The Government is fully supportive of the development of Islamic finance in Hong Kong and is moving full-steam ahead, Financial Secretary John Tsang says. As a key step in this direction, the Monetary Authority will apply for Islamic Financial Services Board associate membership.
A closer relationship with the board will help keep Hong Kong’s financial markets abreast of the latest developments in Islamic finance, he added.
Speaking at a seminar on Islamic finance today, Mr Tsang said the Government has a responsibility to diversify Hong Kong’s financial markets to bolster the city’s status as the Mainland’s global financial centre.The Monetary Authority and the Treasury Market Association set up a team, in conjunction with other market players, to study the possible challenges and implications of the growth of Islamic finance in Hong Kong, as well as the development of a wholesale market for Islamic finance. The team concluded that there are no major legal and regulatory obstacles to transactions involving wholesale Shariah-compliant financial instruments in Hong Kong.
Tax law review
Mr Tsang said issues that are being tackled include changes and/or clarifications that may be needed to Hong Kong’s taxation regime to offer a level playing field for the issuance of Islamic bonds, as compared to other conventional bonds. A review is underway to see whether Hong Kong’s tax laws should be modified.
He pointed out the first Islamic retail fund for sale to retail investors in Hong Kong had already attracted about US$45 million worth of orders by December 10, mainly from local investors.
“Obviously, Islamic finance has become part of the global financial system and it offers huge potential for development and growth. To further consolidate Hong Kong’s position as an international financial centre, we should actively leverage on this new trend by developing an Islamic finance platform, and focus on, among other things, developing a wholesale Islamic finance market,” Mr Tsang said.
“Another reason is that Hong Kong remains the only jurisdiction outside of the Mainland where banks may transact business using the renminbi. This, I believe, provides Hong Kong with a unique opportunity to develop wholesale markets in Shariah-compliant instruments for Mainland-based issuers.
“I believe that Hong Kong possesses the required credentials to become an international centre for Islamic finance. And, as the global financial centre for the world’s fastest growing large economy, we have a ready-made marketplace for new investment opportunities,” he added.
Monetary Authority Chief Executive Joseph Yam said the importance of Islamic finance is rising in the global financial market.
“As an international financial centre, Hong Kong is stepping up its efforts to promote its financial services to major Islamic countries and regions, and developing an Islamic bond market,” he added.