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359.3404

Speeches

Speech at the Signing Ceremony of the Kowloon-Canton Railway Corporation Note Issuance Programme

by Joseph Yam, Chief Executive, Hong Kong Monetary Authority

22 April 1999

Thank you all for attending this signing ceremony. The Kowloon-Canton Railway Corporation (KCRC) Note Issuance Programme is the fourth Programme in which the Hong Kong Monetary Authority (HKMA) acts as the arranger, custodian and agent for the issuer, this following similar arrangements for the Mass Transit Railway Corporation (MTRC), the Airport Authority (AA) and the Hong Kong Mortgage Corporation Ltd (HKMC). The debt paper to be issued by the KCRC under this Programme will be covered by the proven market making arrangements that we initially designed for our own Exchange Fund paper.

2. The Note Issuance Programme serves two important objectives. The first is to promote the continuing development of our debt market through the introduction of high quality borrowers. The second is to assist public sector entities in borrowing Hong Kong dollar funds cost-effectively, and in a way that correctly reflects their credit-worthiness. The market making arrangements help to achieve this by ensuring a high degree of liquidity and therefore enhancing the attractiveness of the paper in the secondary market. This enables the paper to be more finely priced. Under the market making arrangements, the 28 market makers appointed by the HKMA are obliged to make two-way prices during money market hours. They are also allowed to go short in the paper, provided that they have an overall net long position in the paper covered by the market making arrangements, subject to prudent risk management measures.

3. The KCRC has already built up a reputation as a quality borrower and I am confident that through this Programme, it will be able to borrow Hong Kong dollar funds on fine terms, as has already been the case with the Mass Transit Railway Corporation, the Airport Authority and the Hong Kong Mortgage Corporation.

4. The HKMA maintains a keen interest in the development of the debt market and is committed to cultivating a sound and robust market infrastructure. Let me take this opportunity to mention another initiative which should come to fruition in the second half of this year.

5. We are working closely with the Stock Exchange on the listing of Exchange Fund Notes on the Exchange with a view to promoting wider access by investors. In particular, the Stock Exchange provides a marketplace where retail investors can more readily participate in the market for Exchange Fund Notes. The high savings rate of Hong Kong people suggests that there may be money seeking a home in a secure, medium to long term listed investment of this nature. More generally, the imminent launch of the Mandatory Provident Fund (MPF) should further stimulate the demand for high quality Hong Kong dollar products.

6. These various developments - today's KCRC programme, the Listing of EF Notes and the advent of the MPF - should all contribute positively to the development of the HKD debt market. I would also hope that, in due course, the market may become more active as a channel for private sector borrowers to raise funds.

7. Finally, I would like to thank all those concerned for their untiring efforts in bringing the KCRC Note Issuance Programme to fruition. I would also like to thank the market makers and recognised dealers for their support and contribution over the years in helping to develop Hong Kong's debt market. Thank you.

Hong Kong Monetary Authority

Last revision date: 1 August 2011
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