HONG KONG Money related Power.


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HONG KONG DOLLAR EXCHANGE RATE. Spot conversion scale. Convertibility Zone ... US dollar keeps on being the proper grapple for the Hong Kong dollar ...
Transcripts
Slide 1

HONG KONG MONETARY AUTHORITY Briefing to the Legislative Council Panel on Financial Affairs 6 November 2006

Slide 2

DISCUSSION TOPICS Updates on Currency Stability Banking Financial Infrastructure Hong Kong as an International Financial Center Exchange Fund 2

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Convertibility Zone CURRENCY STABILITY HONG KONG DOLLAR EXCHANGE RATE Spot conversion scale 3

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CURRENCY STABILITY THE AGGREGATE BALANCE 4

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CURRENCY STABILITY (I) CURRENCY STABILITY HONG KONG DOLLAR AND US DOLLAR INTEREST RATES 5

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CURRENCY - MARKET EXPECTATIONS CURRENCY STABILITY 12-month Hong Kong dollar forward focuses 6

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CURRENCY STABILITY Monetary conditions Pause in loan fee increments in the US at the August, September and October FOMC gatherings Housing business sector and swelling worries in the US financing cost position is by and large fitting for the monetary conditions of Hong Kong Some dangers of occasion driven quick re-arrangement of Hong Kong dollar financing costs with US loan costs 7

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CURRENCY STABILITY SLOWDOWN IN US HOUSING MARKET Activity pointers Mortgage rate and house cost 8

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CURRENCY STABILITY POLICY RATES AND CONSUMER PRICE INFLATION 9

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Geo-political pressure, especially in Asia Macro modification and control on Mainland Renminbi swapping scale hitting mental levels Hedge stores and worldwide budgetary steadiness CURRENCY STABILITY Risks to Currency Stability – External Factors 10

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CURRENCY STABILITY MACRO ADJUSTMENT AND CONTROL ON MAINLAND 11

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CURRENCY STABILITY RENMINBI EXCHANGE RATE 12

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HKMA Research Findings: Significant increment in the synchronization of business cycles among Mainland, Hong Kong and the US Significant varieties in yield and costs in Hong Kong can be clarified by US stuns, while the effect of Mainland stuns focuses on value developments Little relationship between\'s business cycles in Hong Kong and the Mainland without normal US stuns US dollar keeps on being the proper stay for the Hong Kong dollar CURRENCY STABILITY Is the US dollar still the suitable grapple for the Hong Kong dollar? 13

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Risk going for broke by speculative stock investments Counterparty hazard administration Derivatives markets Currency wagers CURRENCY STABILITY Hedge reserves and worldwide monetary dependability 14

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Domestic environment to a great extent benevolent Sustainable development rate and blurring unemployment rate Higher swelling however stable pattern Balance of Payments solid Property market stable Fiscal position sound CURRENCY STABILITY Risks to Currency Stability – Domestic Factors 15

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CURRENCY STABILITY ECONOMIC CONDITIONS 16

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CONSUMER PRICE MOVEMENTS CURRENCY STABILITY 17

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BALANCE OF PAYMENTS ACCOUNT CURRENCY STABILITY Current record surplus 18

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CURRENCY STABILITY (III) CURRENCY STABILITY PROPERTY MARKET 19

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GRAPHICAL ANALYSIS CURRENCY STABILITY - For the high-end of the business sector (Jul to Aug 2006) * Mortgage installments depend on the most recent home loan financing costs. 2 0

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2005 2000 2001 2002 2003 2004 2006 FISCAL DRAWDOWNS CURRENCY STABILITY Net quarterly changes in monetary situation with the Exchange Fund 2 1

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BANKING SECTOR PERFORMANCE LOCAL AIs REMAIN WELL Capitalized Period-end figures 2

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BANKING SECTOR PERFORMANCE HONG KONG DOLLAR LOAN-TO-DEPOSIT RATIO WAS STABLE (RETAIL BANKS) Period-normal figures 2 3

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Total Domestic loaning: +2.8% Trade financing: +3.5% Manufacturing: - 9.3% Wholesale/retail: - 0.7% Property loaning: - 0.3% BANKING SECTOR PERFORMANCE DOMESTIC LENDING INCREASED (RETAIL BANKS) Domestic loaning in all coinage Period-end preparatory figures 2 4

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BANKING SECTOR PERFORMANCE ASSET QUALITY WAS STABLE Latest accessible position: Sept 2006 for RML misconduct proportion and negative value RMLs; Jun 2006 for other resource quality pointers. Visa charge off proportion is quarterly annualized. Different figures are period-end figures. 2 5

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BANKING SECTOR PERFORMANCE NET INTEREST MARGIN REMAINS LOW (RETAIL BANKS) Period-normal figures * Year-to-date annualized figure 2 6

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BANKING SECTOR PERFORMANCE THE EXTENT OF RESIDENTIAL MORTGAGE LENDING IN NEGATIVE EQUITY EASED Period-end figures 2 7

