1. ECON. 310 Financial Institution In H.K. Section 1
Topic: Hong Kong As An International Financial Centre

2. Content Introduction Hong Kong and Singapore’s banking system
Hong Kong and Singapore’s stock market
Hong Kong and Singapore’s bond market
Conclusion and Recommendations

3. Commercial Banks in Singapore
Deposit taking
Provision of cheque and
lending

4. Commercial Banks in Singapore (Dec 05)
Foreign Banks (105)
Local Full Banks (5)
Foreign Full Banks (24)
Wholesale Banks (34)
Offshore Banks (47)

5. Full Banks
Six of the banks operating in Singapore have been awarded Qualifying Full Banks (QFB) privileges
25 locations
Share ATMs among their sub-branches freely

6. Qualifying Full Banks (QFB)
Credit card holder obtain cash advances through ATM network
Provide debit service through their network
Offer Supplementary Retirement Scheme, CPF Investment Scheme accounts

7. Wholesale Banks
Accept fixed deposit in Singapore dollar (shall not be less than S$250000)
Current accounts in Singapore dollar (shall not be interest-bearing )

8. Offshore Banks Residents of Singapore
Accepted current accounts in Singapore dollars (shall not be interest-bearing and exceed S$500million)
Non-resident of Singapore
Accepted fixed deposits in Singapore dollars (shall not be less than S$250,000, including interest)

9. Banking system in HK Three-tier system of deposit-taking institutions
71 of the world’s top 100 banks

10. Three-tier banking system in HK
131 Licensed banks
36 Restricted license banks
35 Deposit-taking companies

11. Licensed bank It operate current and savings accounts only
accept deposits of any size and maturity from the public
pay or collect cheques drawn by or paid in by customers.

12. Restricted license bank
mainly engaged in merchant banking
and capital market activities.
Accept deposits of any maturity of HK$500,000 and above.

13. Deposit-taking company
mostly owned by, or otherwise associated with, banks.
consumer finance and
securities business
deposits of HK$100,000 or above with an original term of maturity of at least three months.

14. Local representative offices
overseas banks may establish local representative offices
not allowed to engage in
any banking business
mainly to liaison work between the bank and its customers

15. Singapore Stock Market
Singapore Exchange Limited (SGX)
Main market in Asia following HK and Tokyo
Independently open to the public

16. Singapore Exchange Limited (SGX)
Asia-Pacific's first demutualised and integrated securities and derivatives exchange in 1st,Dec,2000
Stock Exchange of Singapore (SES) +the Singapore International Monetary Exchange (SIMEX)=SGX
Functions: A comprehensive and efficient infrastructure for raising capital, and for investors to transact and clear financial products.

17. Singapore Stock Market
660 listed companies (includes domestic and foreign)
Includes SGX Mainboard and SGX SESDAQ.
Strait Times Index (STI):45 components

18. Strait Times Index (STI)

19. Singapore Stock Market
2003
2004
2005
No. of companies
546
589
660
No. of companies in 2005
domestic
No. of companies
Mainboard
48.94%
SESDAQ
19.85%
foreign
No. of
companies
Mainboard
25.5%
SESDAQ
6.06% +
=100%
Source:

20. Singapore stock Market
Year
2004
2005
%change in total capitalisation +
19.58%
-6.98%
Source:

21. Stock Market in Hong Kong

22. Hong Kong Stock Market Fourth largest in the world
Most important in Asia Market
Total capital raised --- US$36 billion
The world's most active and liquid securities markets
Play a key role in funding
China's state-owned enterprises

23. Statistics of HK Stock Market
Up to the end of November 2005
Main Board
Number of Listed Companies
Total market capitalisation(HK$Mil.)
Total turnover in value (HK$Mil.)
922
$7,959,098
$394,202
Growth Enterprise Market
Total Market Capitalization (HK$Mil)
202
$72,428
Source: Hong Kong Exchanges and Clearing

24. Main function of HK Market
Raising capital for the Chinese Mainland
304 Mainland companies were listed in Hong Kong
Total market capitalization amounting to HK$ 2.0 trillion (US$ 256 billion)
30% of Hong Kong's total market capitalization.
raised HK$895 billion (US$ 115 billion)

