Mortgage Securitisation in Hong Kong

Description

Capital markets provide the depth and flexibility to transform and expand key financial activities. Responding to economic demands the markets can bring innovative structures to transform basic financial arrangements and relationships. The innovation generated in more mature markets can provide examples for other markets. In this sense capital market activity is linked in a global movement to more complexity and efficiency.

As an example, in the United States residential mortgage activity broadened over seventy years ago with establishment of government supported agencies to assist in the distribution and investment activities to support the housing market. A key feature of the widened activity has been the creation of securities instruments which can be traded in the capital markets. Supporting this activity has been the use of techniques to alleviate credit risk by the pledge of mortgage assets to support the new classes of securities.

The case of “Mortgage Securitization in Hong Kong and Asia” reviews the actions of the Hong Kong government in the establishment of mortgage securities activities in the capital and financial markets of the territory. As such it demonstrates a series of important themes:
– Internationalization of capital market techniques;
– Maturation of the Asian capital markets to make use of these techniques;
– Adaptation of mortgage security structures to the particular conditions of the Hong Kong environment;
– Character and functions of alternative security arrangements;
– Interplay of banking and capital markets in the creation of innovative securities.

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