As an international financial center, Hong Kong development in the past eight years has been encouraging and it is gaining further momentum to continue.

Stock, bond, insurance, and foreign exchange market have all demonstrated strong and sustainable growth since Hong Kong returned to the motherland in 1997.

Paul Chow, chief executive of Hong Kong Exchange (HKEx) has said that June set another record for HKEx as total funds raised through companies' initial public offering (IPO) is expected to surpass 50 billion HK dollars (6.4 billion US dollars), highest amount for a single month.

Hong Kong ranked the first in Asia and the third in the world last year in terms of capital raised with total IPO and post-IPO equity funds reaching some 265 billion HK dollars (34.4 billion US dollars).

"Ten years ago, who would ever imagine that Hong Kong could raise more funds than London and Tokyo," Hong Kong Financial Secretary Henry Tang has said.

Meanwhile, market capitalization also hit a new high of about 6,650 billion HK dollars (855 billion US dollars) at the end of last year, nearly 50 percent higher than that of the pre-1997 level.

Hong Kong banks have enjoyed better profitability in the past eight years.

Statistics provided by Hong Kong Monterey Authority show that aggregated pre-tax operating profit of retail banks in 2004 rose to 1.3 percent from less than 0.9 percent when the Asia Financial Crisis swept the region.

The profitability attracted most of the world's leading banks to operate in the city. So far, among the world's 100 largest banks operate in Hong Kong, 75 percent conduct business here.Compared with their counterparts in other regions, Hong Kong banks boast a minimum adequacy ratio of 16 percent, far beyond the international capital adequacy framework -- the Basel Committee's requirement of 8 percent.

Most fund-raising activities in Hong Kong are carried out through banking facilities and the stock market. The relatively weak bond market, in Henry Tang's eyes, means that "the market hasample room to develop".

In the past few years, Hong Kong Special Administrative Region government has led several initiatives to develop the local as well as regional bond market.

Last July, Hong Kong government launched its 20 billion HK dollars (2.6 billion US dollars) global bond offering. This was the largest dual-currency and multi-tranche offering from the region available to both retail and institutional investors. It also generated the largest subscription and issue amounts for a retail bond offering in Hong Kong.

Hong Kong's foreign exchange reserves remained the world's seventh largest in May at 122.4 billion US dollars. Meanwhile, Hong Kong ranks the sixth largest Forex market in the world, and seventh largest market for the over-counter Forex derivatives.

Like banks, the insurance companies prosper in Hong Kong. The total revenue premiums of long-term in-force business collected by the insurance industry hit one trillion HK dollars last year.

Hong Kong is already a major asset management center in Asia.In 2003, total assets of fund management business amounted to 2,950 billion HK dollars (380 billion US dollars), of which 1,860 HK dollars (239 billion US dollars) were sourced from overseas investors and accounted for 63 percent of the total.

"The potential to expand our asset management business remains considerable, given the vast pension scheme assets held by banks, fund managers and insurance companies in Asia, coupled with thecontinued growth of personal saving in the mainland," said Henry Tang when announcing the 2005/06 Budget in March.

It is not an coincidence for Hong Kong to succeed in all thesefinancial sectors. For 11 consecutive years, Hong Kong ranks as the freest  economy in the world by the Heritage Foundation. Thecity also ranks the second most competitive economy in the world and the most competitive in Asia according to the World Competitiveness Yearbook 2005 released by the International Institute for Management Development in May.

According to Henry Tang, Hong Kong's virtue lies with its business-friendly environment for all firms to compete on alevel-playing field while maintaining an appropriate regulatory regime to ensure the integrity and smooth functioning of a free market. 

Observers say that besides sound legal and regulatory framework, the Chinese mainland factors also add Hong Kong's attraction as an international financial center.

By the end of March, over 300 mainland companies are listed inHong Kong, representing 28 percent of the number of listed companies, and 30 percent of the market value.

The impact of Chinese mainland companies on Hong Kong stock market is not limited within these figures. While granting themselves a new channel of fund raising, mainland companies are propelling the development and stability of Hong Kong financialindustry.

According to Charles Lee Yeh-Kwong, chairman of Hong Kong Exchange,  Hong Kong has already demonstrated the will to continue to enhance its position as the premier international capital formation center for mainland companies.

Improving the financial regulatory system, enhancing corporate governance, promoting the bond market, reinforcing RMB business, promoting asset management, these are the five must-dos on Henry Tang's top agenda as he outlined in his Budget speech.

"I hope that the foregoing measures will encourage the further development of our financial services industry and strengthen our position as an international financial center," he said.

Source: Xinhua