Speech at the Signing Ceremony of the Hong Kong Dollar 20 Billion Debt Issuance Programme
Speeches
17 Jun 1998
Speech at the Signing Ceremony of the Hong Kong Dollar 20 Billion Debt Issuance Programme
Donald Tsang, Chairman, The Hong Kong Mortgage Corporation Limited
Ladies and gentlemen,
- Let me first welcome you all to this Signing Ceremony to launch
the Hong Kong Dollar Debt Issuance Programme of the Hong Kong
Mortgage Corporation (HKMC). This Programme, together with the Note
Issuance Programme we successfully launched in January this year,
will serve as the two main vehicles of the HKMC in raising funds in
the Hong Kong dollar debt market.
- Despite its short history, the HKMC has already established a
strong presence in the mortgage and debt securities markets in Hong
Kong. The Debt Issuance Programme will further enhance HKMC's
ability to raise funds through the debt market to support the
expansion and diversification of our mortgage purchase
programme.
- Up to mid-June, the Corporation has purchased HK$5.2 bn of
mortgages and we plan to acquire another HK$10 bn mortgages by the
end of this year in accordance with our business plan. The
efficiency of the purchasing procedures for floating rate mortgages
will be further enhanced by the forward commitment facility. Under
this facility, the HKMC will commit to purchase an agreed amount of
mortgages from the Approved Sellers within a period of up to 12
months. This facility should provide banks with greater certainty
on the amount of loans they can sell to the HKMC within the
specified period and help them to plan their new loan businesses
more effectively. It will also enable HKMC to assess more
accurately the selling interest of the Approved Sellers, which will
improve the efficiency of the mortgage purchase operations and
facilitate the planning of our funding activities. I am sure the
facility will add further impetus to the mortgage purchase
programme, and we will announce the details of the facility very
shortly.
- We are also making good progress in promoting fixed rate
mortgages. Market response to the Pilot Scheme we launched in March
has been very encouraging. The HK$500 million we have allocated for
the Pilot Scheme is almost fully committed only half way through
the six-month trial period. So far, the two participating banks
have approved 320 loans involving HK$484 million. In view of the
favourable response, we have raised the pre-commitment amount to
HK$650 mn and the amount may be further increased if necessary. I
am pleased to note the favourable response to the Pilot Scheme has
stimulated the emergence of similar products in the market. A
number of banks, some teamed up with property developers, have
offered fixed rate mortgages to their customers. This shows that
the Pilot Scheme has served as a catalyst in promoting fixed rate
mortgages in Hong Kong.
- The launching of the Debt Issuance Programme is a timely
development crucial to the successful operation of the HKMC. The
Debt Issuance Programme and the Note Issuance Programme complement
each other to provide a comprehensive coverage of the investor base
of the Hong Kong dollar debt market.
- Securities issued under the Note Issuance Programme are covered
by the market making arrangements for Exchange Fund Bills and Notes
and are highly liquid in the secondary market. They are largely
held by financial institutions for trading and liquidity management
purposes. Because of the high degree of liquidity in these
securities, they are issued at a tight spread over corresponding
Exchange Fund Notes, enabling the Corporation to raise funds at a
lower cost.
- On the other hand, the Debt Issuance Programme's main target is
institutional investors. The Programme contains a number of
innovative features which should help the HKMC to reach out
effectively to the institutional investors. First, we have
appointed 5 Primary Dealers which have good access to the
institutional investor base. The Primary Dealers will perform the
role of underwriter and market maker for securities issued under
the Programme. Another 12 Seller Group Members have been appointed
to help with the distribution of the debt securities. Second, the
Programme is very flexible in terms of its offer mechanism,
allowing diversified approaches including book-building,
syndication, bidding and private placement to cater for different
market conditions and investor needs. Mr. Peter Pang, Chief
Executive Officer, will explain the details of the various features
of the Debt Issuance Programme after the Signing Ceremony.
- I would like to thank the Primary Dealers and the Selling Group
Members for participating in the Debt Issuance Programme. I would
also like to take this opportunity to thank the Hong Kong Capital
Markets Association for offering useful advice to the HKMC on the
framework of the Programme. I believe the Debt Issuance Programme
will develop into another flagship of HKMC's funding programme. I
am also confident that in time to come, the HKMC will emerge as one
of the largest issuers in the Hong Kong dollar debt market. Thank
you.