Mr Chairman, distinguished guests, fellow member exchanges, ladies and gentlemen,
It gives Hong Kong Exchanges and Clearing great pleasure to join the
I wish to extend a warm welcome to all distinguished participants and guests. This Forum is an important gathering of leaders and experts in the securities and derivatives industry to share insight and wisdom, particularly on the theme of 'developing markets'. I am sure the presentations and discussions in the programme will yield information and knowledge of great value and interest on this subject, as well as provide an opportunity for the exchange of opinion and experience.
Securities markets are one of the engines driving world economic development and growth. They provide the capital for investment in many sectors of the economy, and also allow the general public and other institutional investors to participate in the rewards in economic growth. Furthermore, in this age of globalisation, investment funds are not bound by national borders, but seek the best investment return and growth opportunities world-wide. Many developing economies are turning to the establishment of stock markets and exchanges to attract investment to their industries and commercial sectors.
I wish to share with you today some of my thoughts on developing securities and derivatives markets. I have observed over the years that there are four essential features and phases a developing market must go through in order to evolve into a mature market.
The first is the development of an efficient trading and clearing platform for stocks or futures, so that transactions, settlement and clearing instructions can be electronically handled, with links to traders, the internet, or even wireless handheld devices. With good hardware and software readily available nowadays, building the sophisticated technical infrastructure needed for a modern financial market is a manageable and less demanding task.
The second essential feature is the institution of a framework of regulatory supervision to govern the fair and transparent operation of the market, including rules for the listing of stock and the corporate governance of listed companies. How listed corporations and their directors and management conduct company business, discharge their responsibility towards shareholders, and disclose information to the market are important indicators of the quality of the market.
These corporate governance norms have to be enshrined in a code of securities and company regulations, visible to all, and closely supervised.
Equally important to the regulatory regime, is the adoption of sound accounting standards based on internationally accepted principles and reporting requirements, which are well understood by global investors and financial analysts. In addition, the regulatory framework should be backed by a system of law promulgated by the legislature, and impartially enforced and administered by a regulatory agency, with access to independent judicial courts, upholding the Rule of Law.
These safeguards and standards are essential to foster the confidence of investors and provide a level playing field for traders, issuers and investors. The healthy growth and credibility of a developing securities market depends on how successfully regulatory supervision is implemented and whether it is seen by investors as a fair and well-regulated market of integrity.
The third requirement is the development of human resources and assets to support and sustain the operation and growth of the securities and derivatives industry. Sophisticated market infrastructure has little value if there is no qualified manager to run it, or, to borrow an old phrase, the machinery is only as good as the operator.
Human resources refer not only to the training and grooming of stock exchange executives, traders, brokers and retail agents, etc. but also include a whole range of professional and financial experts essential in serving the needs of an active market. Among these are corporate lawyers, investment bankers, financial sponsors, accountants, valuers, fund managers, financial analysts, and economists, to name a few.
The services of these professionals are indispensable to capital formation through Initial Public Offerings and post listing fund raisings, and share trading on the secondary market. The cultivation and nurturing of these high-caliber experts require time and sustained effort. Many developing securities markets have chosen to attract and offer access to reputable global accounting firms, law firms, and financial houses, equipped to practice in their markets. Apart from meeting an immediate need, this also ensures that world class standards and practices are implemented from the beginning to form a solid foundation for the market, and to facilitate technology transfers for long term development.
The fourth feature or phase is perhaps the most difficult to achieve. This concerns the formation of a culture of compliance for the market where fairplay, observance of the law and moral integrity are voluntarily observed, not through fear of penalties, but through recognition and adoption of these norms of behavior as a value of the market and society.
It is a culture where investors and companies voluntarily seek to adhere to the highest market standards and practices while expecting the same commitment from others and where good corporate governance practices are observed as a matter of course to uphold both shareholder and the public interest.
In recent years, people have tended to associate ruthless competition with globalisation. I would like to cite one exception. At the WFE, we enjoy cooperation while all member markets become more and more globalised. At HKEx, we certainly appreciate the benefits of being a member of the WFE, which allows us to learn from the insights of the leading markets and at the same time share our experience of market development with others.
In conclusion I wish to say that I am confident that the remarks, presentations and discussions in the 3-day programme for this Forum will stimulate and enlighten all participants, including my colleagues, and I trust this event will be a resounding success.
Thank you.
