LI, Tao @ Hong Kong

An aerial view shows properties in the Mid-Levels area of Hong Kong. The city’s government has taken a series of measures in recent months to cool down the red-hot property market. Paul Hilton / Bloomberg news

When it comes to tough talk about pouring cold water on the city’s red-hot property sector, the Hong Kong government certainly says all the right things. However, its words are having little effect.

“We are determined to stabilize the city’s property market,” said Financial Secretary John Tsang in August, adding that the government would introduce further measures if necessary. He also noted that house prices are approaching peak 1997 numbers, which was followed by a six-year slump.

The government is clearly concerned about a property market bubble. But the remedies – essentially tightening downpayment rules on luxury homes and increasing the supply of land – appear to be rather mild compared with that taken by the Central Government and by authorities in Singapore.

But why is this the case? One reason is that the government may be afraid of the 1997 disaster repeating itself if it takes too rigorous an approach, said Eddie Hui, a professor at the Department of Building and Real Estate at the Hong Kong Polytechnic University.

Capital gains tax?

However, he does advocate the introduction of a capital gains tax to rein in the market, albeit cautiously. “I think the rule is applicable in Hong Kong if the conditions are less strict,” Hui said. “It will not hurt real homebuyers.”

“The Hong Kong government is trying hard but missing the target,” Joseph Tang, head of Capital Markets at Jones Lang LaSalle told China Daily.

“Collecting capital gains tax or imposing fines on owners who resell their property within a certain period after the purchase would be the most effective way to curb speculation in the market. The government does not want to do that,” Tang said.

But that is also in keeping with the Hong Kong government tradition of not interfering with the market, the other main reason for the lack of strong action to curb property speculators.

Nicole Wong, Regional Head of Property Research at investment bank CLSA, said the mild measures are in fact in line with the city’s established practice over the years.

“The Hong Kong government has never imposed any severe measures in regulating the city’s property market since the handover. Apart from the reason that Hong Kong’s home prices were tumbling until 2003, the city’s long established free market keeps the government from intervening too much with the economy,” said Wong.

Wong agrees that imposing a capital gains tax like the Singapore government may provide an instant effect, but pointed out that Hong Kong does not have the same tradition of regulating economic activity.

She also believes that it is not necessary for Hong Kong to imitate the actions taken in other markets since economic status is variable.

But Wong said the government could help alleviate speculation in the property sector by supplying more land aimed at the medium-income demographic and raising downpayment requirements for mid-range homes.

“Hong Kong’s home prices will continue to rise in the near future as short supply of homes will continue for the next 18 to 24 months,” she added.

China Daily

(HK Edition 09/09/2010 page3)

http://www.chinadaily.com.cn/hkedition/2010-09/09/content_11276700.htm

Small and medium enterprises (SMEs) need a market-based loan guarantee scheme much before the current arrangement is phased out, said a leading think-tank in the city. A study released Friday by the Bauhinia Foundation Research Centre has insisted that major financial institutions, not the government, guarantee loans for these SMEs.

“With a third party serving as a guarantor for bank loans, the scheme is more flexible in terms of coverage, maximum loan amount as well as guarantee amount and limit,” said Bauhinia Foundation Chairman Anthony Wu. “It also means more choices for financing in the city.

The Hong Kong government launched the Special Loan Guarantee Scheme (SpGS) in December 2008 to provide an 80 percent guarantee for commercial loans granted by participating lending institutions (PLIs) to eligible SMEs. That was part of its relief measures to help SMEs facing liquidity problems during the global financial crisis.

In April this year, it extended the application period for the special scheme by another six months, to December, in a bid to help SMEs consolidate their business at a time when the economy has just begun to recover.

As early as 2001, the Hong Kong government launched an SME Loan Guarantee Scheme (SGS), which guarantees SME loans up to HK$6 million with a maximum guarantee period of five years.

“The scheme can supplement the existing SGS, and form part of Hong Kong’s long-term SME loan guarantee mechanism,” said Wu.

