Hong Kong Mortgage Corp (HKMC) has set up a US$3 billion mortgage-backed securitisation programme allowing it to issue debt papers to professional investors over the next few years. The programme will help the corporation raise funds through debt papers, with mortgage loans as back-up. The products, popular in the United States have yet to be made available to Hong Kong investors. The new programme will help provide a debt instrument for Hong Kong investors, which will help boost the SAR's debt market. The scheme follows the Government's aim of making Hong Kong a regional debt market centre. Yesterday, the corporation signed documents with a group of investment banks including Merrill Lynch International and HSBC. The bankers will be responsible for selling the mortgage-backed securities to clients. The programme allows the corporation to issue mortgage-backed securities in different currencies and different amounts each time, until the full amount of US$3 billion is reached. Peter Pang, chief executive of HKMC, said it would like to issue the first batch of mortgage-backed securities worth HK$2 billion in the first quarter of next year. He expected it would issue HK$4 billion next year. The money raised will help buy more mortgage loans. Next year, the corporation plans to buy about HK$12 billion worth of mortgage loans. HKMC, wholly owned by the Government, was set up in 1997 to buy mortgage loans from the banks to reduce their risk exposure to the property market. It has HK$20 billion worth of assets on hand from previous acquisitions. Under the programme, the corporation will re-package some of the mortgage loans it has bought into debt papers, called mortgage-backed securities, to sell to investors. Investors earn interest and get the principal back at the maturity of the papers, similar to buying traditional bonds. They could also trade the papers among themselves like other debt instruments. Mr Pang initially said the corporation wanted to sell mortgage-backed securities to investment bankers, fund managers, insurers and pension funds. Later, it would consider making the papers available to retail investors. In the longer term, it may list the mortgage-backed securities on the Hong Kong and overseas stock exchanges, allowing retail investors to easily trade the products. Tony Latter, executive director of the corporation, said the programme was a milestone in developing a secondary mortgage market in Hong Kong, and would boost the debt market. 'Through standardisation of product structure and documentation, the programme provides a convenient platform for the HKMC and banks to convert their illiquid mortgage portfolios into liquid mortgage-backed securities,' Mr Latter said. 'It will substantially shorten the lead time for the issue of mortgage-backed securities, from six to nine months to a few weeks.' The programme will also allow the corporation to issue mortgage-backed securities in Hong Kong dollars as well other currencies. Mr Pang said this multi-currency function would enable the corporation to sell mortgage-backed securities in different currencies to meet foreign and domestic demand. Other banks in the programme include Barclays Capital, Dao Hang Bank, Deutsche Bank, JPMorgan, Salomon Smith Barney and UBS Warburg.