Financial Secretary John Tsang proposes introducing measures to strengthen the competitiveness of the asset management industry and attract more talent, capital and products to Hong Kong.

He also hopes Hong Kong will become the first testing ground for all new measures relating to the liberalisation of the Mainland's capital account and the regionalisation and internationalisation of the renminbi.

In his 2010-11 Budget speech today, Mr Tsang proposed extending the stamp-duty concession in respect of the trading of exchange traded funds to cover funds that track indices comprising up to 40% of Hong Kong stocks. It will reduce the trading cost and promote the diversification and healthy growth of the exchange traded funds market.

Bond market

For the local bond market, currently a concessionary profits tax rate at 50% of the normal rate is applied to the interest income and profits derived from qualifying debt instruments with a maturity period of less than seven years but not less than three years. Mr Tsang proposes to extend this concession to cover qualifying debt instruments with a maturity period of less than three years.

To better meet market requirements he also plans to amend the provisions under the Inland Revenue Ordinance that require such debt instruments be issued to the public.

To attract more fund managers to manage overseas funds in Hong Kong the Commissioner of Inland Revenue will further clarify the definition of "central management and control" to address the industry's concern about the residency requirement for directors of the management committee of offshore funds in their applications for profits tax exemption.

Stocks & futures

The Budget also proposes updating the lists of recognised stock exchanges and futures exchanges under the ordinance to extend the application of tax exemption for offshore funds engaged in futures trading.

The authority is preparing for public consultation on a proposal to amend the Securities & Futures Ordinance to require timely disclosure of certain price-sensitive information by listed companies.

He hopes renminbi sovereign bonds will be issued on a regular basis in Hong Kong and that renminbi denominated investment products will be developed.