This is demonstrated by the fact that we have the largest, deepest, and most open Chinese capital markets outside of the Mainland: half of our stock market capitalisation comprises Mainland related companies. At the end of August, our stock market was the sixth largest in the world and the second largest in Asia in terms of market capitalisation. It ranked first in the world in securitised derivatives turnover, and first in Asia for stock options turnover and exchange-traded funds turnover. It also ranked fifth in the world in total equity raised through IPOs. 4 In the other direction, many Mainland companies have set up regional headquarters or offices in Hong Kong as part of their strategies to step up their international presence. Continuously high growth in recent years has resulted in a vast accumulation of wealth on the Mainland and the authorities there are progressively liberalising the requirements for Mainland financial institutions to invest overseas. As a result, Hong Kong has benefited from the outward investment flows given our geographic, cultural and linguistic affinities with the Mainland and our ability to provide a broad access to numerous Asia-Pacific and global markets. The potential demand for wealth management thus presents capital-market intermediaries in Hong Kong with huge opportunities. We are also the first jurisdiction outside of the Mainland with the ability to conduct renminbi banking business and deal in renminbi-denominated financial products. The establishment of a renminbi bond market in Hong Kong last year marked a key milestone in the development of renminbi business here.
We don’t have a clear and measurable definition of the term financial stability and, in most cases, nor do we have a clear policy or decision-making structure for pursuing financial stability, unlike in the field of monetary policy, in which many central banks follow well-defined strategies which in one form or another respect the principle of “constrained discretion”. Achieving a coherent approach to financial stability may be challenging, if only because it requires a consistent combination of macro and micro elements and because of the large number of interested and participating parties. Also, it should foster financial innovation, and ensure a level playing field. However, I think that our future author might take some comfort from the fact that supervisors, central bankers, policymakers and others learned valuable lessons in the late 20th and early 21st centuries, which will remain valid for the rest of the century. Let me outline four of those lessons. First, we have learned of the need for businesses and consumers to have access to credit on fair and reasonable terms, through all stages of the business cycle, so that the economy can grow through the financing of the best opportunities. We have learned that we need an efficient and resilient payments system to maintain the flow of funds through the economy at all times. We need financial markets to remain active, liquid and trusted, regardless of events in the economy.