LI, Tao @ Hong Kong

Skyscrapers in Central. A total of 52 plots of land will be available for sale this fiscal year. Edmond Tang / China Daily

The government said it is to substantially increase land supply and take the initiative to sell more land this year, boosting the supply of residential flats and easing the risk of property bubble.

A total of 52 plots of land – 18 new sites and 34 sites rolled over from last year’s application list – will be available for sale from the fiscal year starting April 1, Financial Secretary John Tsang said in his annual budget address Wednesday.

Under the Application List system, project sites contained in the list are triggered for auction when a developer promises to pay a floor price which is considered “fair” by the government.

The 52 plots of land will altogether provide some 16,000 residential flats, an increase of more than 70 percent compared with the 9,000 flats made available in the previous fiscal year.

Together with above-station projects at several MTR stations and some redevelopment sites, housing land available in the coming fiscal year will provide a total of 30,000 to 40,000 private residential flats, far exceeding the annual average target of 20,000 flats, said the financial secretary.

Tsang said the government will also take more “proactive” measures this year in response to market demand for residential sites.

It will initiate auctions or tenders for four sites on the list this year, rather than waiting for a developer to trigger it, Tsang said. The government will also put up for sale by tender five residential sites in addition to those on the list. These sites will be used to develop about 3,000 small and medium-sized flats, he said.

The city stopped government-initiated land sales in 2002 to support falling home prices. The system was partially resumed in 2010 when four of the total 10 land sales were initiated by the government rather than by developers.

Home prices in the city have spiked more than 60 percent since 2009 on record-low mortgage rates and an influx of mainland buyers, according to local real estate broker Centaline Property.

In the budget speech delivered in the Legislative Council, Tsang said the risk of asset-price bubbles is one of the “major” challenges in the coming year.

“But we do not set a target for Hong Kong’s property market. Home prices are determined by the market, not us,” Tsang said during a media briefing after the budget speech on Wednesday.

Tsang, nevertheless, added that he would not hesitate to take further action to safeguard socio-economic and financial stability when necessary.

The increased supply of land for private housing development will not affect the current supply of public housing, according to Tsang. The city will complete about 11,200 and 16,700 new public rental housing flats in the coming fiscal year and 2012-13 respectively, among which 84 percent will be built in urban areas.

Tsang also earmarked about HK$300 million to the Development Bureau to explore feasible ways – including land reclamation outside Victoria Harbour and rock cavern development studies – to increase the land supply in the city.

China Daily

(HK Edition 02/24/2011 page1)

http://www.chinadaily.com.cn/hkedition/2011-02/24/content_12068403.htm

City’s jobless rate at lowest level in more than two years

The labor market continues to improve as the city’s jobless rate fell to its lowest level in more than two years.

The rate for the three months ended Jan 31 was 3.8 percent, down a further 0.2 percent from the 4 percent recorded during the previous three-month October-December reporting period, the Census and Statistics Department said on its website Monday.

It is the lowest figure reported in the past 27 months. In Oct 2008, the city’s unemployment rate stood at 3.6 percent, the floor for more than 10 years since May 1998.

“Unlike the US where the jobless rate still hangs around 9 percent, Hong Kong’s job market has basically returned to the condition it was in before the economic crisis,” said Irina Fan, senior economist at Hang Seng Bank.

The city’s total employment increased for the eighth consecutive month to an all-time high of 3.58 million followed by sustained economic growth and job creation, Secretary for Labour and Welfare Matthew Cheung Kin-chung said, commenting on the latest figure.

As many as 98,900 jobs were created in the labor market in the past eight months and the number of people unemployed has fallen notably to 130,200 – the lowest level since the June to August reporting period in 2008.

New jobs were mainly seen in decoration, repair and maintenance for buildings, information and communications as well as transportation sectors.

Cheung said the strong growth in total employment entering 2011 was mainly due to the robust business activities and labor demand in the run-up to the lunar new year holidays.

“It is customary for employers to review and if necessary adjust their staffing position after the holidays,” said Cheung. “According to the latest vacancy data and business survey feedback, employers generally are still adopting a positive attitude towards hiring. More new jobs are therefore expected.”

