Hong Kong, China
Bond market development in Hong Kong, China has another greatadvantage in the form of the Governments policy of providing a free,open, and competitive environment for the development of the localeconomy. The Government provides the necessary infrastructure and astable legal and administrative framework under which businesses ourishwith minimum intervention, having implemented a set of prudential scal,monetary, and regulatory policies to enhance economic growth.However, a number of factors have been identied for the furtherdevelopment of the debt market, particularly to improve liquidity anddepth. While over-the-counter (OTC) debt market activity has grown sat-isfactorily in Hong Kong, China, trading activity in the listed debt marketremains low. Secondary market trading in debt securities is generallylow relative to that in the equities market, even in more establisheddebt capital markets such as New York and London. However, the levelof secondary market activities for debts is negligible when comparedwith the activities for equities.
Improve Information .low
Market information relating to the paperstraded in the OTC market is available through information vendors suchas Reuters and Bloomberg. An improvement in the ow of informationbetween the OTC and the SEHK should be considered to enhancetransparency.
Market-Making and Credit Rating
A market-making system, similarto the one in the OTC market, should be introduced on the SEHK toencourage trading, and improvements made in credit rating and marketinfrastructure.
Widen the Investor
Widening of the investor base should resultfrom the Governments decision to launch the Mandatory Provident und(MP) in December 2000. It has been estimated that annual pensionfund contributions will amount to more than HK$10 billion (US$1.3billion), or around one percent of gross domestic product (GDP) ini-tially, growing to around HK$60 billion (US$7.74 billion) when thescheme matures. The establishment of MP funds will signicantly in-crease the demand for long-term Hong Kong dollar debt securities. Tofurther encourage the participation of retail investors in the debt market,more e¬orts should be made in public education on debt securities.
Modernize Legal .ramework
The existing legal framework for regu-lation of debt securities has become outdated in certain aspects, as it isbased on United Kingdom legislation dating from 1929. The Securities