Hong Kong signs Air Services Tax Pact with Finland

On November 19, 2007, Hong Kong and Finland signed an avoidance of double taxation agreement that which covers income derived from the operation of aircraft in international traffic.

The pact was signed by Hong Kong Secretary for Transport & Housing, Eva Cheng and Finnish Consul-General, Timo Rajakangas.

Hong Kong has already signed similar agreements with the UK, China, Germany, Canada, Russia, Switzerland, Norway, Sweden, Belgium, the Netherlands, Bangladesh, Mexico, Croatia, Denmark, New Zealand, Iceland, Israel, South Korea, Jordan, Kenya, Kuwait, Mauritius, Estonia, Ethiopia, and Macau.

According to the Hong Kong government, Hong Kong International Airport handled 4.13 million passengers in October 2007, which is up 7.1% on October 2006. Airport Authority Chief Executive Officer Stanley Hui said that this reflects Hong Kong’s continued attraction for Mainland visitors.

Also, the Hong Kong government revealed that the airport processed 353 000 tonnes of cargo, which is up 7.6%, in line with growth in foreign trade between China and Europe and the United States. There were 25 830 air traffic movements, which is up 5.8%.

Filed under: Taxation

HK Economy goes on growing

In the middle of November, Acting Government Economist Helen Chan announced that in the 3rd quarter of 2007 the economy of Hong Kong continued to grow. Hong Kong’s GDP rose 6.2% in real terms in comparison with the same period in 2006 – this result marked the 16th consecutive quarter when the growth of GDP exceeded the average trend growth.

According to Chan’s explanation, the strong outturn of 6.1% GDP growth in the 1st 3 quarters and the prevailing strength in domestic demand signify that Hong Kong’s economy is able to attain 6% growth for the whole 2007. She added that the economy looks set for further strong growth in the 4th quarter.

Merchandise exports in Hong Kong increased by 6.4% in real terms.

Services exports in Hong Kong grew 12.3%, which reflected vibrant financial market activities, a continued rise in offshore trade and strong inbound tourism.

A key role in driving the economy forward was played by domestic demand. The increase in private consumption spending accounted for 9.7% – this increase was supported by the improving job market as well as by rising household income and wealth.

In accordance with the information provided by the Hong Kong government, the global credit market turbulence in August and September 2007 had only a limited impact on local financial markets and caused greater volatility.

Uncertainty to the global trading environment was also added by the recent surge in oil prices. It should be noted that this might have some impact on trade performance in the 4th quarter of 2007.

Mrs Chan was asked about the impact of the US economic downturn on Hong Kong. She observed that if the United States’ economy shows a downturn which is bigger than expected, the effect on the global economy, Hong Kong’s economy including, will be inevitable. Nevertheless, the direct impact should not be as severe as before because the dependence on the United States as an export growth driver has declined significantly over the years, and the Mainland has become a significant export market for Hong Kong.

Mrs Chan said that the Government will cautiously observe the future economic performance of the United States as well as other external factors.

She also stated that the Government will do its best in order to maintain the market’s smooth operation and to strengthen risk management.

Filed under: Business and Economy

HKEx profits increase

A 140% year-on-year surge in the profit attributable to shareholders was seen by Hong Kong Exchanges and Clearing (HKEx) in the 1st 3 quarters of 2007, to USD 515.2 million.

In accordance with 3rd quarter results announced on November 14, 2007, HKEx recorded income of HK$5.5 billion in the 1st 3 quarters, which is up 93% on a year earlier. Operating expenses of HKEx rose 15% to HK$1.03 billion, while the profit attributable to shareholders was HK$4.01 billion or USD 515.2 million.

The average daily turnover value on the Exchange was 138% higher than the same period in 2006. The average daily number of derivatives contracts traded on the Futures Exchange rose 69%, while stock-options contracts traded on the HKEx rose 161%.

