November 1, 2007
Islamic finance has huge potential: CE

Donald Tsang
Future finance: Chief Executive Donald Tsang speaks at the Hong Kong Association of Banks luncheon.

The Islamic financial sector has enormous potential and opportunities, Chief Executive Donald Tsang says, adding he is seriously thinking of leading a mission to the Middle East early next year to help promote the development of an Islamic bond market in Hong Kong.

Speaking at the Hong Kong Association of Banks luncheon today, Mr Tsang said some financial centres outside the Middle East have already taken steps to tap opportunities brought by the market. To further consolidate Hong Kong’s position as a global financial centre, we should do more in this regard, he said.

Globally, the Islamic financial sector is worth an estimated US$700 billion to US$1 trillion, and is expected to grow by 15% annually.

“At present, assets worth more than US$300 billion are being held by some 300 Islamic financial institutions in 75 countries. A further US$400 billion is managed by the Islamic business units of international banks,” he said.

The focus will be on the bond market, adding the Hong Kong Monetary Authority, in conjunction with the financial sector, has set up a dedicated team to study the related issues such as taxation, legal and regulatory frameworks and make recommendations for the early introduction of Islamic debt offerings in Hong Kong.

“The HKMA is going to hold a seminar early next year and I will do a lot more promotion work as well. We are looking at our regulations, we are looking at our market infrastructure to ensure we produce the right environment for the Islamic investors to come and do trade. The bond market is our major initiative at the moment. I think this is something that would be very useful and attractive to Islamic investors.”

Strong complementarities

Mr Tsang said there are very strong complementarities between what Hong Kong and Shanghai and Shenzhen and Tianjin.

“All of us are in a complimentary and reinforcement role, helping our country grow into an economic superpower in the coming decade.

“For a country with an enormous economy like China, definitely we need more than one centre. But as far as an international financial centre is concerned, this is a different matter. I believe this role of ours, separated into three major time zones of eight hours each, we cannot sustain too many international financial centres.

“For instance, serving the Americas you have New York, serving Europe you have London. In Asian time zone I feel that we already have a head start. We have the best infrastructure, we’ve got the best people – people in this room – helping it grow and sustain its strength. We feel no competition, we welcome competition and I do believe Hong Kong will continue to be the premier international financial centre in our timezone.”


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