25. Bond market in Singapore

26. History of the bond market
Singapore Government
budget surpluses
Bond market
small and undeveloped
Corporations
borrowing from banks

27. Asian Crisis (1997) Importance of deep Overdependence
and efficient capital
markets
Overdependence
on bank finance
Well-diversified financial system
risk management
more efficient manner
of allocating resources
and capital

28. Singapore bond markets
Asian dollar bond market (ADB)
Singapore government securities market (SGS)
Singapore dollar corporate bond market (SDCB)

29. Asian dollar bond market (ADB)
was initiated in the early 1970s
issue in December 1971
for international bonds denominated in the US dollar, the Japanese Yen, or other hard currencies
corporations, financial institutions, national governments and their agencies, and international organizations

30. Singapore government securities market (SGS)
Major measures
MAS would begin to issue more Singapore government securities with longer maturities, and encourage statutory boards and government-linked corporations to increase their security issuance
MAS would grant tax exemptions for fee income earned by financial institutions operating in debt securities in Singapore
Interest income earned by financial institutions and corporations from holding debt securities would be subject to a concessionary 5% tax rate

31. Singapore dollar corporate bond market (SDCB)
transformed since 1998
two strategies
encouraged the statutory boards and government-linked corporations (GLCs) to tap the bond market
opened up the Singapore dollar bond market to foreign issuers; if funds were raised for use in Singapore, issues by non-bank nonresidents no longer required MAS approval
restrictions on the credit rating of issuers and the minimum size requirement were abolished

32. Govt Securities Maturity Profile-LCY: SG

33. Benchmark Yield Curve - LCY Bonds : SG

34. Trading Volume - SG

35. Size of LCY Bond Market in USD : SG

36. Share of FCY Bonds to Total Bonds Outstanding : SG

37. Hong Kong’s Bond Market
Three type of bonds
Government bond
Corporate bonds
Supranational Bonds

38. Government Bonds Exchange Fund Bills Exchange Fund Notes
(91-, 182- and 364-day)
Exchange Fund Notes
(2-,3-,5-,7-10-year)

39. Trading Volume

40. Trading Volume-SG

41. Benchmark Yield Curve - LCY Bonds

42. Benchmark Yield Curve - LCY Bonds-SG

43. Government Security Maturity Profile-LCY

44. Corporate Bonds In September 1977, by Chase Manhattan Bank
The issue size was HK$100 million
A five-year issue with a coupon rate of prime
an interest rate 5.25%

45. Corporate Bonds
From 1995 to 2005, the corporate bonds are rapid increase
Increases from 18.8 billions USD to 63.8 billions USD.

46. Size of LCY Bond Market in USD

47. Size of LCY Bond Market in USD-SG

48. Supranational Bonds
Played an important role in the development of the Hong Kong bond market
The first supranational issue was launched in 1989 by the World Bank

49. Share of FCY Bonds to Totals Bonds Outstanding

50. Conclusion & Recommendations
For the Hong Kong Banking System
HKMA has launched several measures
e.g. Removal of the Interest Rate Rules
To consolidate Hong Kong IFC status
Opening the Renminbi service
Consummate between the inland and Hong Kong the Renminbi fund circulation pipeline

51. For Hong Kong Bond Market
Actively develop HK government bond
Develop RMB bond market

52. For Hong Kong Stock Market
Lower the restriction for the company switching from the Growth Enterprise Market to the Main Board
Be co-operative, no competitive

53. MC
Questions

54. Question 1
Which of the followings is not the one of the banking system in HK?
A. Licensed bank
B. Full bank
C. Restricted license bank
D. Deposit-taking company

55. Question 2
How many listed companies in the Main Board until November 2005?
A. 900
B. 912
C. 922
D. 932

56. Question 3 Which of the following is NOT the issued bond in Hong Kong?
A. Government bond
B. Corporate bonds
C. Asian dollar bond
D. Supranational Bonds

57. Group Members
Wong Ka Tat, Keith
023081
Kwok Wai Yi, Elle
023091
Chan Hui Chi, Tracy
023092
Tse Ching Ching, Michelle
023099
Wong Ka Lee, Carrie
023105
Lam Ching Man, Joey
023107
Chan Kin Chung, Kenneth
023109