eddie yue : hong kong ’ s possible role in islamic finance welcome address by mr eddie yue, deputy chief executive of the hong kong monetary authority and executive board chairman of the treasury markets association, at the hong kong showcase on islamic finance, dubai and amman, 11 - 12 may 2008. * * * ladies and gentleman, it is with great pleasure that i welcome you all to the hong kong showcase on islamic finance, presented by members of the financial services industry in hong kong, and jointly organised by the hong kong monetary authority, the hong kong treasury markets association and hong kong trade development council, which is being held over two days in dubai, uae and amman, jordan. i would first like to thank her majesty queen rania al - abdullah of jordan, who is hosting the islamic financial services board ’ s annual summit, the central bank of jordan, and of course the ifsb itself, for graciously agreeing to allow us to organise this event under the auspices of the annual summit. this forum is indeed an excellent opportunity for the regulators, industry practitioners and investors in the gulf region and hong kong to share new perspectives in the rapidly expanding area of islamic finance, which transcends national borders and is fast penetrating global financial markets. today we will be focusing on what hong kong has to offer and where it fits into this changing global financial landscape. what i would like to do in the next ten minutes or so is to give you an overview of the current landscape of islamic finance in hong kong from the perspective of both a financial regulator and a market facilitator, and tell you about how we could help promote this initiative from the hong kong monetary authority ( hkma ) point of view. why does hong kong wish to develop islamic finance? first, allow me to share with you some thoughts in how we see the relevance of hong kong to the development of islamic finance in asia. from its early phase of development in the 1980 ’ s, islamic finance has grown tremendously and undergone a rapid transformation in less than two decades. today, it has gained widespread recognition, not just among investors of the muslim faith, but also among other investors who see islamic finance as a new investment alternative. islamic finance is therefore no longer characterised by its uniqueness, but rather seen as an integral part of the international financial system. this brings remarkable opportunities for hong kong, as a frontrunner in international finance, which possesses key strengths in financial intermediation on an international scale to bring together investors and fund raise

##rs from different parts of the world. with that we see great potential for hong kong to take on the intermediary role for islamic financial products, just as it currently does for conventional products to a high degree of sophistication across all asset classes. our contacts with investors and financial institutions in the gulf region have also reinforced our belief in promoting the development of islamic finance in hong kong. this has in fact been articulated as a key policy initiative set out by the chief executive of the hong kong special administration region in his 2007 policy address. in other words, it is now official government policy to develop islamic finance in hong kong and our commitment to this is beyond doubt. being a major international financial centre in asia, hong kong should seek to become an important player in the booming islamic finance arena by providing a platform for middle east investors to access investment opportunities in the asia pacific region. hong kong can also leverage on its experience, innovation and market diversification to serve as a capital - raising centre for middle eastern issuers to tap the funds made available by the high savings rate in mainland china. some people have expressed scepticism about how hong kong could play a role in these segments of the market. but market players in hong kong have answered this scepticism by quickly introducing our first shariah - compliant product. in late 2007, we witnessed the first islamic fund introduced by a local bank in hong kong. the fund is an index - tracking fund which tracks the performance of the dow jones islamic market china / hong kong titans index. in december last year, the hong kong mortgage corporation signed a joint venture agreement with cagamas berhad, malaysia ’ s national mortgage corporation, to establish a company to develop mortgage guarantee business in malaysia and other parts of the world. earlier this month, a new dow jones islamic market index came to the marketplace to track china - related equities listed in the hong kong stock exchange, further enriching the islamic index infrastructure in hong kong. these initiatives clearly demonstrate the dynamism of hong kong ’ s financial systems in responding to an emerging market opportunity. is the timing right? some observers have questioned whether it is a bit late for hong kong to develop islamic finance, when some other financial centres in the region have already made a head start. it may be true that hong kong has started the development only recently, but so long as the demand is there, it ’ s never too late for hong kong to contribute to this vibrant