The underemployment rate remained unchanged at 1.8 percent for the three months through Jan 31 from the fourth quarter last year.

Hang Seng Bank’s Fan forecasts a buoyant job market outlook for the near term, expecting the jobless rate to hover between 3.8 to 4 percent this year.

She added that there are two major challenges to the labor market this year. The expected inflation hike will push wages up and increase costs for employers, which might stymie their desire to expand recruitment .

Slower economic growth this year is also likely to pull down profits of the employers, Fan said, adding that it will also bring about uncertainty to the employment environment in 2011.

Hong Kong’s gross domestic product expanded at an annual pace of 6.8 percent in the third quarter. Hang Seng Bank estimates the full-year growth in 2010 to stand between 6.5 and 7 percent and has forecast economic expansion to grow at a more moderate pace of around 5 percent this year.

The city’s first minimum wage rate, which was set at HK$28 per hour, will also increase business costs and restrain hiring, Hang Seng Bank’s Fan added. The ordinance will take effect May 1.

China Daily

(HK Edition 02/22/2011 page2)

http://www.chinadaily.com.cn/hkedition/2011-02/22/content_12053580.htm

A worker unloads Lenovo computers from a tricycle at a computer market in Beijing. The company attributes the best quarterly result in more than two years to double-digit sales growth in developing economies. Nelson Ching / Bloomberg

China’s top PC maker reports profit of $99.7m in Q3 ending Dec 31

Lenovo Group Ltd, China’s biggest maker of personal computers, said Thursday its fiscal third-quarter profit rose 25 percent on the back of lower component costs and strong sales growth in emerging market.

Net profit for the three months ended Dec 31 was $99.7 million, up from $79.5 million during the same period a year earlier. The better-than-expected result beats the estimated $86.85 million forecast of analysts polled by the Wall Street Journal and the $86.1 million prediction compiled by Bloomberg.

The best quarterly result in more than two years was mainly due to double-digit sales growth in developing economies – including on the Chinese mainland – as well as in the US and Europe where consumers are replacing their old machines, the company said.

Sales in its home mainland market were up 18 percent compared with a year earlier at $2.7 billion, according to the personal-computer maker, adding that its market share on the mainland has reached a record 32.2 percent, up 2.4 percentage points from a year earlier. Its marketshare also growing at three times the industry average.

In the global market, Lenovo reported market share of 10.2 percent, up about 1.5 percentage points compared with the same period last year.

Sales in other developing markets excluding the mainland increased 34 percent to $1.1 billion, while they increased 22 percent to $2 billion in the US and Europe.

Yang Yuanqing, Lenovo’s chief executive officer, described the growth as “faster than any of the top five PC manufacturers” in the world, citing its worldwide shipments of PCs increasing 20.6 percent year-on-year in the third quarter compared with the industry average of 3.4 percent .

“Lenovo now owns double-digit market share in 15 countries, among which 13 are emerging markets,” Yang told reporters in a conference call Thursday. “PC shipments across emerging markets increased 43 percent year-on-year in the third quarter, almost triple the overall industry’s 16 percent increase in the region.”

However, operating losses in emerging markets widened to $13 million in the third quarter compared with a $6 million loss last year. Yang said this was mainly due to promotional activities in the region in a bid to seize more market share.

“It was not realistic to talk about profits before we achieved double-digit share in an emerging market,” said Yang. He cited India as an example, which reached 10.3 percent market share in the quarter for the first time and contributed about $3 million profit to the group.

Yang also sees a “short-term” slowdown in mainland’s PC market, but he is “optimistic” about its long-term growth.

Nevertheless, with the market penetration of PCs in smaller centers on the mainland at low rates compared with mature economies – at about only one-fifth the size of the US – Yang added that the group is more confident about expanding its business opportunities in those areas.

Lenovo shares rose HK$0.16 or 3.36 percent to close at HK$4.92 in Hong Kong trading Thursday.

“Investors may also uphold Lenovo’s share price in the long run as apart from its traditional PC market, new products such as LePhone and LePad – which competes with Apple Inc’s iPhone and iPad – are also likely to draw considerable market share in the future,” Alvin Chung, associtate director with Prudential Brokerage, told China Daily.

