow.  Outstanding loans amounted to RMB 300 billion at end-2015, representing an increase of 58 per cent as compared with 2014.

97. With the wide use of RMB internationally, there will be growing demand for RMB trade settlement, RMB assets and related financial services which will drive various types of transactions in our offshore RMB market.  We shall continue to explore with the Mainland authorities ways to open up more channels for the two-way cross-boundary RMB fund flows, including the possibility of increasing the investment quota for us under the RMB Qualified Foreign Institutional Investors (RQFII) Scheme.

98. The successful implementation of the Shanghai-Hong Kong Stock Connect and the Mutual Recognition of Funds Arrangement is a key milestone for the mutual capital market access between Hong Kong and the Mainland.  We have discussed with relevant authorities of the Central Government the launch of the Shenzhen-Hong Kong Stock Connect and the enhancement of the Shanghai-Hong Kong Stock Connect.  We are all set with preparatory work and, subject to the announcement of the Central Government, shall implement the programme as soon as possible.

Asset Management

99. Hong Kong is a major asset management centre and investment platform in the Asia-Pacific region.  The business is burgeoning.  As at the end of 2014, the combined fund management business amounted to $18 trillion, representing a year-on-year growth of 10.5 per cent.  Funds from overseas investors continued to increase and recorded growth of nine per cent in 2014, accounting for over 70 per cent of the fund management business.

100. In 2014, I proposed to waive the stamp duty for the transfer of all exchange traded funds (ETF) to promote the development of the ETF market in Hong Kong.  The relevant legislation was passed by LegCo and became effective last year.  The average daily turnover of ETFs in 2015 rose to $8.8 billion, an increase of 86 per cent over 2014.

101. Hong Kong ranked second in Asia in terms of the total capital under management in private equity funds, which amounted to US$120 billion as at September 2015.  We are currently home to 410 private equity firms, of which 350 have their regional headquarters in our city.

102. To promote further the development of the private equity industry, we have allowed private equity funds to enjoy profits tax exemption available to offshore funds.  The aim is to attract more offshore private equity fund managers to set up business in Hong Kong, which will in turn drive the demand for other related professional services.

103. To attract more multinational and Mainland enterprises to establish corporate treasury centres in Hong Kong, we have introduced a bill into LegCo to allow, under specified conditions, interest deductions under profits tax for intra-group financing business of corporations and reduce profits tax of qualifying corporate treasury centres by 50 per cent.

104. We submitted a bill into LegCo in January this year to provide a legal framework for introducing an open-ended fund company structure to further diversify the fund domiciliation platform in Hong Kong.

Green Finance

105. Green financial business investing in environmental projects is gaining attention in the global market.  The development of green finance is also proposed in the Proposal on Formulating the National 13th Five-Year Plan.  The Mainland's financial institutions are actively promoting relevant financing products such as green bonds to raise capital for environmental projects with a long payback period, such as renewable energy technology, waste treatment and sewage treatment.  To encourage the participation of the financial sector, we shall strengthen our efforts to publicise our competitive capital market and highlight our edge in developing green financial products.  AA will also explore the feasibility of financing through green bonds.

Securities Market

106. Last year, Hong Kong ranked first globally in terms of funds raised through initial public offerings, which amounted to $260 billion, representing an increase of 12 per cent over 2014.  Given the size and complexity of the securities market, we need to constantly review the relevant regulatory regimes, streamline procedures and enhance market efficiency and quality to reinforce Hong Kong's status as the premier capital formation centre.  SFC and the Hong Kong Exchanges and Clearing Limited are planning to conduct shortly a joint public consultation exercise on enhancing the regulatory structure in respect of listing matters.

Retail Bonds

107. We have launched five issuances of inflation-linked retail bonds (iBond) since 2011 under the Government Bond Programme.  The issuances have all been well received and have enhanced people's understanding of and interest in retail bonds.  I shall launch another iBond issue of up to $10 billion with a maturity period of three years following the existing practice.  HKMA will announce the details in due course.

(To be continued.)

Ends/Wednesday, February 24, 2016
Issued at HKT 11:54