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BANKING SECTOR - WORK PROGRESS Implementation of Basel II in Hong Kong Banking (Capital) Rules and Banking (Disclosure) Rules tabled in LegCo taking after broad interview Rules focused to produce results from 1 January 2007 Parallel-reporting of Capital Adequacy Ratio computation by AIs in advancement to encourage sway appraisal and arrangements for consistence 2 8

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BANKING SECTOR - WORK PROGRESS Anti-tax evasion (AML) and Counter Terrorist Financing (CFT) Set up Industry Working Group & three User Sub-gatherings to share AML/CFT experience and systems, address execution issues and create industry best practices Amend AML/CFT rules by consolidating most recent Financial Action Task Force (FATF) CFT standard on cross-fringe wire exchanges Prepare for FATF\'s common assessment of Hong Kong – to be directed in second 50% of 2007 2 9

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BANKING SECTOR - DEPOSIT PROTECTION SCHEME DPS dispatched on 25 September 2006 Each contributor is qualified for pay of up to HK$100,000 in case of a bank disappointment Collecting commitments from part banks to develop the DPS Fund Average commitment rate is 0.08% p.a. amid asset develop period and will be lessened to 0.01% p.a. a short time later Expect to achieve the objective asset size of 0.3% of aggregate applicable stores (around HK$1.3 bn) by 2010 The HKMA will keep on assisting the HKDPB in keeping up a viable DPS in Hong Kong 3 0

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MARKET INFRASTRUCTURE The tasks and business activities emerging from the Review of Financial Infrastructure Development are gaining great ground Project Development Renminbi Settlement System Migration to SWIFTNet Electronic exchanging stage Bulk settlement for Mastercard exchanges 3 1

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MARKET INFRASTRUCTURE Encouraging Business Development Greater utilization of the Hong Kong settlement stage by monetary organizations on the Mainland Promote PvP joins with other Asian economies (e.g. join between Hong Kong\'s US dollar RTGS framework and Malaysia\'s ringgit RTGS framework) Promote provincial reporter saving money business 3 2

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DAILY HKD RTGS TURNOVER (JAN - OCT 2006) 3 2a

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MARKET INFRASTRUCTURE Oversight of the clearing and settlement frameworks All nearby assigned frameworks stay in consistence with the security and proficiency prerequisites of the Clearing and Settlement Systems Ordinance Completed the yearly evaluation on Continuous Linked Settlement (CLS) System and affirmed that CLS kept on meeting the criteria of assignment and the issuance of endorsement of absolution Continued backing to the Process Review Committee to play out its capacity. Quarterly reports covering oversight exercises of the HKMA have been submitted to the Committee for audit 3

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HONG KONG AS AN INTERNATIONAL FINANCIAL Center 5-Pronged Strategy to keep up Hong Kong as an IFC Enhance access for Hong Kong money related establishments on the Mainland Enhance the versatility of asset raisers, speculators and budgetary foundations from the Mainland to Hong Kong Enhance the portability of monetary instruments to the Mainland from Hong Kong Enhance the ability of Hong Kong\'s budgetary framework to handle exchanges designated in renminbi Strengthen budgetary base connections between the Mainland and Hong Kong 3 4

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HONG KONG AS AN INTERNATIONAL FINANCIAL Center Renminbi business in Hong Kong Outstanding renminbi stores: RMB 22.7 billion yuan toward the end of August 2006 State Council is effectively considering: Hong Kong shippers to settle direct import exchange from the Mainland in renminbi; and Financial organizations on the Mainland to issue renminbi budgetary securities in Hong Kong on a pilot premise. 3 5

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HONG KONG AS AN INTERNATIONAL FINANCIAL Center Regional Co-operation Actively taking part in the most recent survey by local national banks to reinforce co-operation Taking the lead in recognizing undertakings and building obstructs for improved co-operation in the territories of keeping money supervision and provincial reconnaissance The audit will be finished before the end of November, with suggestions to be considered by the governors of national banks in Asia 3 6

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MANAGEMENT OF THE EXCHANGE FUND 3 7

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MANAGEMENT OF THE EXCHANGE FUND Evaluation of venture execution # Compounded development rate 3 8

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2006 1 2005 2004 2003 (HK$ billion) Jan - Sept Full Year Full Year Full Year Gain/(Loss) on HK values 19.8 7.0 12.0 21.2 Gain/(Loss) on different values 9.9 20.5 11.2 26.8 Exchange pick up/(misfortune) 13.9 (19.5) 8.5 22.9 Total come back from securities, and so forth 24.2 29.8 25.0 18.8 Investment pay 67.8 37.8 56.7 89.7 1 Unaudited figures EXCHANGE FUND PERFORMANCE 3 9

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CHANGE IN ACCUMULATED SURPLUS 2006* Note 1: The impact of changing from utilizing mid-cost to utilizing offer cost for esteeming securities held, and utilizing approach cost for esteeming securities issued. * Unaudited figures 40

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THE FOREIGN EXCHANGE MARKET 41

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BOND YIELDS 42

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BOND YIELDS 43

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EQUITY MARKETS 44

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