Hong Kongs Securities and Futures market - Current Issues Mr Andrew - - PowerPoint PPT Presentation

SLIDE 1

Hong Kong’s Securities and Futures market - Current Issues

Mr Andrew Sheng Chairman Securities and Futures Commission 24 April 2001

SLIDE 2

Hong Kong’s Securities Market

Overview:

• Main board and GEM run by HKEx
• Third largest stock market in Asia after

Japan & the Mainland

• 10th largest stock market in the world
• Important international fund-raising centre,

especially for the Mainland.

SLIDE 3

Hong Kong’s Securities Market

Reasons for growth:

• high liquidity
• transparency
• strong participation by institutional

investors

• Mainland factor

SLIDE 4

Moving Up the Value Curve

Focused and competitive financial services are needed because of:

• Increasing competition due to

globalisation, technology and capital movement

• Greater expectations from investors

SLIDE 5

Market change over Market change over P/E Cap Mar 00 Turnover 2000 ratio

Australia

323

• 20%

214

• 3%

19

Hong Kong

544

• 17%

295

• 14%

18

Indonesia

22

• 55%

10

• 62%

25

Japan

2,798

• 37%

1,952

• 12%

182

Korea

157

• 42%

456

• 46%

n.a.

China

615 39% 657 12% 59

Malaysia

107

• 40%

27

• 59%

18

Philippines

26

• 43%

5

• 72%

44

Singapore

123

• 27%

85

• 30%

14

Taiwan

306

• 35%

789

• 32%

22

Thailand

31

• 34%

21

• 49%

n.a.

Germany

1,099

• 25%

1,766

• 10%

52

UK

2,259

• 20%

4,524 18% 23

US

13,238

• 24%

28,620 20% 55 Turnover - for the 12 months ending Mar 2001, P/E ratio - end Mar 2001 P/E ratio for China includes A shares markets only Sources: FIBV, CSRC and websites of various exchanges

Performance of Major Markets (end Mar 2001, US$ bn)

SLIDE 6

Current Issues

• Corporate Governance
• Reform of Financial Markets
• The Securities and Futures Bill

SLIDE 7

Corporate Governance

• Reliable, accurate and timely information is

a market fundamental

• Production of good quality information

requires good governance

• Globalised markets impose high cost on

poor governance

• Good governance needs strong legal

framework and process

SLIDE 8

Corporate Governance

3 Disciplines

• Self-discipline of corporate captains
• Regulatory discipline
• Market discipline

SLIDE 9

Quality of Information

• Working closely with HKEx to ensure

timely disclosure of information

• Daily monitoring of stock prices
• Moving towards IAS and IOSCO 2000

standards

• Publishing more information on HKEx and

SFC websites

SLIDE 10

Quality of Listed Companies

• McKinsey survey - Investors are willing to

pay a premium for better corporate governance.

• Decline of share market capitalisation of

family-led listed companies - 24%

• Rise of listed companies with institution

based ownership - 26% as at Jan 2001

SLIDE 11

Quality of Intermediaries

• Markets are being increasingly dominated

by large players

• Technology has introduced new players

such as e-brokers and ATS’s

• Intermediaries have to be more focused and

market oriented to survive

• Building a broad array of advisory and

market groups to raise quality of financial services

SLIDE 12

Quality of Regulation

• No single corporate regulator in Hong Kong
• Responsibility for corporate governance is

spread across many agencies and regulatory bodies:

• Stock Exchange of Hong Kong
• SFC
• Companies Registrar
• Commercial Crime Bureau
• Inspector appointed by Financial Secretary
• ICAC

SLIDE 13

Quality of Regulation

Regulatory Scope:

• Listing Rules of the Stock Exchange
• Takeover Code
• Market Codes of Conduct
• Securities and Futures Bill
• Companies Ordinance
• Anti-corruption law
• Bill of rights
• Protection of privacy ordinances

SLIDE 14

Financial Market Reform

• Demutualisation
• March 2000 - Merger of 4 exchanges and 2

clearing houses to create Hong Kong Exchanges and Clearing (HKEx)

• Benefits of merger:

– economies of scale in terms of operational efficiency – ensures HKEx would be responsive to market forces, not only members interest

SLIDE 15

Financial Market Reform

• SCEFI (Steering Committee on the

Enhancement of the Financial Infrastructure) created to co-ordinate reform of :

• modernising and enhancing financial

infrastructure &

• rationalising the legal framework

SLIDE 16

Electronic Infrastructure

• Securities and Derivatives Network

(SDNet) - electronically linking market participants

• Ongoing development of the Financial

Network (FINet)

• AMS /3 - high efficiency automatic

matching system

• Electronic application for shares - MTRC

SLIDE 17

New Securities Legislation

Reasons for change:

• Complex existing patchwork of 10 Ordinances
• Old laws overtaken by market developments

and technology

• SF Bill cornerstone of new financial

framework

• New legislation on par with international

standards

SLIDE 18

New Securities Legislation

New regulatory initiatives:

• Single licensing regime
• Civil Market Misconduct Tribunal
• Greater investigative powers
• Better disclosure of interests
• More efficient channels of appeal

SLIDE 19

The Way Forward

Objective of new reforms to enhance :

• transparency in Hong Kong’s financial

markets

• investor confidence
• good corporate governance
• market integrity
• Hong Kong’s position as an international

financial centre

SLIDE 20

THANK YOU

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