be less affected than their counterparts in europe and the us : it is likely that the falling prices of financial assets, the economic downturn and other unfavourable factors will inevitably affect banks'asset quality and drive up the ratio of nonperforming loans. nevertheless, it is also true that hong kong has entered this crisis in a position of strength and should be able to weather it relatively well. despite the complex and stressful financial environment, the fundamentals of the banking sector in hong kong has remained strong and sound. the local banking sector here is well capitalised, at 13. 8 %, with a strong liquidity position averaging 45 % in the fourth quarter of last year. the asset quality of retail banks is also high by historical standards, with preliminary figures showing overall non - performing loan ratio edging marginally from below 1 % before the global financial crisis to just above 1 % at the end of 2008. these very solid foundations will help hong kong cope with the challenge of a possible rise in non - performing financial assets and losses in the financial markets. they also supply the conditions for moving beyond crisis towards opportunity, and for exploring what seems set to become one of the strongest and more interesting of growth engines in markets in this region and beyond : islamic finance. like most other asset classes, the growth of islamic finance decelerated last year as a result of the global credit crunch and unfavourable economic conditions. new sukuk issuance retreated to us $ 14 billion last year, down from a high of us $ 31 billion in 2007. 1 and without a doubt, there will continue to be great challenges in the coming year. market participants are reportedly expecting a slowdown in annual growth in global islamic banking assets to 10 - 15 % in 2009, compared with a growth of 20 - 30 % last year. 2 even so, a growth rate of 10 - 15 % is robust by any standard, and especially so when set against the strong shrinkage in other areas of finance. there remains a healthy stock of sukuk issuance in the pipeline for this year, thus providing a good market to tap : one report conservatively estimates planned or announced sukuk for 2009 as being in excess of us $ 45 billion. 3 as a new asset class, islamic finance practices banking and investments in compliance with the principles of islamic shariah law, which prohibits excessive leverage, risk - taking and uncertainty, and promotes ethical practices. these are indeed universal principles in all

eddie yue : hong kong : the natural gateway to islamic finance in asia – current developments keynote address by mr eddie yue, deputy chief executive of the hong kong monetary authority, at the 2009 asia sukuk summit, hong kong, 18 february 2009. * * * ladies and gentlemen, it is a great honour to be invited to speak at today's inaugural asia sukuk summit in hong kong, and a pleasure to welcome you all, especially those of you who are visiting hong kong. this is the first sukuk summit to be held in asia and it takes place at the beginning of the year of the ox in the chinese calendar. the ox symbolises strength, resilience, and – of course – bullishness. for, while it may be true that we are still in the middle of unprecedented financial turbulence, every crisis brings with it new opportunities for renewal and change. the remarkable turnout today clearly reflects a desire to explore new ways of restoring financial market stability and, most important of all, promoting growth. this summit has assembled an impressive gathering of colleagues from both the public and private sectors from many parts of asia, europe and the middle east. the theme of the summit – " towards a new silk route for islamic finance " – is an apt one : it is a call for partnership in creating new regional bonds and links of the kind that once allowed this ancient trade route to flourish in a diverse yet co - operative world. in the globalised world, such co - operation is more important than ever if our economies are to be able to meet future challenges successfully. i have been asked to give a brief overview of hong kong, with particular emphasis on how this city is developing its islamic finance capabilities. hong kong ’ s strength as a free and open international financial centre has helped nourish its deep and liquid financial markets. yet maintaining a free and open market in such a turbulent world is not an easy task. it is therefore reassuring that hong kong ’ s monetary and financial systems have continued to be sound and robust, reinforced by a number of recent contingency measures to strengthen financial stability. there are many factors that underline the resilience of hong kong's financial markets : i would like to highlight two. first, even when extreme volatility prevailed in the global foreign exchange markets following the collapse of lehman brothers, the exchange value of the hong kong dollar remained firmly anchored even as other major currencies suffered wide fluctuations, causing a ripple effect to