Wu said the choice of guarantor is crucial in the new arrangement, for its sold financial strength, high credit rating as well as sufficient guaranteed loans will be essential for the new scheme to be viable.

He believes Hong Kong Mortgage Corporation (HKMC), a public limited company wholly owned by the government through the Exchange Fund, is one of the best choices.

“Since HKMC is a self-financing company, its guarantee will not involve any subsidy from taxpayers. Moreover, credits from its government background will encourage banks or lending institutions to sustain their scale of financing for SMEs in Hong Kong,” said Wu.

In Hong Kong, SMEs account for over 98 percent of all the enterprises, provide employment opportunities for 1.2 million works – almost half of the total working population.

The SpGS has helped stabilize about 300,000 jobs, contributing to “supporting enterprises and preserving employment”, the government said in April.

The new scheme will cover all non-listed enterprises and SMEs in the city, and is designated to include both term loans and revolving facilities to broaden support for SMEs, with the guarantee coverage ratio ranging from 50 percent to 70 percent.

China Daily

(HK Edition 09/04/2010 page2)

http://www.chinadaily.com.cn/hkedition/2010-09/04/content_11255410.htm

In what promises to presage a breakthrough in the Hong Kong Exchanges & Clearing’s (HKEx) efforts to rope in more international companies, Mongolian Mining Corp is set to sell stocks worth $700 million in an initial public offering in Hong Kong, the first IPO by a Mongolian company in the city.

Mongolian Mining, previously known as Energy Resources, said new shares account for 75 percent of the initial sale, which constitutes 20 percent of the company’s enlarged share capital. After the listing, it may exercise an option to sell additional shares equal to 15 percent of the offering.

It will use the proceeds to develop mines, fund transport infrastructure projects and acquire companies with mining rights, said the company. Earlier reports said the company plans to build a privately-owned railway directly from the mine to China at a cost of approximately $700 million. It is now in touch with some international banks discussing financing.

“Hong Kong investors dote on energy stocks as power consumption is always rising in fast-growing economies, particularly China,” said Alvin Chung of Prudential Brokerage.

Chung nevertheless voiced concerns about the amount Mongolian Mining plans to raise, for several other companies are also scheduled to list in the city’s bourse during that time.

“There are over 10 new IPOs in Hong Kong this September and, as far as I know, Mongolian Mining should be the largest among them,” said Chung.

Mongolian Mining also plans to price its shares on September 24 and start trading on October 5. It will become the first company listed in Hong Kong to be fully based and operated in Mongolia.

SouthGobi Energy Resources Ltd, the largest coal producer in Mongolia in terms of export sales, raised $436.3 million from its Hong Kong IPO, but headquartered in Canada.

Mongolia’s domestic companies seek foreign capital for expansion. Chairman of the Government of Mongolia’s State Property Committee, Dulam Sugar in June said the country plans to privatize State-owned assets in initial share sales in local and international stock markets, such as Hong Kong.

A $4-billion deal signed in October last year between Mongolia and Rio Tinto PLC and Ivanhoe Mines Ltd for a giant gold-and-copper deposit is an added incentive for the investors.

Charles Li, HKEx’s newly appointed CEO, had said the city is a regional platform capable of attracting more listings from mainland as well as international firms.

Hong Kong also amended one chapter of its Listing Rules in June, laying more comprehensive guidelines for listing of mineral companies. This “paves the way for mineral companies to become a major listing platform,” Benson Wong from PricewaterhouseCoopers said in an earlier interview.

According to July report cards, two mining companies have raised over HK$20 billion from their IPOs in Hong Kong, including the world’s largest aluminum company, Moscow-based United Co. Rusal which raised $2.6 billion in January and became the first Russian company to go public on the Hong Kong Stock Exchange.

China Daily

(HK Edition 09/02/2010 page2)

http://www.chinadaily.com.cn/hkedition/2010-09/02/content_11244137.htm