|My accountant friends have jokingly nicknamed me the
'Ace Broker' of the HKSAR. They are, of course, referring
to my recent appointment as a director of the Exchange
Fund Investment Company Limited (EFIL).
As you know, the EFIL has been give the important task
of safeguarding the value and interests of the substantial
portfolio of Hong Kong equities recently acquired by
the Government. To be exact, this translates into a
heavy HK $118.1 billion responsibility, not to mention
the very real and considerable political risks that
come with the job.
The fact of the matter is, the EFIL has to manage the
fund for the public (the HKSAR) which is almost impossible
to please. The initial buying spree caused quite a stir
in the market place and when this process is reversed,
it is easy to foresee that the eventual exit of this
huge portfolio will be met by similar difficulties and
Worse still, as such a buying spree supports the stock
and share markets and pleases the public, an unskilled
dumping exercise could easily trigger a free fall in
the value of shares. This would result in the EFIL being
made an obvious scapegoat for any associated economic
and financial problems, taking the wrath of public anger.
So with such real risks and a heavy responsibility,
was it worth taking the job?
I pledged in my recent election campaign that I would:
||cultivate a close working relationship
with the Hong Kong Government
||support Government's reasonable financial
and fiscal policy and help accountants in public
||promote wide recognition of accountants'
professional qualifications and raise our social
Accepting the appointment as a director of the EFIL
will serve to enhance the status of accountants.
In my quarterly report to the HKSA Council on 20 October
1998 (available on my web sits at http://www.ericli.org),
I explained that the unexpected move by the Government
to directly intervene in the financial markets on 14
August 1998 was justified because it had little choice
but to do all it could to maintain market order.
I predicted that the move would result in an immediate
profit windfall for the Exchange Fund, but that the
Government should refrain from intervening after that.
I also urged the Government to actively seek international
support and co-operation as a matter of urgency and
to restructure the financial markets to increase transparency,
and to push up the costs borne by speculators.
The Government did exactly this and when the Financial
Secretary offered me a directorship of the EFIL, I felt
duty-bound to accept in my capacity as a professional
accountant. How else could your LegCo representative,
who persistently champions the cause of responsible
stewardship and openness in public finance, have reacted?
The 11-member board of the EFIL is balanced in its
mix of people who are drawn from different sectors of
the community. Our principle role is to act as an external
manager advising the Government on the timing and method
of disposal of the portfolio so as not to disrupt the
market. The EFIL will also liaise with the Central Clearing
and Settlement System and attend to all corporate matters
on the part of the shareholders.
Our additional brief from the HKMA is not to undertake
active trading of the portfolio, but to dispose of all
or any part of it in a manner conductive to the maintenance
of an orderly market. Our actions will also be guided
by the HKMA on the advice of the Exchange Fund Advisory
To safeguard against any possible conflict of interest,
all directors of the EFIL will be regarded as public
servants under the Prevention of Bribery Ordinance.
Furthermore, we will be subject to the EFIL's strict
internal code of conduct. We will also have to adhere
to the guidelines set down by the Security and Futures
Commission for registered investment advisers.
In addition, I have publicly pledged not to personally
hold or trade in any of the 33 listed securities while
serving as a director of the EFIL.
Besides demonstrating the highest possible standard
of ethical conduct for Government boards and committees,
I have also spoken out clearly on many public occasions
to explain the role, functions and intentions of the
EFIL. This high level of transparency has helped to
calm investors' nerves and avoid further unnecessary
speculation which may prove harmful to the already fickle
The Board has only met once to establish the modus
operandi of the EFIL. But the impatient public cannot
wait to get answers. And rightly so, because important
decisions that will effect their investments will need
to be made and soon.
I look forward to contributing the point of view of
the accountancy profession during this difficult, but
challenging task. If you have any bright ideas, please
do not hesitate to let me know. Let us take a forward,
responsible stance and work hard with the Government
to regain some of the lost trust and confidence in Hong
Kong's vibrant free-market system.