LI, Tao @ Hong Kong

China Overseas Land & Investment Ltd (COLI), the largest Hong Kong-listed mainland developer by market capitalization, said it is optimistic about achieving its full-year sales target after posting strong results in the first half of the year.

The blue-chip developer, which owns property developments in various tier-one mainland cities including Beijing, Shanghai, Guangzhou and Shenzhen, posted a 67 percent year-on-year growth in net profit for the first six months ended June to HK$5.07 billion from HK$3.04 billion a year earlier, due to stronger revenue from home sales and gains from one-off items including selling three projects to a fund and acquiring a controlling stake in a subsidiary.

Revenue rose 13.4 percent to HK$17.55 billion from HK$15.48 billion. The company recommended a first-half dividend of HK$0.10 a share, up from HK$0.07 a year earlier.

The company said on Tuesday that it sold 2.65 million square meters of properties in the first seven months of this year, keeping itself on course to achieve a spell-out target of selling at least 4.8 million square meters of properties in 2010.

In the first half, the developer generated total contracted sales of HK$28.1 billion, up 7 percent from a year earlier.

“We will achieve the target of posting a 20 percent growth in gross profit this year even if mainland home prices fall further in the second half,” Chairman Kong Qingping said during a press briefing on the group’s interim results Wednesday.

Mainland home transactions have slumped this year after the Central Government took measures to curb soaring home prices, including raising the required down-payments and mortgage interest rates for multiple-home buyers in the first quarter.

Chen Wenhan, a property analyst at CLSA, said COLI’s interim results have not fully reflected the negative impact of the government measures due to the time lag.

“China Overseas’ first-half revenue was mostly from its presales last year when property sales were still flourishing,” said Chen. He believes the negative effects of these tightening measures may show up in the developer’s second-half results.

Kong said he believes the current government measures will stay in place for some time. But he does not expect the government to introduce more stringent measures in the second half.

“We will see more downward pressure on property prices in the second half,” said Kong, adding that the group is ready to launch new projects on the mainland and in Hong Kong soon.

Shares of COLI fell 1.3 percent to HK$16.30 in Hong Kong Wednesday.

China Daily

(HK Edition 08/12/2010 page4)

http://www.chinadaily.com.cn/hkedition/2010-08/12/content_11141257.htm

An HSBC Plc employee displays bundles of 100 yuan bank notes at the bank’s branch in Shanghai earlier this year. Hong Kong will see more yuan-denominated financial products go on sale in the city after the Securities and Futures Commission approved the first RMB fund Friday. Qilai Shen / Bloomberg

The $50 million sale will fund an energy-efficiency project on the mainland

International Finance Corp (IFC) and Asian Development Bank (ADB) are likely to become the first foreign institutions to issue yuan-denominated bonds in Hong Kong, marking a breakthrough in the city’s efforts to develop as an offshore center for yuan products.

IFC, the private investment arm of the World Bank, plans to sell the equivalent of $50 million in yuan-denominated notes and use the proceeds to finance an energy-efficiency project on the mainland, its treasurer said Friday.

“We regard any yuan bond as part of market development and beneficial to our clients for access to local currency,” said IFC treasurer Nina Shapiro, adding that the notes which would be the first in a series of deals have a maturity of three to five years. IFC will wait for approval from the Central Government to set the timing of the issue.

ADB declined to reveal any details on its own issue. Sources with knowledge of the matter said the bank had drawn up plans to sell yuan bonds offshore.

“We will naturally be interested in any opportunity to issue yuan bonds in Hong Kong subject to the necessary regulatory approvals,” said ADB’s head of local currency capital markets Monish Mahurkar.

Donna Kwok, an economist with HSBC told China Daily that the launch of yuan-denominated bonds by foreign institutions will mark a “stamp of approval” for Hong Kong’s brand new yuan products platform.

“It could almost be considered the first maiden flight off Hong Kong’s yuan products runway,” said Kwok. “It wasn’t possible to do so before but now it is – after the effective launch of Hong Kong’s new yuan-interbank market last month.”

The city’s yuan-denominated bond market has seen only 14 issuances since it was initially created in 2007, mostly by mainland banks.

The pace at which the local yuan bond market develops could accelerate since the People’s Bank of China and the Hong Kong Monetary Authority signed an agreement last month to remove restrictions on intra-bank yuan transfers, a move that has opened the door for the introduction of more yuan-denominated products in the city.

Kwok believes the move could also help speed up the emergence of a benchmark interest rate for yuan funds in Hong Kong’s nascent yuan-product market and establish benchmark practices for other institutions.

Billy Mak, associate professor of Finance and Decision Sciences at Hong Kong Baptist University agrees with Kwok’s views. He said the first yuan-bond issuance by an international institution in the city will “pave the way for other institutions to follow suit”.

“Other multilateral institutions like the International Monetary Fund will likely follow the step to make a fortune in the city. Hong Kong’s role as an offshore center for yuan products will be further strengthened after a successful precedent,” said Mak.

Mak believes the internationalization of the yuan could also be boosted after its acceptance by global players in Hong Kong, particularly international financial institutions which usually prefer to hold US dollars and euros.

