1 Update on HKEx’s Latest Developments Mr Paul Chow HKEx Chief Executive 8 July 2003

2 Development Strategy u The key international capital market for Mainland and Hong Kong enterprises; u The Asian time-zone pillar in the global securities and futures markets; u The preferred Asian partner for major equities and derivatives exchanges seeking to build global alliances. HKEx is committed to reinforcing and developing the Hong Kong markets as:

3 Development Strategy u Assist Mainland enterprises and investors in moving into the international market; u Establish a rating mechanism appropriate for the region and develop a new rating service industry in the region; u Become the most important investment and fund management centre in the Asian time zone where analysts assemble; and u Integrate with the Shanghai and Shenzhen markets upon full convertibility of renminbi to develop into Asia’s biggest financial market. In the longer term, HKEx will join with other financial institutions and professionals to work towards the following objectives:

4 Strengthened Corporate Structure u Main structural changes involved the Exchange Business Unit and the Listing, Regulation and Risk Management Unit which was renamed the Listing Unit; u Streamlining resulted in some redeployment and redundancies; u Corporate restructuring has been completed but workflow review continues; u Staff salaries continue to be reviewed annually based on individual performance. Corporate structure was revised in June to strengthen operational efficiency:

5 Revised Corporate Structure Chief Executive Paul Chow Chief Operating Officer Patrick Conroy Chief Operating Officer E-Business & Information Services Roger Lee Head - E-Business & Information Services IT/Systems Stephen Law Head - IT/Systems Listing Richard Williams Head - Listing China Development & Listing Promotion Cash Market Development & Operations Derivatives Market Development & Operations Participants Admission & Surveillance Corporate Finance Expert Department Regulatory Discipline Legal & Secretarial Services Mary Kao Head - Legal & Secretarial Services Corporate Communications Henry Law Head - Corporate Communications Internal Audit Coven Hui Head - Internal Audit Research & Planning Matthew Harrison Head - Research & Planning Human Resources Brenda Yen Head - Human Resources Finance, Treasury, Administration & Risk Management Karen Lee Chief Financial Officer Finance Treasury Administration Risk Management Exchange Lawrence Fok Deputy Chief Operating Officer Head - Exchange Clearing Walter Reisch Head - Clearing

6 Looking Ahead Listing Matters: u The Government’s consultation on the listing regime; u Amendments to Listing Rules relating to corporate governance issues; u Conclusions on the consultation on proposed amendments to Listing Rules regarding sponsor regulation; and u Conclusions on the consultation on initial and continuous listing eligibility criteria and delisting mechanism

7 Looking Ahead Market Facilities: u Upgrade of HKATS to OM 17.1 u Integration of derivatives clearing u Enhancement of Investor Account in CCASS u Third Party Clearing u Scripless market model u Consolidation of clearing houses u Consultation on narrowing minimum spreads

8 Looking Ahead Development of Products and Services: u Exploration of new financial products and review of existing products u Development of energy derivatives u Capital Protected Instruments u Equity Linked Instruments u Regional Exchange Traded Funds u Stock Options u Interest Rate Swap Futures

9 Market Highlights Market Statistics (as of 30 June 2003) Main BoardGEM Number of listed companies Newly listed companies this year1612 Average daily turnover this year6,956 mil103 mil Market capitalisation3,907,287 mil60,965 mil Price earnings ratio IPO funds raised this year6,541 mil577 mil Number of H share companies5822 Number of Red Chip companies711

10 Market Highlights 2003 (Jan – Jun)2002 *contract size increased by 5 times from 27 May 2002 Total Turnover Volume Average Daily Volume Total Turnover Volume Average Daily Volume Hang Seng Index Futures 2,996,05724,7614,802,42219,602 Mini-Hang Seng Index Futures 564,0164,6611,107,9644,522 HSI Options1,111,3979,1851,070,4054,369 3-Month HIBOR Futures* 24, ,2571,144 1-Month HIBOR Futures* Stock Options1,768,27914,6143,724,70515,203

11 Thank you