in these few years, the syndicated loan market has expanded in terms of number of arrangements and value of each arrangement. the rapid development of macao ’ s syndicated loan market has brought professionalism, diversification and internationalization to the financial sector of this enclave. they certainly have had positive impact. the arrangement of syndicated loans involves higher demand for professionals, such as analysts for specific industries, back office administrative and operational staff, property valuation agents and legal counsels. the growth in syndicated loan markets thus stimulates professionalism in a number of service sectors. in the past, syndicated loans concentrated on financing of local construction projects. but in the past few years, funding purposes of syndicated loans show diversification – from casinos, hotels, residential and commercial properties to construction projects of various nature. we expect that the development of syndicated loan market locally will accelerate the economic diversification process. the recent arrangements of several syndicated loans for gaming projects have attracted the participation of renowned international investment and commercial banks as arrangers and bookrunners. we believe that the continued growth in macao ’ s economy, and hence the accompanying expansion of the local syndicated loan market will certainly serve as catalyst for further globalization of the macao economy. as financial regulator, i encourage local financial institutions to participate in syndicated loans which will accelerate the expansion and internationalization of our financial sector. in the process, we should always be on the alert to mitigate losses arising from reckless lendings which will certainly undermine the stability and healthy development of our financial sector. before the asian financial crisis, some might use the term “ asset - based financing ” to describe the lending culture of the region. many credit exposure were in fact backed by assets before the crisis. but after the value of these assets had taken a nose - dive, the shock to the financial system was critical and it took a long time to recover. collaterals do provide good protection for credit risk but their market values are prone to fluctuations under the ever - changing economic and monetary conditions and should only be regarded as the last resort for repayment. the condition of the overall economy, the soundness of the financial system and the self - perfection of the regulatory regime in the region have greatly improved since the asian financial crisis. the resilience of the region to withstand the same sort of crisis has been much strengthened. but will it be able to withstand another shock of a more devastating magnitude, especially now that the global financial markets have been characterized by two features ; inflated asset prices and excess liquid

##ity. infact, it was excess liquidity which causes the universal asset inflation. there are many explanations why there is so much money moving around the global village. some of them are : 1. to alleviate the economy from plummeting into a tailspin after the dotcom bubble of 2000 and 911 incident of 2001, the fed eased money supply during the ensuing years ; 2. the thrifty asians save much of their trade surplus and continue to keep their currencies tied to a weak dollar which results in the printing of more local currencies in the process to feed their export led growth ; 3. although many central banks have raised short term interest rate, japan however still clings to a near zero interest rate monetary policy in an attempt to uplift the economy. the comparatively weaker yen has given rise to carry trades ; 4. oil exporters have reaped a windfall in the wake of a sharp rise in oil prices in the past 5 years, the huge surplus has joined the river of excess liquidity ; 5. demand for higher return by investors and deployment of derivatives have expanded lending capacity of financial institutions. the excess liquidity has pushed up prices of all categories of assets. in the equity market, it has triggered an increased concern of shareholders to enhance the value of their shareholdings. leveraged buy - out firms are prowling to buy public companies or merge them and remove them from the stockmarket. a large chunk of their ammunition has been provided through debt financing, either by willing banks or hedge funds. on the other hand, directors of “ prey companies ” tend to raise funds through borrowing to buy back shares to avoid being gobbled up by the predators. in the past, only big companies swallowed small companies. nowadays, with the help of easy money, relatively smaller companies are taking on companies of bigger size. the demand for syndicated loans has also increased due to the prolonged prosperity of the world economy. financing is needed for additional infrastructure and exploration for commodities and energy. this is especially true for emerging markets, particularly asia. we have explored the demand side. how about the supply side? the financial institutions appear to have unlimited capital and are not afraid of taking credit risk arising from hitherto not so desirable borrowers. what is the reason behind it? again, it has something to do with excess liquidity. as i have just mentioned, there has been a universal inflation of all kinds of assets. when the price of a certain