as compensation for moving down the risk ladder into corporate paper - at any rate a better return than typical existing holders of such paper would be content with. consequently, although top - rated corporate paper may benefit from the scramble for quality, lesser ratings may face a rather inelastic demand for any additional issuance. thus, although overall private sector issuance may increase as a means of closing the sector ’ s financing gap, there is some evidence - perhaps not conclusive - that this may be at the cost of some hardening of yields relative to government yields, at least for lesser names. of course, in some cases the increase in yields may just be the more straightforward consequence of a rising level of corporate gearing. there are also indications that increased debt market activity may have been more evident in the floating rate sector than for longer - dated fixed rate issues, where it may have been difficult to establish appropriate new benchmarks. thus, although crowding - in may be occurring, the process is more complex than the simple like - for - like substitution of corporate for government paper. another consideration for certain investors is that they increasingly have to accept that a strategy based simply on purchasing the paper of top - rated issuers such as governments or multinational organisations may no longer be feasible or economic. yet, if they are going to embrace lesser - rated paper in their portfolios, they may need to shift their approach towards a somewhat more sophisticated portfolio strategy, which permits the holding of lower - rated paper at prices which appropriately reflect the risks, with the risks balanced across the whole portfolio. this may necessitate changes in the ways in which fund managers are instructed to address their task and in the tools which they need to perform it. given these developments, the role of credit rating agencies may assume a still higher profile in guiding investors. i have mentioned these global trends in order to illustrate how even those markets which are regarded as mature have to adapt continually to changing circumstances ; and i haven ’ t even mentioned the potential role of internet trading, virtual exchanges and the like, which may pose still greater strategic, managerial and operational challenges. if we turn now to consider the debt markets specifically in this part of the world, we encounter at least as great an array of challenges, albeit in somewhat different circumstances : for example, in a number of asian countries government issuance has still been on the increase. last year saw something of a milestone for regional markets with the publication, by a working group under the chairmanship of

appropriately managed. i am sure that the mpc will play a useful role in helping the industry meet this challenge, by providing training for new practitioners and continuing its work on product development. the recent study on the feasibility and desirability of introducing overnight index swaps in hong kong is one good example of this work. 7. i should perhaps stop here to avoid encroaching further on the valuable time set aside for our guest speaker today. donald mathieson of the imf is no stranger to hong kong. many of you will be familiar with the authoritative reports and analysis of financial markets that he and his colleagues produce. we are fortunate in having been able to grab him for a couple of hours today while he is briefly passing through hong kong. it is my pleasure to welcome him and to join with you all in the launch of this seminar, which will, i hope, be the first of many organised by the mpc over the coming months and years. 8. finally, let me record my gratitude and congratulations to all the committee members of the mpc for the excellent work they have put into the reconstruction of the committee, and my thanks to everyone here for supporting this event today.