Joseph Yam: Financial market developments in Hong Kong
Remarks by Mr Joseph Yam, Chief Executive of the Hong Kong Monetary Authority, at the
Euromoney 40th Anniversary Gala Dinner, Hong Kong, 16 July 2009.
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It is a great pleasure to be able to share the honour at this evening's Euromoney awards
dinner with so many excellent recipients. And it is a particular honour to receive the award
for "Outstanding Contribution to Financial Markets". This is a threefold honour.
First, because it is awarded by Euromoney, a publication - or rather an institution - with a
particularly strong relationship with central banks and markets in this region. Secondly,
because the award is presented to the HKMA as a whole, as a recognition of the hard work
of staff from all parts of the organisation who have helped develop financial markets. And
thirdly, because the award highlights an area of our work that usually receives less
acknowledgement than it should: the development of financial markets not just through
encouraging product innovation, but also through laying down the infrastructure to enable
markets to function and grow.
It is, I think, entirely appropriate that this evening's event is being held in a restaurant on top
of the Star Ferry Pier - as we are from time to time reminded by the swaying of the structure
and the occasional battering from the ferries themselves. Transport links are a good analogy
for financial infrastructural links. They involve both local and international networks. They
make use of technology at many different levels: from traditional cross-harbour ferry and
metallic coins to advanced transcontinental passenger planes and real-time electronic
clearing. And usually both transport systems and financial infrastructure receive attention
only when something goes wrong. Financial infrastructure suffers the further handicap that it
is largely invisible - a matter of wires and electronic pulses - with none of the glamour or
nostalgia that physical transport can sometimes evoke. So, quite understandably, the
general public take it for granted - indeed may not even be aware - that Hong Kong has for
some time had some of the most advanced, efficient and secure payment, clearing and
settlement systems of any financial centre in the world.
One of the responsibilities of the HKMA is to promote the development of these systems in
collaboration with dedicated service-providers and the financial industry generally. In
addition to its responsibility for Hong Kong's domestic systems, the HKMA also has a specific
responsibility for promoting the development of systems in Hong Kong that facilitate the safe
and efficient conduct of international and cross-border financial activities. We have been
paying special attention to this aspect of our work in recent years in a way that has a very
direct bearing on the development of financial markets in the region. The foundation is the
development in Hong Kong of multi-currency clearing and settlement systems operated on a
real-time gross-settlement basis: so far we have systems for the US dollar, the euro, and the
renminbi, in addition to the Hong Kong dollar; there is the possibility of replicating this for any
number of currencies, should the demand arise. To make these systems available in Asian
time to the rest of the region, we are progressively linking them to other cities in China and
with other countries in the region: we established a link with Malaysia in 2006 and have
agreed with Bank Indonesia to establish a similar link with Indonesia in 2010. I have no
doubt that other links will follow. In addition, through our Regional CHATS service launched
in July 2007, we have made available Hong Kong's own clearing and settlement services
throughout the region and beyond for cross-border payments. By June this year, 30 banks in
Hong Kong had registered as service providers for services covering over 2,000 payment
beneficiary points in 42 economies.
These are examples of how we are helping to build the hardware, or - to use the transport
comparison - laying down the roads, tracks, junctions and interchanges, for regional financial
markets. For the software and the actual traffic, it is of course the case that in a free-market
economy such as Hong Kong's there is a limit to how much the government should take the
lead. Nevertheless, there is much that the government can do to facilitate financial-market
development by clearing the way, particularly where this involves markets of a regional
nature. Three areas of work in which the HKMA - with various partners - is taking an active
role are worth citing here. The first involves the gradual introduction and expansion of
renminbi business within Hong Kong, which requires primarily co-operation between the
Mainland and Hong Kong authorities at various levels, including both political and technical.
The second example is our collaboration with other central banks in the region, under the
auspices of EMEAP, on the Asian Bond Fund, which is intended not just to encourage
business in the debt market, but also to stimulate regulatory reforms in economies in the
region. The third example is our work in encouraging the development of Islamic finance in
Hong Kong, through ensuring a level playing field, stimulating interest in Hong Kong among
Islamic countries, encouraging product development, and raising market awareness within
Hong Kong, particularly through the educational work of the Treasury Markets Association.
All of this work looks both to the past and to the future for inspiration. Looking to the past, we
have the still-recent experience of the Asian financial crisis, one element of which was the
undeveloped state of some of our financial markets, in particular the debt market. Many of
the market-development initiatives on which we have been working have been intended to
address these deficiencies. More recently, the current financial crisis serves as a reminder
that some aspects of market development may be taken too far, where, for example, they
privilege the process of intermediation and neglect the financial and economic realities that
lie behind it. The caution inculcated by the Asian financial crisis, and a natural conservatism
in many markets in this region, seem to have helped us avoid the worst excesses we have
seen in more developed markets.
Looking more positively to the future, this region is poised to become the centre of economic
growth and wealth creation in the world. Indeed we are already a long way down that path.
So far, a great deal of the wealth created has been diverted into markets elsewhere in the
world. Market development in this region, on a foundation of efficient infrastructure and
sound regulation, will help retain more of that wealth for investment within the region.
This evening's gala event celebrates the 40th anniversary of one of the world's foremost
financial publications. It is therefore only proper to say something about the vital role of the
media in financial market development. The media can, I think, be seen as a kind of
complementary, parallel infrastructure to the financial infrastructure that I have briefly
described. The media are, of course, more visible, and much more diverse, but they also
make use of similar technologies, whether advanced or traditional, and at various points they
intersect with the financial infrastructure. Modern markets are, in fact, dependent on the
media, whether in their provision of real-time information second by second, or in the more
reflective analysis of market trends, or in the exposure of scandals and malpractices.
It is no coincidence that Hong Kong is both a financial centre and a world media centre. At
least seventeen international news agencies, 29 international or regional newspapers, and
another 29 magazines have a presence in Hong Kong, and all of them have some interest in
financial affairs. We have 45 daily newspapers printed in Hong Kong and no fewer than 661
registered periodicals. Now, of course, some of these publications are what are known as
ma ging (馬經) or racing papers, and not all of them have their dedicated financial pages.
Even so, Hong Kong is remarkably well served by the financial media, and one thing that has
never ceased to impress me during my sixteen years as Monetary Authority has been the
quality and dedication of the many people in Hong Kong who make up the financial media.
The many colleagues in the media play an extremely important part in the development of
financial markets, and I should like to pay tribute to their professionalism.
I feel entitled to use the word "colleagues", not just because I have enjoyed a very close and
productive relationship with the financial media, but also because I too, albeit uninvited and
unpaid, have for the past 11 years served as a columnist in several newspapers through my
weekly "viewpoint" articles. I should like to thank those newspapers who have faithfully
reproduced these articles, week after week, even when the content may not always have
been as newsworthy as they may have hoped.
Ladies and gentlemen, this evening's gala dinner, in recognising excellence in financial
services will provide encouragement for the future development of financial markets in the
region. It is also an opportunity to celebrate Euromoney's 40th anniversary and its long
association with Hong Kong and this region. I should like to offer Euromoney heartiest
congratulations on its birthday and the very best of wishes for a flourishing future.