“It could be a breakthrough for both the yuan’s influence in the international arena and Hong Kong’s long-aspired status as an offshore yuan hub,” Mak added.

IFC and ADB were also the first foreign institutions to issue yuan-demoninated bonds – dubbed “panda bonds” – on the mainland. The two issued more than $260 million worth of yuan bonds between them in 2005. ADB issued another 1 billion yuan worth of “panda bonds” on the mainland last December.

China Daily

(HK Edition 08/07/2010 page2)

http://www.chinadaily.com.cn/hkedition/2010-08/07/content_11113383.htm

The expansion of Hong Kong’s private sector economy weakened further in July as growth in new orders and output eased amid a slowing economic recovery in the US and debt woes in Europe, according to the latest survey of purchasing managers by HSBC.

The HSBC Hong Kong Purchasing Managers Index dropped to 51.3 in July from 52.6 in June. A reading above 50 indicates expansion.

The July numbers released Wednesday suggest the pace of expansion slowed for a third consecutive month to the weakest pace since August 2009.

“Hong Kong’s rate of expansion is normalizing following a sharp recovery in the early part of the year. The easing of output and new order growth is an expected part of this process,” said Mark McCombe, chief executive of HSBC Hong Kong.

Input costs rose markedly during the month due to higher raw material costs and unfavorable exchange rates. In turn, purchasing activity fell as companies responded to the weaker growth in new business, which slowed for a fourth successive month, suggesting concerns over the stability of the recovery has dampened demand.

New orders received from companies on the mainland also posted a weaker rise to the lowest level in 13 months.

The latest increase in overall new business nevertheless supported further expansion in output during the month. Growth has now been sustained since July 2009.

McCombe said domestic demand will be a key driver for the economy.

“The resilience of employment conditions underlies our strong outlook for domestic demand as a key growth driver for the rest of 2010.”

Growth in employment in Hong Kong remained moderate. The pace at which employers have been adding workers has been largely flat in recent months despite the easing in output growth, HSBC noted.

“It suggests that Hong Kong’s economic growth has peaked out after recovering from the recession,” said K.C. Law, chief economist and strategist at Bank of Communications.

Law expects lackluster recovery in Europe and the US and the ongoing shrinking of international business orders will continue to drag down the city’s exports and economic growth in the next few months.

“It will not necessarily be a recession but the economy will start experiencing contraction. The city’s stock and property prices will also encounter pressure next year, when hot money is expected to leave,” Law added.

The HSBC Hong Kong PMI is derived from indexes measuring changes in different aspects of the private sector economy including output, new orders, employment, suppliers’ delivery times and stocks of goods purchased.

China Daily

(HK Edition 08/05/2010 page3)

http://www.chinadaily.com.cn/hkedition/2010-08/05/content_11098433.htm

Hang Seng Bank, the biggest Hong Kong-based lender by market value, said Monday its first-half net profit rose 8.4 percent from a year earlier thanks to robust fee income from wealth management and cross-border commercial banking businesses.

Hang Seng Bank, which is 62 percent owned by HSBC Holdings Plc, earned a net profit of HK$6.96 billion or HK$3.64 per share, for the six months ended June, up from HK$6.43 billion, or HK$3.36 a year earlier.

Lenders in the city are battling fiercely for lending margins. Though Hang Seng Bank’s interest-earning assets rose 7.8 percent, net interest income fell to HK$6.71 billion in the first half, down 7.7 percent from HK$7.28 billion a year ago.

“With economic recovery, competition intensified as banks sought to capitalize on increased trade flows and an upswing in investment sentiment,” said the bank’s chief executive Margaret Leung at a press conference Monday.

“I do not expect interest rates to fall much further, (but) pressure on the net interest margin will stay in the second half of the year.”

Leung said income from the wealth management business, the lender’s key driver of growth, surged 14.6 percent during the first half of the year. Investment-related income also recorded a 20.7 percent increase. Growth in other fee-based business, including insurance and credit cards, also helped compensate the decrease in net interest income.

She said the bank is conducting more and more yuan-denominated cross-border trades, handling a total of over 4.2 billion yuan as of the end of June.

Hang Seng opened two new branches on the mainland this year, in Guangdong province’s Foshan and Zhongshan. Leung said the lender’s 38 mainland outlets now spread across 13 cities, which will further strengthen the bank’s reach there.

Hang Seng Bank’s mainland business portfolio remains sound, with no exposure to local government borrowing, said Leung. Customer deposits in mainland branches rose 24.6 percent from the end of last year and 67.4 percent year-on-year. She declined to disclose the actual figure.

The Hong Kong lender declared an interim dividend of HK$1.1 per share for the second quarter, bringing the total dividend for the first half of 2010 to HK$2.2, unchanged from a year ago.

Shares of the bank rose 1.3 percent and closed at HK$109 Monday. The stock has fallen 5 percent this year, compared with a 2.1 percent decrease of the city’s benchmark Hang Seng Index for the same period.

China Daily

(HK Edition 08/03/2010 page3)

http://www.chinadaily.com.cn/hkedition/2010-08/03/content_11083617.htm