With Macau’s strategic planning in the development of the Greater Bay Area, the exploitation of modern financial services has become one of Macau’s main lines of economic diversification. After the first issuance in 2019, the Central Government will issue government bonds worth RMB 3 billion this week.
With Macau’s strategic planning in the development of the Greater Bay Area, the exploitation of modern financial services has become one of Macau’s main lines of economic diversification. After the first issuance in 2019, the Central Government will issue government bonds worth RMB 3 billion this week.In August, the Industrial and Commercial Bank of China (Macau) issued “panda bonds” worth 2 billion, helping to revitalize the local bond market and its reputation in the international investment market, attracting investors. Due to the pandemic and other factors, this issue is limited to professional investors. However, I suggest that the Government issue more retail government bonds or investment products to interested citizens to promote the market.
In recent years, this market has grown from scratch and its infrastructure has been constantly improved. The offshore aspect must also be optimized, as well as the legal framework, to allow greater international participation and develop an ecosystem that accelerates the growth of the bond market.
PROMOTION OF PUBLIC SECURITIES AND OTHER FINANCIAL PRODUCTS
Macau’s economic growth has suffered from the pandemic and geopolitical context, affecting residents’ employment and income level. According to the Monetary Authority of Macau (AMCM), bank deposits from local individuals grew by 0.2 percent in the last month, compared to the previous year. This reflects the population’s concern with their spending and intention to save in times of economic recession.
Compared to other investments, low-risk government bonds offer a safe return, guaranteeing stable interest income and capital protection, diversifying the risk of your portfolios and improving their stability. The high turnout in 2019 resulted in an oversubscription – three times the number available. The August issue was very well received by investors from Mainland China, Hong Kong, Macau and Singapore.
Securities issuance in Macau will continue, with stable credit and positive returns. In the long term, this decision makes the local market more attractive to national and foreign investors, while promoting job creation and revitalizing social and economic development.
OPTIMIZATION OF THE OFFSHORE MARKET WITH THE ADOPTION OF A REGISTRATION SYSTEM
The offshore markets of Hong Kong and Singapore allow foreign issuers to register for the issuance of debt bonds, unlike Macau, which has adopted the Reg S+ system (approval system). AMCM has been considering changing the “Legal Regime of the Financial System” so that the issuance of securities moves from an approval system to a registration system.
Due to the limits of the local market, it is necessary to attract issuers and investors from abroad, which is why it is so important that the mechanism is improved as soon as possible. The simplification of processes facilitates and attracts more investment.
OPTIMIZE THE LEGAL FRAMEWORK
Underwriting institutions and investment banks with a foreign customer base are the only ones capable of attracting investment to Macau. The Government should encourage these companies to establish their headquarters in Macau and provide them with favorable conditions, such as short-term subsidies and tax exemptions.
Foreign investors must be encouraged to open investment accounts and offices in Macau, developing the sector rather than subsidizing local organizations. the use of direct taxation, with underwriting fees to be discounted by institutions at three times the pre-tax amount for legal expenses, enables legal advisors involved in the underwriting process to be exempt from supplementary income tax.
Studies prove that Macau’s strength is its integration into the nation’s overall development.
The Region should continue to attract investors from the Mainland and consider the possibility of including the market in the Transactions towards the South scheme, suggesting the creation of a specific quota for investors from Mainland China, improving its competitiveness and creating more tax incentives for investors. in the city.
*Macao Livelihood and Economy Alliance/Member of the Macau Legislative Assembly