Lenovo’s Chief Operating Officer Rory Read also said Thursday he expects tablet computers to account for 10 percent to 15 percent of the PC market. Sales of the smart-phone LePhone reached 230,000 in the third quarter, double that of the previous quarter, according to the group.

On Jan 27, Lenovo announced it had agreed to invest $175 million to form a venture with NEC Corp to expand in the Japanese market. NEC and Lenovo together accounted for about 26 percent of Japan’s PC market, according to Lenovo’s Chief Financial Officer Wong Waiming.

A JPMorgan report published the same day said it is overweight on Lenovo as “consolidation is positive for the industry as well as Lenovo”, and it expects better cost structure for Lenovo due to increased scale.

China Daily

(HK Edition 02/18/2011 page2)

http://www.chinadaily.com.cn/hkedition/2011-02/18/content_12035971.htm

Buildings in Baotou in China. Evergrande said their sales strategy for third-tier cities is working. Nelson Ching / Bloomberg

But ratings agencies are getting nervous about debt burden

Evergrande Real Estate Group Ltd, the second-largest developer by sales on the mainland, said Tuesday in a business update that its strategy to focus on third-tier mainland cities is bearing fruit as its contracted sales in January jumped 181.6 percent year-on-year to 9.79 billion yuan.

However, Standard and Poor’s also released a statement Tuesday saying that the recent surge in bond sales by mainland property firms would weaken their credit profiles.

Evergrande’s January sales grew 262.4 percent month-on-month from December, the developer told reporters at a press conference in Hong Kong Tuesday. The surge in January contracted sales was mainly due to Evergrande’s plan to deliberately postpone the launch of some projects to January as the company had substantially exceeded its 2010 sales target before the year ended.

In a filing to the Hong Kong Stock Exchange Jan 10, Evergrande said it had set a contracted sales target for 2011 of 70 billion yuan, compared with total contracted sales of about 50.4 billion yuan for 2010.

“The nearly 10 billion (yuan) sales in January set a new record high for a single month in our group,” said its Chief Executive Officer Xia Haijun. “If this momentum can continue, the sales we achieve this year would be very significant.”

Evergrande, which had previously focused on second-tier cities, has achieved a presence in provincial capital cities across the nation with the exceptions of Lhasa, Xining, Hangzhou and Fuzhou.

Xia said the group has now shifted its geographical focus to third-tier cities – those prefecture-level cities surrounding provincial capital cities with ample population and robust economies, which are exempt from government tightening measures aimed at reining in the red-hot property market.

On Jan 27, the central government raised the minimum down payment requirement for second home purchases to 60 percent of the property’s value from 50 percent and limited home purchases in some cities to curb soaring home prices.

As the real estate markets in third-tier cities are still at their start-up stage, Xia said home prices there are relatively low and most purchasers are first-time home buyers. He said government policies, therefore, will hardly affect their business in these markets.

He added that of the five projects launched for sale by Evergrande in January, three are located in third-tier cities. Its development project in Danzhou, the third largest city in Hainan province, achieved total contracted sales of 300 million yuan in the first day of its launch, with an average selling price of 6,000 yuan per square meter.

“Demand in third-tier cities is very buoyant, and these cities will become the main driving force for growth,” said Xia.

Xia denied market talk that the group is planning to issue convertible bonds, saying that the developer’s stock is trading at a level far below the expectations of the management team, and that “the group is rich in cash through the previous two fundraisings last year”.

Evergrande sold $750 million worth of bonds in January 2010 and issued an extra $600 million worth of bonds in April of that year. The developer reported a net profit of 2.5 billion yuan in the first half of 2010, up 381 percent from 520 million yuan in the corresponding period in 2009.

The company also raised a further 9.25 billion yuan through the sale of a synthetic yuan-denominated bond on Jan 14, 2011. Synthetic bonds are priced at the market rate for yuan, but settled in US dollars. It was Asia’s biggest high-yield corporate deal ever, according to the Wall Street Journal. They also reported Moody’s downgraded the company to negative from stable in January, due to concerns about its debt burden.

