WARDLEY, the merchant banking arm of HSBC Holdings, launches a bond index today to act as a benchmark for the value of the Hong Kong dollar bond market. The Wardley Hongkong Bond Index has been given a base of 100 and its value, calculated as a weighted average of 23 bonds, will be revised monthly. According to Andrew Fung, manager of swaps and trading at Wardley, the index comprises 23 publicly and privately offered Hong Kong dollar fixed-interest bond issues. ''Other issues will be added as their payment date comes,'' he said. ''For instance, issues by Hongkong Land and Nordic Investment Bank will be added by January,'' he said. In order to be included on the index issues must meet a number of criteria. Index bonds must be fixed-interest local currency issues with a maturity of more than one year, Mr Fung said. ''They must also have reasonable liquidity. We can't make a strict definition of that because the secondary market is still small but it should be offered on the screens of at least two market makers,'' he said. Wardley claims to have a 20 to 30 per cent share of daily secondary market turnover in Hong Kong dollar issues with trade of $20 million to $50 million a day. ''At the moment there is quite a small group of active traders,'' Mr Fung said. He said his list of major players would include Oakreed Financial Services, a pure Hong Kong dollar bond boutique; Union Bank of Switzerland; Societe Generale Asia; ANZ McCaughan; Bank of Tokyo International; Chemical Bank Asia; Industrial Bank of Japan and Sanwa Bank while Jardine Fleming and Goldman Sachs were just emerging as large traders. ''We decided the time was right for this kind of index as the market has had a record year for issues. ''We hope it will attract passive investors and investors who do not know a great deal about the Hong Kong market yet and need this kind of benchmark,'' Mr Fung said. A senior executive at one of the other large traders yesterday gave the index a cautious welcome. ''If it helps to lift prices it will be a bonus,'' he said. ''But the market has not been screaming for this.'' Mr Fung said the plan was to gradually introduce a range of derivatives to allow hedging. ''We plan to do over-the-counter options and forwards, but things will need to develop a bit first,'' he said.