The rise in profit was caused mainly by the higher turnover-related income that, in its turn, resulted from the increase in the level of activity in the cash and derivatives markets. The above-mentioned increase was partly driven by the market sentiment improved by the relaxation of rules that govern the permissible investments under the Qualified Domestic Institutional Investor (QDII) scheme and under the proposed pilot program for direct foreign portfolio investments by domestic individuals.

According to HKEx Chairman Ronald Arculli, the expansion of the QDII scheme in the 1st half of this year and the anticipated implementation of the pilot program will present new opportunities for the growth of Hong Kong’s financial market. He said that the Exchange will go on supporting the Mainland authorities as regards preparing for the implementation of the program. Also, HKEx Chairman added that the HKEX still aims to enhance market quality so that Hong Kong would hold up well notwithstanding global market changes.

Filed under: HK as a Financial Centre

Hong Kong SFC signs MoU with Financial Reporting Council

A memorandum of understanding has been signed by Hong Kong’s Securities and Futures Commission and the Financial Reporting Council in order to enhance co-ordination and exchange of information between these 2 bodies.

In accordance with a statement made by the government, the above-mentioned memorandum outlines the working arrangements between Hong Kong’s Securities and Futures Commission and the Financial Reporting Council as regards potential authority overlap and common interest issues. Now, the organizations will be able to discharge their functions as well as protect investors more effectively. Also, the memorandum of understanding outlines the framework for case referral and establishes contact points for ensuring effective and efficient communication.

Martin Wheatley, the commission’s Chief Executive Officer, welcomed the deal.

MT Shum, the Chief Executive Officer of the Financial Reporting Council, expressed his confidence that the 2 bodies will co-operate to enhance the financial reporting integrity of listed entities in Hong Kong.

It should be noted that the Financial Reporting Council established in July 2007 aims to investigate auditing and reporting irregularities, enquire into non-compliance with financial reporting requirements as well as to require listed entities to address any non-compliance identified.

Filed under: Investment Environment

HK welcomes Canadian business

Frederick Ma, Hong Kong’s Secretary for Commerce and Economic Development, has urged Canadian businessmen to use the established Hong Kong-Canada links in order to grasp opportunities in Hong Kong and Mainland China.

On November 9, 2007, he spoke at an Empire Club luncheon in Toronto. He stated that the territory has leveraged the rapid economic development of Mainland China since the handover, and that this has helped Hong Kong to enter the threshold of a new era.

Ma also explained that the jurisdiction is plotting a course in order to make the most of the new opportunities, as well as outlined Hong Kong’s latest action plans regarding equipping itself with the necessary hardware and software at the upcoming stage of progressive development. This includes 10 infrastructure projects covering roads, railways and urban planning. Some projects employ cross-boundary collaboration, and therefore will improve the jurisdiction’s transport links with China.

Hong Kong’s Secretary for Commerce and Economic Development named several areas which are good for Hong Kong and Canada co-operation. These included financial services, bi-lateral trade, IT and creative industries.

Filed under: HK as a Financial Centre

No need for Deposit Protection Upgrade in HK

Hong Kong’s Secretary for Financial Services and the Treasury, Prof KC Chan made an announcement that the Deposit Protection Scheme has been operating smoothly since its inception in 2006 and that it does no need any adjustment.

Prof KC Chan informed legislators that the scheme fund reached $374 million in March, and it seems to reach the targeted $1.3 billion as scheduled in 3 years. He also said that the scheme fund has enhanced public confidence in deposits with small and medium-sized banks.

In accordance with a survey commissioned by the Deposit Protection Board in June 2007, 50% of respondents suggested that bank deposits became more secure after the introduction of the scheme, and 65% of respondents were more confident in placing deposits with small and medium banks.

Prof Chan revealed that despite the intense competition in the local banking industry, the board has received no comment and no complaints on banks passing the cost of the scheme on to depositors.

According to the existing scheme, in case of the failure of a member bank, each eligible depositor will be paid a compensation of up to a maximum of $100 000.

Filed under: Banking Services