Meanwhile, Standard and Poor’s warned Tuesday that a surge of bond sales by Chinese property developers had weakened their credit profiles.

Several property developers could be “caught out” if market conditions turn quickly, credit analyst Bei Fu said in a report. Debt issuance is likely to weaken the credit ratios of both Evergrande and rival Country Garden Holdings Company, it said.

“We are skeptical whether property developers will follow through with their plans to refinance onshore borrowings with bond proceeds,” Fu said in a statement. “They may be tempted to use the funds to bolster their liquidity buffers and war chests while conditions are favorable.” Property developers have raised more than $3 billion in bonds since January, the statement said. Last year they sold a record $8 billion.

Evergrande closed down 1.51 percent in Hong Kong trading Tuesday at HK$3.92 per share.

Dow Jones and Bloomberg contributed to this story.

China Daily

(HK Edition 02/16/2011 page3)

http://www.chinadaily.com.cn/hkedition/2011-02/16/content_12021552.htm

Shoppers at Times Square, a mall owned by Wharf Ltd. The company said its rights issue would be in the best interest of shareholders. Nelson Ching / Bloomberg

Firm to use proceeds to help fund mainland property developments

Property-to-ports operator Wharf Holdings Ltd said it is planning to raise HK$10.05 billion through a rights issue, in order to help fund its ambitious mainland property development plans.

It will sell 275.39 million shares at HK$36.50 each via the rights offer, in which it will issue one share for every existing 10 shares, the conglomerate told the Hong Kong Stock Exchange late Thursday.

Shares of Wharf closed at HK$53.1 in Hong Kong trading Friday, up 0.1 percent or HK$0.05 from a day earlier. The issue price represents a 31 percent discount to Wharf’s closing price of HK$53.05 on Thursday.

Wharf, which owns two of the city’s most popular shopping malls – Harbour City and Times Square – said in the filing that “it would be in the best interest of Wharf and the shareholders as a whole to raise long-term equity capital through a rights issue to finance its future expansion plan and to strengthen its capital base”.

Proceeds will be used to finance additional property and related investments on the mainland, which is in line with Wharf’s overall long-term business strategy, according to the group.

The stock has tumbled 11.2 percent or HK$6.7 so far this year, compared with a 0.9 percent loss on the city’s benchmark Hang Seng Index.

“Wharf has been very active in developing mainland projects in the past few months,” said Linus Yip, strategist with First Shanghai Securities. “Even though recent market sentiment is rather gloomy, it is still proceeding with the rights issue because it needs the money.”

On Jan 31, the company announced that it had won the bids for two pieces of land in Changsha, Hunan province, and Hangzhou, Zhejiang province, for a total of 6.28 billion yuan.

The deal followed its purchase of land in Suzhou, Jiangsu province, earlier in the same month. Wharf bought two plots of land in the city for 2.91 billion yuan through a land auction.

Wharf’s land bank reserves on the mainland now totals more than 125 million square feet following these deals, the group said.

As mainland lenders have stepped up the interest rate hikes and the trend also beginning to felt in developed economies, Yip said it was possibly part of Wharf’s strategy to replenish its capital before the loan situation gets worse.

Wharf also operates the city’s largest cable television network as well as container terminals, and office-retail complexes in both the city and the mainland.

In November, Sino Land Co, the Hong Kong-based development firm controlled by billionaire Robert Ng, said it would raise HK$5.14 billion in a top-up placement to enhance working capital.

The city’s third-biggest developer by market value, Hang Lung Properties Ltd, also placed almost 300 million shares in the same month, raising about HK$10.9 billion.

“Hong Kong developers are not necessarily following suit. These share placements are more related to their individual development plans on the mainland since land acquisitions have become rather pricey there,” said Yip.

According to its interim report released in August, Wharf’s profit excluding property revaluations rose 27.7 percent to HK$4.2 billion for the six months ended June 30, up from HK$3.29 billion a year earlier.

Wheelock & Co, which owns a 50.02 percent stake in Wharf, will take up its allotment of new shares and will underwrite the offer this time, said the company.

China Daily

http://www.chinadaily.com.cn/hkedition/2011-02/12/content_11989544.htm