Last year was impressive for initial public offerings in Hong Kong, the third largest centre for raising money through equity funds, Monetary Authority Chief Executive Joseph Yam says, adding the possibilities for further developing IPO, the channel of financial intermediation, are worth pondering.

In his latest Viewpoint column posted on the authority's website today, Mr Yam said despite the unfortunate events surrounding the IPO of the Link Real Estate Investment Trust, Hong Kong was one of the largest centres in the world for the amount of IPOs organised last year.

"This is quite an achievement. There is also a good chance that Hong Kong will maintain that status in the years to come, and even aspire to move higher in this ranking, if we play our cards right," he said.

Mr Yam said the Mainland relies too heavily on the banking system for intermediating funds and has an urgent need for diversification of financial intermediation channels, for financial stability and efficiency, and economic development reasons. The development of the debt and equity channels on the Mainland has also been slow.

World-class platforms

Mr Yam said Hong Kong has ready-made, world-class debt and equity trading platforms that command the confidence of international investors, but the Mainland's continuing exchange controls may hinder investors there to raise funds offshore.

"While Mainland enterprises are given permission, on a case-by-case basis, to raise funds offshore, for example in Hong Kong, there is no mechanism yet to allow the many individual or institutional Mainland investors to invest outside of the Mainland. And so the listing of Mainland enterprises on the Hong Kong stock market only attracts, and leads to the inflow of, foreign (including Hong Kong) funds.

"If somehow a way could be found to build on this strength and to cater for the demands of investors on the Mainland without significant adverse effects on exchange control, Hong Kong's role as an international financial centre could be reinforced."

Mr Yam said there is a need to explore options for achieving this. This is not just a matter of maintaining Hong Kong's status as an international financial centre, but more important, a matter of meeting a pressing urgent need on the Mainland.

"I am sure we have the financial architects and engineers in Hong Kong who can think of imaginative initiatives to serve the specific needs of our country."