RMB sovereign bonds roll out
On September 28, the Central Government issued US$878.6 million in renminbi (RMB) sovereign bonds in Hong Kong.
The issuance “clearly demonstrates the Central Government’s support for Hong Kong as an international financial center to further develop RMB business and illustrates the ‘interactive,’ ‘complementary’ and ‘cooperative’ relationship between the financial systems of the Mainland and Hong Kong,” a Hong Kong government spokesman said.
The spokesman added that the issue of RMB sovereign bonds was a milestone for the development of RMB business in Hong Kong, enhancing financial cooperation between the Mainland and Hong Kong.
US$4.51 billion deficit recorded
The Hong Kong Special Administrative Region Government recently announced its financial results for the four-month period that ended July 31.
Expenditures during the period totaled US$11.48 billion and revenues totaled US$6.97 billion, resulting in a deficit of US$4.51 billion.
A government spokesman said the deficit is mainly because some major types of revenue, including salaries tax and profits tax, are mostly received toward the end of a financial year.
Fiscal reserves stood at US$58.87 billion on July 31.
Foreign currency reserves at US$223.3 billion
Hong Kong’s foreign currency reserve assets amounted to US$223.3 billion at end-August, according to the Hong Kong Monetary Authority, compared to US$218.1 billion a month earlier.
Including unsettled forward contracts, the foreign currency reserve assets also stood at US$223.3 billion, compared to US$219.8 billion at end-July.
Based on the latest published figures, Hong Kong is the world’s seventh-largest holder of foreign currency reserves after mainland China, Japan, Russia, Taiwan, India and South Korea.
The total foreign currency reserve assets represent approximately nine times the currency in circulation, or 49% of Hong Kong dollar M3.
Exchange Fund totals US$238.96 billion
Total assets of the Hong Kong Exchange Fund amounted to US$238.96 billion on July 31. This is US$3.93 billion more than at end-June, according to the Hong Kong Monetary Authority.
Foreign currency assets increased US$5.01 billion while Hong Kong dollar assets decreased US$1.07 billion.
The increase in foreign currency assets is due mainly to purchases of foreign currencies with Hong Kong dollars and valuation gains on foreign currency investments. These increases were partially offset by a decrease in securities purchased but settled in the following month.
The decline in Hong Kong dollar assets is due mainly to a decrease in Exchange Fund bills and notes issued but not yet settled and fiscal drawdowns, which were partially offset by valuation gains on Hong Kong equities held by the Exchange Fund and an increase in bank borrowings.
The Currency Board Account shows the monetary base at the end of July was US$98.8 billion, a 9.4% increase of US$8.46 billion, from end-June. The rise in the monetary base is due mainly to an inflow of funds into the Hong Kong dollar.
Backing assets increased 8.9% — US$8.51 billion — to US$104.39 billion. The increase is attributable mainly to the rise in the monetary base, together with interest from investments. At end-July, the backing ratio stood at 105.65%, compared with 106.13% the previous month.
HKMC's profits improve
Hong Kong Mortgage Corporation (HKMC) and its subsidiaries recently announced their semi-annual financial results for 2009.
The unaudited profit after tax (PAT) for the six months ended June 30 (1H 2009) was US$59.48 million. This is US$16.79 million, or 39%, higher than the first six months of 2008, mainly due to a significant loan purchase during the peak of the global financial crisis in late 2008 and favorable interest rates. The annualized return on shareholders’ equity was 15.6%, compared to 11.6% in 1H 2008. The capital-to-assets ratio remained strong at 9.6% at end-June, prudently above the minimum 5% stipulated by the Financial Secretary. The cost-to-income ratio was 11.9% for the first half of 2009, compared to 15.1% in 1H 2008.
The HKMC has proven to be highly efficient and resilient, meeting its objectives of contributing to banking and financial stability, promoting home ownership and developing the debt and securitization markets. It has maintained its strong commitment to risk management in pursuing its business diversification in Hong Kong and overseas, and has not purchased any subprime mortgages or invested in subprime-related products.
The HKMC’s long-term foreign and local currency debt ratings are Aaa from Moody’s and AA+ from Standard & Poor’s.
SFC appointments extended
Hong Kong Financial Secretary John C. Tsang recently re-appointed Mark Steward as Executive Director (Enforcement) and extended the appointment of Paul Kennedy as Executive Director/Chief Operating Officer of the Securities and Futures Commission (SFC). Mr. Steward's new three-year appointment ends September 24, 2012. Mr. Kennedy's appointment, which was to expire on October 15, was extended to July 15, 2010.
A government spokesman said Mr. Steward has extensive regulatory enforcement experience in the securities and futures field; he was first appointed as the SFC’s Executive Director (Enforcement) in September 2006.
“Mr. Steward has made significant contributions to the SFC,” the spokesman said. “We look forward to his continued dedicated service in maintaining and promoting a fair, transparent and orderly securities and futures market in the new term.”
Mr. Kennedy was first appointed as Chief Operating Officer of the SFC in October 2006. “Mr. Kennedy has managed the Corporate Affairs Division of the SFC in an effective and responsive manner,” the spokesman said. “We, however, respect Mr Kennedy's personal plans. He has indicated that after three years with the SFC, he would like to pursue other interests. We appreciate his agreement to extending his appointment, which will be conducive to an orderly and smooth transition prior to his departure.”
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