HONG KONG - THE chief executive of the Hong Kong Monetary Authority (HKMA), Joseph Yam, will resign on October 1, the city's government said in a statement on Tuesday.

Financial Secretary John Tsang thanked Yam for his 'outstanding contributions and dedicated service' which he said had 'contributed in no small measure to Hong Kong's financial stability.'

Mr Tsang said Mr Yam's departure after 16 years as head of the city's de facto central bank, which had been expected, would not affect Hong Kong's monetary policies, and that the government was in the final stages of identifying his successor.

Hong Kong Chief Executive Donald Tsang praised Yam for helping the territory 'overcome the Asian financial turmoil. Under the present financial tsunami, Hong Kong's banking system has remained stable.

'I hope after he has left the HKMA, he (will) continue to serve Hong Kong and the motherland (mainland China) in other positions,' Donald Tsang's statement added.

Mr Yam, who held the top post since 1993, when Hong Kong was still a British colony, paid tribute to his colleagues at the HKMA.

In a statement he said it had been 'a real privilege to serve with such excellent and dedicated colleagues' and that he looked forward to working with them 'in the coming few months.'

Dow Jones Newswires quoted 'people familiar with the situation' as saying that Norman Chan, a close aide to Donald Tsang and a former deputy to Yam, was considered the favourite to take Yam's place.

The news of Mr Yam's departure comes at a time of a strong Hong Kong dollar, which has been hovering near the top end of its trading band of 7.85-7.75 to the US dollar. The strength in the local currency has prompted the HKMA to intervene in the market dozens of times over the past few months, and sent the city's aggregate balance - a measure of interbank liquidity - to its highest levels yet.

While the recent activity raised some concern over the sustainability of the US dollar peg, analysts said Yam's departure alone was not likely to fuel much speculation.

'The dollar peg system in Hong Kong is very well established and the city has sufficient foreign-exchange reserves to defend the peg,' Calyon economist Eric Tsang told Dow Jones. 'I don't think the scenario will be affected by the departure of Mr Yam, or any one single person.' -- AFP