1 HKEx Year-end Review 2003 Paul Chow Chief Executive, Hong Kong Exchanges and Clearing Limited 22 December 2003

2 HKEx 2003 Market Highlights Securities Market Change (As of 18 Dec)(year-end)(%) Funds raisedHK$ bil*110.5 bil86.61 Main Board:HK$ bil101.4 bil99.01 GEM:HK$ 4.4 bil9.1 bil Funds raised by IPOsHK$ 57.8 bil52.0 bil11.15 Main Board:HK$ 55.7 bil45.0 bil23.78 GEM:HK$ 2.1 bil7.0 bil Funds raised in the secondary market HK$ bil^58.5 bil Main Board:HK$ bil56.4 bil GEM:HK$ 2.4 bil2.1 bil14.29 ^ Include funds raised by issue of new shares only * Figures may not add up due to rounding

3 HKEx 2003 Market Highlights (contd) Securities Market Change (As of 18 Dec)(year-end)(%) Funds raised in H-share and red-chip markets HK$ 50.8 bil70.8 bil Main Board:HK$ 49.4 bil69.6 bil GEM:HK$ 1.4 bil1.2 bil16.67 New listings Main Board:45^60^ GEM: No. of listed companies Main Board: GEM: 1, ^ including two and six GEM companies that have switched to the Main Board for listing in 2002 and 2003 respectively

4 HKEx 2003 Market Highlights (contd) Securities Market Change (As of 18 Dec)(year-end)(%) Average daily turnover in the secondary market HK$ bil 6.65 bil54.74 Main Board:HK$ bil6.47 bil56.72 GEM:HK$ 0.15 bil0.18 bil Closing Hang Seng Index World ranking (in terms of market capitalisation) Eighth*Tenth * as of end Oct

5 HKEx 2003 Market Highlights (contd) Derivatives Market Change (As of 18 Dec)(year-end)(%) Total Volume (Contracts) Total Futures7,844,5656,228, HSI Futures Record high daily volume: 104,534 contracts (26 Aug 03); 6,523,7814,802, Mini-HSI Futures Record high daily volume: 8,868 contracts (25 Sep 03); Record high open interest: 4,256 contracts (12 May 03) 1,222,7961,107, H-shares Index Futures (Introduced on 8 Dec 03) 21,934N/A

6 HKEx 2003 Market Highlights (contd) Derivatives Market Change (As of 18 Dec)(year-end)(%) Total Options6,184,0894,801, HSI Options Record high daily volume: 20,382 contracts (31 Mar 03) Record high open interest: 150,256 contracts (27 Mar 03) Stock Options Record high open interest: 798,161 contracts (18 Dec 03) 2,085,498 4,067,090 1,070,431 3,724, Mini-HSI Options (Introduced on 18 Nov 02) 31,5016,

Milestones March Launched S&P/HKEx LargeCap Index and S&P/HKEx GEM Index Amended guidelines for gambling activities undertaken by listing applicants and/or listed issuers March Launched S&P/HKEx LargeCap Index and S&P/HKEx GEM Index Amended guidelines for gambling activities undertaken by listing applicants and/or listed issuers March June Revised organisation structure to improve operational efficiency Prioritised development projects June Revised organisation structure to improve operational efficiency Prioritised development projects June January Published consultation conclusions on proposed amendments to the Listing Rules relating to corporate governance issues Held listing promotion conference in Harbin January Published consultation conclusions on proposed amendments to the Listing Rules relating to corporate governance issues Held listing promotion conference in Harbin January April Formed new board of directors and re-appointed Charles Lee as Chairman Signed MOU with SHFE on development of energy derivatives Appointed Paul Chow as Chief Executive Abolished some fees for Exchange Participants Amendments to Main Board and GEM Listing Rules and new disclosure of interests mechanism became effective with the SFO April Formed new board of directors and re-appointed Charles Lee as Chairman Signed MOU with SHFE on development of energy derivatives Appointed Paul Chow as Chief Executive Abolished some fees for Exchange Participants Amendments to Main Board and GEM Listing Rules and new disclosure of interests mechanism became effective with the SFO April May Announced the appointment of members to the Main Board and GEM Listing Committees with overlapping membership to provide greater flexibility Jointly published the Consultation Paper on Regulation of Sponsors and IFAs The final phase of CCASS/3 was introduced with the rollout of Participant Gateway Abolished more fees and charges for Exchange Participants

8 November Opened Beijing Representative Office under the CEPA, and held a conference in Beijing marking the 10 th anniversary of the listing of Mainland enterprises in Hong Kong Awarded Diamond Award by 2003 HKSA Best Corporate Governance Disclosure Awards in the non-HSI Category Held listing promotion conference in Hangzhou November Opened Beijing Representative Office under the CEPA, and held a conference in Beijing marking the 10 th anniversary of the listing of Mainland enterprises in Hong Kong Awarded Diamond Award by 2003 HKSA Best Corporate Governance Disclosure Awards in the non-HSI Category Held listing promotion conference in Hangzhou November 2003 Milestones September Amended Listing Rules for listing and trading of collective investment schemes authorised by the SFC September Amended Listing Rules for listing and trading of collective investment schemes authorised by the SFC September October Issued consultation paper on proposed operational model for scripless securities market Upgraded HKATS Finalised the strategic plan for October Issued consultation paper on proposed operational model for scripless securities market Upgraded HKATS Finalised the strategic plan for October August Held listing promotion conference in Guangzhou and Fuzhou Abolished more fees and charges for Exchange Participants August Held listing promotion conference in Guangzhou and Fuzhou Abolished more fees and charges for Exchange Participants August December Introduced H-shares Index Futures December Introduced H-shares Index Futures December July Began the strategic planning process July Began the strategic planning process July

9 Direction & Strategies for the coming three years Positioning Being the international gateway for Mainland issuers Being the gateway for international players to access China Strategies Becoming a Mainland partner Building a quality market Becoming one of the worlds larger exchanges with international standards and practices

Key initiatives - Becoming a Mainland Partner China Listing Attract more major, high quality Mainland enterprises Enhance listing services to Mainland issuers China Products Develop China-related products Cooperation Explore crude oil contract with Shanghai Futures Exchange Explore cooperation with Shenzhen Stock Exchange

Key initiatives - Building a quality market Strengthen Market Infrastructures Introduce DCASS Strengthen the reliability, security and availability of market systems Study the potential and market impacts of a scripless market Study Enhanced CCASS Investor Participant Account services Explore the possibility of network consolidation (i.e. AMS/3, CCASS/3, HKATS and Market Data Feed) to seek cost reduction at both HKEx, and Exchange and Clearing House Participants without sacrificing service quality

Key initiatives – Building a quality market Improve Investor Protection Improve the listing regulatory structure based upon the outcome of the Government review Revamp the Listing Committees role in decision-making and related structures Improve disciplinary process Promote the statutory backing for selected Listing Rules Further develop corporate governance by introducing new rules and code Publish consultation conclusions on initial listing criteria and continuing obligations Consider delisting mechanism Consider market views on regulation of sponsors and IFAs

Key initiatives – Building a quality market Improve Investor Protection (contd) Improve the transparency of the odd lot market Enhance investor education Strengthen market education and director training

Key initiatives – Building a quality market Improve Market Liquidity Review the trading spreads in the securities market Review Exchange Traded Fund market making mechanism Study the introduction of more structured products Review the stock option market and introduce more single stock options Study the introduction of H-shares index options

Key initiatives – Consolidation Continue to improve cost structure Prioritise project and streamline workflow Strengthen staff team Improve risk management

16 Questions & Answers