Re-appointments at HKEx

Hong Kong Acting Chief Executive Henry Tang recently approved the re-appointment of Ronald Arculli as Chairman of Hong Kong Exchanges and Clearing (HKEx).

The April 27 approval was made under the Securities and Futures Ordinance (SFO). Mr. Arculli’s chairmanship coincides with his term as an HKEx Board director, which will expire at the end of the 2012 annual HKEx general meeting.

Mr. Arculli was elected HKEx chairman at the April 23 board meeting. Section 69(1) of the SFO provides that no person shall be chairman of a company that is a recognized exchange controller unless he has the approval in writing of the Chief Executive. By virtue of Schedule 10 of the SFO, HKEx is deemed to have been recognized as an exchange controller under section 59(2) of the same ordinance.

On April 22, Hong Kong Financial Secretary John C. Tsang re-appointed Mr. Arculli, Laura Cha and Moses Cheng as members of the HKEx Board for two-year terms.

Mr. Arculli has been HKEx chairman since 2006. During his tenure, HKEx has rolled out many new market development initiatives to enhance its competitiveness and to broaden its source of listing.  

Mrs. Cha is nonexecutive deputy chairwoman of HSBC. Previously, she was vice chairwoman of the China Securities Regulatory Commission from 2001 to 2004 and deputy chairwoman of the Securities and Futures Commission from 1998 to 2001.

Mr. Cheng is a senior partner at P.C. Woo & Co.  He was chairman of the Listing Committee of the Stock Exchange of Hong Kong in 2005-06 and has served on the Financial Reporting Council since 2006.

The HKEx Board comprises up to six directors elected by shareholders, the HKEx chief executive and a maximum of six directors appointed by the Financial Secretary.

The other current appointed directors are Marvin Cheung, Stephen Hui and Michael Lee.

Appointments are made under the Securities and Futures Ordinance. The ordinance, together with HKEx’s Articles of Association, empowers the Financial Secretary to appoint a maximum of six people to the board of directors in the interest of the investing public or in the public interest.

Foreign currency reserves at US$259.2 billion

The official foreign currency reserve assets of Hong Kong amounted to US$259.2 billion at end-April, compared with US$258.8 billion at end-March, according to the Hong Kong Monetary Authority.

Including unsettled forward contracts, the foreign currency reserve assets at that time also stood at US$259.2 billion, compared with US$258.8 billion a month earlier.

Hong Kong is the world’s seventh-largest holder of foreign currency reserves after mainland China, Japan, Russia, Taiwan, India and South Korea.

The city’s total foreign currency reserve assets represent more than nine times the currency in circulation, or approximately 56% of Hong Kong dollar M3.

Exchange Fund totals US$284.51 billion

Hong Kong Exchange Fund assets totaled US$284.51 billion at end-March, up US$2.25 billion from the previous month, according to the Hong Kong Monetary Authority.      

Foreign currency assets increased US$3.21 billion, while Hong Kong dollar assets decreased US$961.53 million.

The increase in foreign currency assets is mainly due to an increase in unsettled purchases of securities and valuation gains on foreign currency investments, which were partially offset by a decrease in Certificates of Indebtedness. The decline in Hong Kong dollar assets is mainly due to fiscal drawdowns, which were partially offset by valuation gains on Hong Kong equities and placements received from Hong Kong Special Administrative Region Government funds and statutory bodies.

The Currency Board Account shows the monetary base at end-March was US$131.24 billion, a 0.4% (US$589.94 million) decrease from end-February. The decline is mainly due to a decrease in Certificates of Indebtedness.

Backing Assets fell US$666.66 million, or 0.5%, to US$140.66 billion. The decrease is attributable mainly to the decline in the monetary base and revaluation losses. These changes were partially offset by interest from investments. The backing ratio fell from 107.21% at end-February to 107.18% at end-March.

US$3.3 billion surplus recorded

The Hong Kong Special Administrative Region Government recorded expenditures of US$37.5 billion and revenues of US$40.8 billion for the 2009-2010 financial year that ended March 31, resulting in a surplus of US$3.3 billion.

An HKSARG spokesman said the provisional surplus represents an improvement of US$1.55 billion over the revised forecast. Revenue was US$1.26 billion better than expected, largely due to higher receipts of salaries tax, profits tax, land premiums and stamp duties. Expenditures were US$282.05 million lower than expected, mainly due to lower requirements.

The territory’s fiscal reserves stood at US$66.7 billion at end-March.

The spokesman added that all figures are provisional pending the final closing of the annual accounts, but experience shows that any changes to the provisional figures are unlikely to be significant.

Funding approved for Asian Development Bank

The Finance Committee of the Legislative Council recently approved full funding for Hong Kong’s subscription to the Fifth General Capital Increase of the Asian Development Bank (ADB).

The funding includes a paid-in portion of US$18.6 million to be paid over a 10-year period and a remaining callable portion of US$575 million that will constitute a contingent liability for the government.

The ADB is a multilateral financial institution for regional development with the principal goal of reducing poverty. The bank provides both financial and technical assistance to governments for specific projects and programs.  To prevent lending disruptions, the bank replenishes its authorized capital stock periodically through these general capital increases.

This fifth general capital increase will allow ADB to continue its lending and related activities in 2010 and beyond. On March 30, the Chief Executive in Council decided that Hong Kong should subscribe fully to the ADB’s Fifth General Capital Increase.

In welcoming the funding approval, a Hong Kong Special Administrative Region Government spokesman on April 23 said, “Hong Kong’s continued subscription to the general capital increase is a clear demonstration of our continued support and commitment to the ADB. Being a responsible member of the ADB and an international financial center, Hong Kong should support this important initiative, which is largely in response to the call by G20 leaders to increase resources of multilateral development banks so as to support growth in developing countries amid the global financial crisis.

“The subscription also shows our recognition of the ADB’s contribution to the development of Hong Kong in the past.”

Hong Kong has benefited from the bank’s lending programs before. From 1972 to 1980, Hong Kong obtained five loans totaling US$101.5 million to finance various infrastructure projects. All the loans were repaid in full by 1987.

The city joined the ADB in 1969 and subscribed fully to all four previous general capital increases in 1970, 1977, 1986 and 1994.