Local capital markets experts yesterday criticised regulators and legislators for hindering the growth of Hong Kong's bond market. However the Hong Kong Monetary Authority dismissed the criticism, saying the SAR debt market was among the most diversified and active in the region. 'Hong Kong's Companies Ordinance is still based on British legislation dating from the 1930s,' Philip Li Wing-kuen, senior vice-president of the Hong Kong Mortgage Corporation, said at the MoneyWorld Asia conference. 'The Securities and Futures Commission understands this, but they must go to the Legislative Council to change it - and . . . it is not easy to get bills passed by Legco,' he said. The result, he added, was that bond issuers were obliged to comply with 'absurd levels of disclosure' and observe tedious schedules which exposed them to unnecessary and unacceptable levels of market risk. Joining in the criticism was Helen Wong, head of origination Asia Pacific for HSBC Treasury and Capital Markets and chairman of the Hong Kong Capital Markets Association. Though Hong Kong remained a far larger bond market than Singapore, she said, it was losing ground to a concerted challenge from its smaller but more aggressive competitor. 'In 1994 the HKMA approved certain private sector debt of HK$1 billion or more and investment grade ratings, as collateral to raise money through the Liquidity Adjustment Facility,' said Ms Wong. Prior to this, only government bonds qualified as collateral, and the change in policy had encouraged debt issuers and investors and contributed to the growth of the market, she said. However after twin moves in 1998, private sector debt could no longer be used to raise money through the HKMA's discount window and supranational organisations such as the World Bank and Asian Development Bank were officially discouraged from making debt issues with a maturity of below three years. These moves had put the brakes on the growth of the bond market and should be reconsidered, said Ms Wong. 'In the meantime, Singapore has launched a lot of initiatives to encourage the growth of their bond market - allowing foreign issuers into the domestic dollar market and offering tax breaks to both investors and intermediaries,' she said. The result was bonds outstanding grew 53 per cent in Singapore from S$18.6 billion (about HK$83.3 billion) in December 1998, to S$28.5 billion in April this year. 'Of course our market is far bigger - HK$435.3 billion at the last count. And about 75 per cent of that is private sector debt, whereas more than half the Singapore dollar bonds are issued by the government,' said Ms Wong. 'Our market is also freer and the first foreign private sector issue in Hong Kong dollars came from Qantas in 1998. 'But Singapore is playing catch-up,' she warned, 'and despite our representations the tax regime remains inefficient and unfair as well,' she added. Their comments come despite Government efforts in the wake of the Asian financial crisis to deepen the liquidity of the bond market. Responding to the criticism the HKMA issued a statement saying that Hong Kong's debt market remained among the most diversified and active in the region: 'The HKMA has taken a number of steps to assist in the growth of the debt market (and) is in active discussion with the supranational issuers and they understand and are happy to co-operate with our three-year request. 'It is designed to strengthen the local debt market by helping to develop a longer-term yield curve for pricing private debt. 'Indeed issuance by private corporates has surged since it was introduced.' The Inland Revenue Department said it was preparing a reply to criticism regarding the tax regime and its impact on the bond market.