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Speech by FS at LME Week Asia 2016

Following is the speech delivered by the Financial Secretary, Mr John C Tsang, at LME Week Asia 2016, organised by the Hong Kong Exchanges and Clearing Limited (HKEX), at the Hong Kong Convention and Exhibition Centre this morning (June 14):

C K (Chairman of HKEX, Mr Chow Chung-kong), Charles (Chief Executive of HKEX, Mr Charles Li), Garry (Chief Executive of the London Metal Exchange, Mr Garry Jones), distinguished guests, ladies and gentlemen,

Good morning.

It is indeed my great pleasure to join you all here today at the LME Metals Seminar, the highlight of LME Week Asia. Well, until tonight's gala dinner, that is.

We are here today, of course, to talk about metal, or, if you like, "any of various opaque, fusible, ductile and typically lustrous substances that are good conductors ... and yield basic oxides and hydroxides", according to my Oxford (dictionary).

Well, I may be wrong, but I am willing to bet that the "yield" most of you are looking for from these magical metals goes well beyond "basic oxides and hydroxides".

If that's the case, I have no doubt that you are in the right place. And my thanks to the Hong Kong Exchanges and Clearing Limited for staging this flagship commodities event in Hong Kong for the fourth year in a row. And, in so doing, bringing together the world's most influential aficionados of those "lustrous substances" that we call metals.

Last year was a challenging one for global commodities markets. As Jim Rogers once said, "commodities tend to zig when the equity markets zag". There was certainly that - plenty of zigging and zagging in the face of a sluggish global economy and volatile financial markets.

Total LME volume was about 170 million lots last year, down 4.3 per cent from 2014, while the year-end open interest of the LME futures market stood at 2.3 million lots, up 2 per cent over 2014.

The international outlook remains worrying for the remaining half of 2016. The good news is, as the global economy struggles to gather momentum under the "new normal", Asia, particularly the Mainland of China, will continue to be a key source of growth.

Indeed, while the IMF recently lowered again its forecast for global growth this year to 3.2 per cent, it predicted that emerging and developing Asia will contribute about 60 per cent of the world's GDP growth this year.

That trend will continue, with growth expected to average 6.3 per cent a year over the next five years, markedly higher than the 3.7 per cent forecast for the world over the same period.

China's 13th Five-Year Plan got going in March this year, targeting innovation-driven economic growth of at least 6.5 per cent a year from now through 2020. In the first quarter of this year, the Mainland's economy expanded by 6.7 per cent. I believe most of the advanced economies around the world would cheerfully settle for half or even a third of that.

And there are more promises down the road. I am talking about the Mainland's Belt and Road Initiative, a visionary strategy spanning some 65 countries in three continents that count for two-thirds of our planet's population. A grand initiative about boosting integration, connectivity, trade and investment, as well as people-to-people bonding.

Clearly, the Belt and Road Initiative has enormous potential. As companies in economies along the Belt and Road corridors, including those in the Mainland, "go global", they will inevitably generate demand for a wide range of financial services, from financing to IPO, and from international investment and trade settlement to asset and risk management.

Just last month, Hong Kong hosted the inaugural Belt and Road Summit. There, Chairman Zhang of the Standing Committee of the National People's Congress made clear that the Central Government was counting on Hong Kong to play a significant role in the implementation of the initiative.

In particular, he highlighted Hong Kong's wide-ranging prowess as an international financial centre, in enabling capital flow, in promoting the internationalisation of the Renminbi and, of course, in offering comprehensive financial services for the Belt and Road projects.

Last year, Hong Kong ranked first in equity funds raised through IPOs. And according to the UN World Investment Report, Hong Kong ranked second in global FDI in 2014, with record amounts of inflows at US$103 billion and outflows at US$143 billion.

We are now the world's largest offshore Renminbi business centre, as well as the largest Renminbi bond market outside the Mainland.

As economic and trade ties between the Mainland and the Belt and Road economies grow stronger, the Renminbi will become even more widely used worldwide.

The IMF's decision last November to include the Renminbi in the SDR basket of currencies confirmed the Renminbi's status as a global currency.

The continued internationalisation of the Renminbi will, no doubt, present new opportunities for Hong Kong in Renminbi trade settlement and related financial services.

And we also should not underestimate the potential of and opportunities arising from Islamic finance, given the large Muslim population living in the Belt and Road region.

Hong Kong has put together two well-received sukuks since September 2014, demonstrating our capability to support Islamic financial products that meet specialised financing needs. So we are no one-trick pony here.

Hong Kong's wealth-management and asset-management business is also looking good, growing exponentially in recent years. Indeed, Hong Kong is ideally positioned to enable the flow of capital from the Mainland in a risk-controlled manner, serving as the asset-management centre for the Mainland's outbound capital.

The mutual recognition of funds arrangement between the Mainland and Hong Kong, in operation since (last) July, will only enrich the variety of Renminbi fund products offered in the Hong Kong market.

Hong Kong is also Asia's premier location for corporate treasury centres. We have what it takes to manage treasury activities denominated in Renminbi.

To enhance the competitiveness of our corporate treasury services, a new legislation has been passed last month to provide interest deductions under profits tax for intra-group financing business of corporations under specific conditions.

The HKEX has been no less active this past year, as C K has just mentioned. And you will hear a good deal more about that from Charles in a moment about the opportunities they have created, and will continue to create, for Hong Kong and for all of you here today.

I wish you all a rewarding seminar and the best of business at LME Week Asia, and for those from abroad a most enjoyable stay here in Hong Kong.

Thank you.

14.06.2016


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