The following updates are examinable from 1 March 2022


  • Dates and data updated for the Asian Infrastructure Investment Bank
  • Material added relating to types of financial markets:

Virtual Asset Market

  • Virtual asset trading began with the trading of Bitcoin. A wide range of products is available in the virtual asset market with most trades supported by distributed ledger technology (DLT), one of which is blockchain
  • DLT allows direct transactions between buyers and sellers without going through an intermediary (eg banks, securities firms), thereby saving transaction costs
  • SFC definition of virtual assets:

“virtual assets” means digital representations of value which may be in the form of digital tokens (such as digital currencies, utility tokens or security or asset-backed tokens), any other virtual commodities, crypto assets or other assets of essentially the same nature, irrespective of whether they amount to “securities” or “futures contracts” as defined under the Securities and Futures Ordinance (SFO)”

  • Security token offering/trading is limited to professional investors under the SFO
  • Trading of non-security tokens (payment tokens, virtual commodities, non-fungible tokens (NFTs)) is out-with the SFC’s jurisdiction
  • Central banks are starting to introduce their own digital currencies – virtual money
  • Virtual asset trading platforms (VATPs) offering security token trading are regulated by the SFC, however VATPs operating outside of Hong Kong are not covered by Hong Kong laws

Loan Market and Syndicated Loan

  • Unlike bonds, loans are not tradable in the public market
  • Banks traditionally play the role of lenders, however non-bank lending companies (finance companies) are permitted to provide loans as long as they apply for a money lender license. Such lending is governed by the Money Lenders Ordinance
  • A loan is an agreement between two parties, whereas a bond is an agreement between a bond issuer and numerous investors. A syndicated loan is an agreement between a borrower and numerous lenders.  The lenders are usually banks with one bank acting as lead manager. Such loans often finance long-term infrastructure projects

 Islamic Financial Market

  • The population and economic growth of Islamic countries has continued to grow at a rapid rate
  • How to make financial assets and financial services fit into Islamic culture will be a lucrative opportunity for Hong Kong financial institutions
  • Malaysia plays a strong role in international Islamic financial services
  • A bond structured as a Sukuk complies with Islamic rules – in Hong Kong a Sukuk is considered to be an asset-backed security
  • The Hong Kong Government issued Sukuks in 2016/17 receiving extremely positive feedback from Islamic investors


    • Dates and data updated for the Exchange Fund, the Government’s fund accounts, Authorised Institutions, government budget surpluses and trade figures
    • Material added relating to the economy of Mainland China::


    • Hong Kong is the dominant financial gateway to China, is an important RMB financing centre and hosts the largest offshore RMB bond market
    • Many China-based securities firms set up their operations in Hong Kong, helping institutions and individuals from China trade Hong Kong listed stocks
    • The mutual market access schemes between Hong Kong and China, including Stock Connect and Bond Connect, have ensured Hong Kong’s status as a unique financial hub connecting investors from overseas and China
    • China’s commitment to reform and opening-up continues with the development of the Greater Bay area (GBA) bringing together Guangdong, Hong Kong and Macao
    • Plans are in place to allow the GBA to reinforce its leading fintech position and enhance Hong Kong’s competitive position by strengthening fintech supervisory exchanges in an environment of rapidly advancing technology


    • Dates and data updated for main board of the Stock Exchange of Hong Kong and the Hang Seng Index
    • A new section has been added covering Equity Pricing:
    • The value of a company’s equity is influenced by numerous factors, including:
      • Macroeconomic conditions
      • Government policies
      • Competition environments
      • International politics
      • Natural disasters
      • Pandemics
      • Population composition and growth
      • Management quality
      • Business innovation
      • Technology breakthroughs
    • A survey of around 2,000 financial analysts gave results of their preferred method of equity valuation:
    Method of equity valuation%
    Market multiples approach92.8
    Discounted present value approach78.8
    Asset-based approach61.4
    Real options approach5.0
    Other approach12.7


    • One commonly adopted market multiple is the price-earnings ratio (P/E) which considers how much peer companies are valued with reference to their earning records
    • The discounted present value approach is based on the discounted cash flows model
    • The asset-based approach assumes liquidation of a company and estimates the market value of all assets, less total debt
    • The top three methods require information regarding cash flows, accounting records of sales, earnings and operating income and estimates of the disposal value of assets


  • Dates and data updated for the listing of exchange fund notes, southbound bond market, and investors in debt securities


  • Compliance risk added to list of other risks



The Archegos Capital Management case has been added to “lessons from the past”:

  • Archegos Capital Management Case
    • Archegos was a family office established by Bill Hwang to manage his personal wealth
    • In March 2021, Archegos suffered a serious loss in its heavy investment in total return swaps, a type of credit derivative product
    • Brokers involved in Archegos derivative trades had to liquidate the positions as margin calls were not answered. Due to an illiquid market, brokers lost significantly due to poor prices.  Examples of losses were:
      • Credit Suisse – USD5.5 billion
      • Nomura – USD2.8 billion
      • Morgan Stanley – USD911 million
      • UBS – USD774 million
      • Mitsubishi UFJ – USD300 million
    • Bill Hwang lost USD20 billion and some of the above financial institutions saw their share prices fall by more than 10%
    • This case highlights two risk issues:
      • When a client trades aggressively and loses money, the client’s brokers may also get into trouble. A client’s risk can become the risk of a financial institution
      • Family offices are not fully regulated by financial regulators. This needs to be resolved


  • Dates and data updated for regulated open-end funds

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