Speech at the Cocktail Reception to Mark the Commencement of Business of The Hong Kong Mortgage Corporation
Speeches
20 Oct 1997
Speech at the Cocktail Reception to Mark the Commencement of Business of The Hong Kong Mortgage Corporation
Donald Tsang, Financial Secretary, HKSAR
(Reprinted in the HKMA Quarterly Bulletin Issue No.13)
- Welcome to this reception which marks the commencement of business of the Hong Kong Mortgage Corporation.
- We are all happy to see that after many months of planning and hard work, the concept of "Mortgage Corporation" finally comes to fruition today. This marks another major milestone in the development of the Hong Kong financial system. The Mortgage Corporation is a strategic piece of infrastructure which will enhance the safety and robustness of the home financing mechanism.
- The Corporation will play an important complementary role in intermediating between long-term funding sources and long-term borrowers for home finance. It will also contribute towards promoting banking and monetary stability, local debt market development as well as home ownership. As our Fannie Mae consultants have succinctly put it, "Hong Kong is in an enviable position compared to many other economies, as its desire to expand its current housing finance mechanism is driven by a long-term vision, not in reaction to a crisis in the housing market or credit system."
- As you may recall, when we drew up the Mortgage Corporation proposal in April last year, there was an interesting debate on whether our forecast of the significant shortage in mortgage funds was realistic. Subsequent developments suggest that the forecast might even be on the conservative side. The size of outstanding residential mortgage loans grew by 28% in the twelve months to June 1997, which outpaced the study*s projected annual growth rate of 19%. The share of property-related loans in total domestic loans further increased from 45% to 47% in the same period.
- In his Policy Address earlier this month, our Chief Executive, Mr Tung, announced the Government's new housing programmes to boost housing supply to at least 85,000 units a year and to increase the home ownership rate to 70% by the year 2007. This will undoubtedly sustain high growth in demand for mortgage funds. Our measures to promote home ownership reinforces the need to broaden the funding sources for mortgage finance. The Mortgage Corporation will perform this strategic role by channeling long-term savings, such as pension and insurance funds, to meet the rising demand for home financing.
- I am confident that the Mortgage Corporation will thrive in this environment of rapid mortgage growth. The Corporation is forging ahead with its first phase of business. It is focusing on the purchase of mortgages for its retained portfolio. It will fund this operation by issuing unsecured debt securities. In a few minutes, we will sign the Master Mortgage Sale and Purchase Agreement and the Master Mortgage Servicing Agreement with the first batch of Approved Sellers involving eight banks. These Agreements, along with their corresponding Manuals, outline the policy guidelines and procedures of the Mortgage Corporation. The Corporation is discussing with other banks and will sign up more in due course. The initial block of mortgage purchase, expected to involve a total size of HK$750 mn to HK$850 mn, will take place next month.
- On the funding side, the Corporation is discussing with the Hong Kong Monetary Authority to set up a Note Issuance Programme, similar to the ones arranged for the Mass Transit Railway Corporation and the Airport Authority. We hope to benefit from the higher liquidity and lower issuing costs of papers under this Programme. Depending on market conditions, we hope to launch the first debt issue in the first quarter of 1998. Separately, the Corporation will also set up a multi-currency medium-term notes programme to tap funds from the capital market.
- As an organization operating on a commercial basis and in a competitive environment, the Mortgage Corporation is keenly aware that it will ultimately depend upon its ability to provide real benefits and service to our clients. We look forward to establishing a long-term, mutually beneficial relationship with the banking community and the capital market participants, many of whom are present here today.
- I would like to thank my fellow Directors for their valuable contribution in setting up the Corporation. I would also like to thank the Executive Directors and the staff of the Mortgage Corporation who have worked very long hours in the past few months to develop the business plan, set up the various operational systems and prepare the voluminous documentation, while maintaining the highest professional standards.
- Before I close, let me introduce to you members of the Senior Management. Apart from the three Executive Directors : Mr. Joseph Yam, Mr. Andrew Sheng and Mr. Norman Chan, we are pleased to have Mr. Leland Sun as our Chief Operating Officer, Mr. Philip Li as our Senior Vice President (Finance), Ms. Pamela Lamoureaux as our Senior Vice President (Operations) and Ms. Susie Cheung as the General Counsel.
- Thank you.
