LI, Tao @ Hong Kong

But Q4 growth expected to slow

The Hong Kong government raised its full-year GDP growth forecast Friday to 6.5 percent from 5-6 percent after it reported a better-than-expected 6.8 percent rise in the third quarter on the back of strong exports and consumption figures.

Real GDP grew by 6.8 percent in the third quarter compared with the same period a year earlier. It was also up on the 6.5 percent growth seen in the second quarter. On a seasonally adjusted basis, real GDP expanded by 0.7 percentage point in the third quarter compared with the previous quarter, the sixth consecutive quarterly gain.

“Given the strong growth so far this year, even allowing for some possible deceleration in the fourth quarter, economic growth in 2010 should exceed the forecast of 5-6 percent we put out earlier this year,” said government economist Helen Chan after the latest quarterly figures were released.

Despite the brighter overall forecast, Chan added that the fourth quarter is likely to see growth moderating. Among other reasons, the anticipated slowdown in the advanced economies as the effects of the stimulus and inventory restocking fade out, may drag on Hong Kong’s export growth, she said.

The export sector maintained its strong momentum in the third quarter. Exports of goods surged 20.8 percent year-on-year, supported by robust demand from the mainland and other Asian markets. Exports of services continued to benefit from vibrant inbound tourism and registered a 14 percent year-on-year rise.

Irina Fan, senior economist at Hang Seng Bank, meanwhile, said buoyant local spending contributed to the better-than-expected performance in the third quarter.

Riding on improving employment and growing incomes, private consumption expenditure picked up further in the third quarter at 5.7 percent year-on-year, following a 4.4 percent rise in the second quarter.

At the same time, total employment in the third quarter climbed to its highest level since early 2009, driving the unemployment rate down to 4.2 percent. However, further improvement is largely unlikely, as the current unemployment rate of 4.2 percent is “quite low already”, Chan said.

However, wages have failed to keep pace with the level of economic growth. The property market has also shown clear signs of reviving after turning quieter in September on government measures to rein in the overheating housing market. And the situation seems unlikely to improve in the months ahead, as the second round of quantitative easing just announced by the US last week is likely to make things worse by encouraging a higher inflow of money into Asia, Fan noted.

Harm may also be done to the economy by the city’s property market, as rising rents and housing prices will eventually translate into higher consumer prices. “Inflation is likely to pick up further if the uptrend of the property market continues,” said Chan.

Underlying inflation expanded to 2 percent in the third quarter from 1.5 percent in the previous quarter. For the year as a whole, underlying inflation is now forecast at 1.7 percent, up from the August forecast of 1.5 percent.

China Daily

(HK Edition 11/13/2010 page2)

http://www.chinadaily.com.cn/hkedition/2010-11/13/content_11544594.htm

By Li Tao and Qian Yanfeng

HONG KONG/SHANGHAI – Growing inflationary pressure on the Chinese mainland, led by rising food prices, is driving mainland buyers to Hong Kong to fill their shopping carts – not for the luxury and imported goods the financial hub is known for, but for daily necessities that used to flow the other way.

More and more residents in South China’s Guangdong province, especially Shenzhen, have in the past few weeks been queuing to cross the border into Hong Kong to buy sugar, salt, soybean sauce and even tissue paper in bulk to cushion increasing pressure from rising food prices at home.

Figures from the Shatoujiao border station in Shenzhen show that in the past two weeks, the number of people passing the station to visit Hong Kong on weekdays has increased by 16.7 percent compared with two weeks ago, while at weekends the figure has been up by 27.8 percent. Many of them are going to the other side to buy daily necessities, according to local media reports.

Only a few years ago it was Hong Kong residents who would come to Shenzhen to spend weekends shopping and dining.

A Shenzhen local woman surnamed Zhang said shopping for supplies in Hong Kong has been the norm for her since 2009, when she was allowed to apply for multiple entries to Hong Kong within one year.

Since then, the number of items on her shopping list has been growing from imported goods to most daily necessities, including products made on the mainland.

“I’ve even started buying salt in Hong Kong,” she said. “Many living essentials are cheaper in Hong Kong, some of them even by 50 percent, and I suppose these goods are of better quality compared with those sold in Shenzhen,” she added.

Zhang’s favorite shopping destinations in Hong Kong are the supermarkets spotted around Sheung Shui Station – the first subway station where trains departing from Shenzhen stop.

