Tsang sees bigger role for yuan bond business

PUBLISHED : Thursday, 25 February, 2010, 12:00am
UPDATED : Thursday, 25 February, 2010, 12:00am

More yuan investment products will be encouraged and incentives offered for investors to trade Exchange-Traded Funds and bond products.

The measures are part of the government's efforts to promote Hong Kong as a testing ground for offshore yuan services.

Financial Secretary John Tsang Chun-wah said the government hoped the 6 billion yuan (HK$6.8 billion) sovereign bond launched by the Ministry of Finance in October would be the first of many.

'We hope to further promote the development of the yuan bond business in Hong Kong, such as expanding the issuance size of the bonds and increasing the types of bond issuers and the classes of qualified investors,' Tsang said.

The Hong Kong Monetary Authority announced this month that any local firm could issue yuan bonds. Previously, only mainland financial firms could do so.

Hong Kong Exchanges and Clearing has indicated it plans to launch more yuan-denominated stocks and futures products in the next three years. The Chinese Gold and Silver Exchanges Society also wants to launch yuan-denominated gold products.

Tsang proposed measures to boost Hong Kong's stock and bond markets, including extending stamp duty exemption to exchange-traded funds (ETFs), as long as no more than 40 per cent of their assets are composed of Hong Kong stocks.

At present, only ETFs that exclusively trace overseas markets are exempt from stamp duty. ETFs are index funds that allow investors to trade a unit of the fund instead of trading a basket of stocks in a certain market. At present, the government collects a 0.1 per cent stamp duty from both buyers and sellers on the value of stocks traded.

Brokers said these measures could attract international traders but were of little use to local investors.

'If the government really wants to benefit local investors, it should abolish the stamp duty for all stocks,' said Louis Tse Ming-kong, director of VC Brokerage.

A government official said this could not be done because stamp duty on stocks was a major source of government income.

Investors paid HK$25.6 billion in stamp duties to the government last year, representing 10.2 per cent of total government revenue.

Chim Pui-chung, lawmaker for the financial services sector, said most international markets had abolished the stamp duty.

'Hong Kong should follow this international trend,' he said.