A one-way ticket costs HK$19.5, or 17 yuan ($2.55), which, according to Zhang, is even cheaper than taking a taxi when going shopping at home.

A sales assistant surnamed Wong from the Park’n Shop – one of the most popular supermarkets in Hong Kong – told China Daily that she is no longer a fan of Shenzhen as the Hong Kong dollar is getting weaker while prices are rising in Shenzhen.

“I used to spend a lot of time in Shenzhen but in the past four or five months, I only traveled there once,” said Wong, adding that everything is becoming costly in Shenzhen, even drinking morning tea.

The weaker Hong Kong dollar, said Wong, is another reason she tries to curtail her visits to Shenzhen.

“HK$100 used to trade 116 yuan but now it is totally reversed. Mainland visitors swarm into our shops, especially during weekends, since buying goods here has become a really good bargain,” Wong added.

Mainland customers’ favorites, according to Wong, are those imported goods as well as Hong Kong-made items, including milk powders, snacks and toiletries.

“Some of them buy a case of Hong Kong-made instant noodles, and I heard it is sold for less than half the price in Shenzhen,” said Wong.

In Shanghai, a recent survey jointly launched by Oriental Morning Post and Fudan University’s School of Management showed prices of personal care products, such as shampoo and shower cream, are on average three times higher in Shanghai than in Hong Kong.

A China Daily random investigation found that a 750-milliliter bottle of Rejoice, a shampoo brand, costs 46.5 yuan at the Lianhua Supermarket in Shanghai, while its 1000-ml version costs only HK$48.8, or 42 yuan, in Hong Kong.

Likewise, a 500-ml bottle of Listerine mouthwash costs 28 yuan in Shanghai while its 1000-ml version costs only HK$53.9, or 46.4 yuan.

China Daily

http://www.chinadaily.com.cn/china/2010-11/10/content_11524958.htm

Hang Lung Properties Ltd, the city’s third-biggest developer by market value, said Friday it planned to raise about HK$10.9 billion in a share placement to fund its expansion plans on the mainland.

The developer will sell about 294 million shares to its controlling shareholder Hang Lung Group at HK$37.48, or a discount of 7 percent to the closing price of HK$40.30 per share Thursday, the company said in a statement filed to Hong Kong Exchange and Clearings Limited. It is the biggest share placement in Hang Lung’s history.

Castor Pang, research director with Cinda International told China Daily that Hang Lung has taken advantage of the surge in its share price recently. The stock has risen 31.7 percent from its share price of HK$30.60 at end-2009.

However, Hang Lung’s share price plunged 6.45 percent to close at HK$37.70 Friday after the announcement of the share placement.

“Hang Lung Property has a strong track record in timing the market,” Keith Yeung, head of property research at Mirae Asset Securities (HK) Ltd, wrote in a report after the placement.

“Its large share placement at a relatively big discount, when the company is in net cash position, is likely to raise market concern that other property companies will follow.”

Yeung expects the company to raise as much as HK$15 billion net cash in the share sale this time, which “should be sufficient to fund its existing mainland projects in the coming three years.”

The firm’s land acquisition bids will now focus on second-tier mainland cities, Hang Lung Chairman Ronnie Chan said in July.

Hang Lung Properties plans to invest HK$40 billion in seven commercial property projects on the mainland, according to Chan. He said that acquiring land in Hong Kong had become too expensive.

“It is nevertheless a good move for Hang Lung to divert its attention to the mainland, even though the government’s determination to cool home prices, particularly in the first tier cities, is pretty firm,” said Cinda’s Pang.

The Central Government has initiated a series of measures throughout the year, including plans to extend property taxes across the country in a bid to stabilize the mainland’s buoyant property market.

Ratings agency Standard & Poor’s earlier forecast that home prices in major mainland cities may drop by 10 percent in the next six to 12 months, due to the government’s efforts to avoid a property bubble. Most property analysts, however, are still bullish on the mainland, saying that the momentum is difficult to stop.

“The Central Government never said it wants home prices to slump,” said Pang. “Even if the prices remain at current levels, it is still a good deal for Hong Kong developers.”

China Daily

(HK Edition 11/06/2010 page2)

http://www.chinadaily.com.cn/hkedition/2010-11/06/content_11510260.htm