LI, Tao @ Hong Kong

The plot of land in Hung Hom was sold at auction for HK$1.52 billion to local developer Nan Fung Holdings on Wednesday, despite government efforts to curb property prices. Mike Clarke / AFP

Hung Hom site sells for HK$1.525b

Hong Kong’s first land sale of the fiscal year came in at the top end of estimates, defying the tough measures announced by the government last November to curb rising home prices.

The Ko Shan Road site in the Hung Hom district, southern Kowloon, was sold to closely held local property firm Nan Fung Holdings for HK$1.525 billion ($196 million) on Wednesday. This was at the top end of estimates ranging between HK$1.07 billion and HK$1.53 billion, according to a poll of five surveyors and analysts surveyed by Bloomberg.

The final price was almost 70 percent higher than the opening bid of HK$900 million. It is equivalent to gross buildable area of HK$9,934 a square foot, according to real estate broker Centaline Property Agency Ltd.

Nan Fung will develop the site in a 50-50 joint venture with Wing Tai Properties Ltd, Donald Choi, managing director of Nan Fung, told the media after the auction.

Estimating that the selling price will exceed HK$15,000 per square foot, he added that the site will be built into more than 100 three to four-bedroom luxury apartments. It is estimated that it will cost HK$500 million to HK$600 million to build the project.

Choi said that a selling point of the site was its convenience. He said it was located in one of the city’s urban heartlands and adjacent to a future MTR station.

Auctioneer G.M. Ross, deputy director of the Lands Department, said the result was “well within expectations but towards the upper end”.

“The bidders are being positive in the way that they are bidding. They are not holding back,” Ross told reporters after the auction. He added that the land sale shows that the city’s developers have a strong interest in this type of property.

James Cheung King-tat, a director at Centaline Surveyors, said that the price of the land sale was a positive development. “This is reasonable and shows most developers believe the market has already digested the latest measures to curb prices and are confident prices will remain solid,” Cheung said.

He said the completed properties on the plot should sell for at least HK$13,000 per square foot for the developers to see reasonable returns.

Charles Chan Chiu-kwok, managing director of Savills Valuation and Professional Services (Greater China), said he believes the higher-than-expected sales result reflects the positive views of developers towards the property market in Hong Kong.

“As land in urban areas is insufficient and the government does not have a long-term plan for urban land supply, together with pressure from heritage preservation groups, land in urban areas have become precious, leading to its surging price,” said Chan.

On April 13, Financial Secretary John Tsang said the government will try to boost land supply in the city by selling 12 sites in the second quarter – nine for residential development – in a bid to curb soaring home prices in the city.

Hong Kong may auction as many as 52 plots of land this year, Tsang said in the government’s budget speech on February 23.

China Daily

(HK Edition 04/28/2011 page2)

Hong Kong’s inflation hit its highest level since August 2008, driven by increases in the cost of food, rent and cigarettes.

The city’s overall consumer prices rose 4.6 percent year-on-year in March, compared with 3.7 percent in February, the Census and Statistics Department said on its website on Thursday.

The March reading marked the highest level of inflation seen since August 2008, which also increased 4.6 percent. It also exceeded the 4.2 percent median estimate of 13 economists surveyed by Bloomberg News.

Netting out the effects of the government’s one-off relief measures, including electricity subsidies, waivers of property rates and public housing rents, underlying inflation in March rose 4.4 percent, higher than the 3.6 percent seen in the previous month.

Food price and private rent increases were the biggest factors in the city’s surging prices, rising 6.3 percent and 4.9 percent last month from a year earlier, according to government figures.

The price of alcoholic drinks and tobacco jumped 21.8 percent from the same period in 2010, after the government in late February imposed another heavy duty on cigarettes of over 40 percent, which has soared to 70 percent of the total price of one cigarette.

Electricity, gas and water rose 7.8 percent while clothing and footwear prices jumped 5.2 percent from the corresponding period last year.

A government spokesman said the city’s inflation is likely to stay elevated in the coming months, amid upward price pressure on the external front and robust local economic conditions.

“We expect the underlying pace of CPI inflation to pick up further momentum through the coming months,” Donna Kwok, Greater China economist of HSBC wrote in a research report Thursday. “The consumer’s power and desire to shop has yet to show meaningful signs of erosion and we expect it will hold strong for as long as labor market conditions stay tight.”

Financial Secretary John Tsang in February forecast the city’s underlying inflation for 2011 to average 4.5 percent due to the soft US dollar and a possible sustained increase in global food and commodity prices, which will bring more inflationary pressure to Hong Kong.

Irina Fan, senior economist from Hang Seng Bank, told China Daily that as Hong Kong’s climbing food price and private rental show no signs of retreat, the bank will probably further lift the city’s inflation forecast for 2011 from the current 4.7 percent.

“Surging global food and commodity prices as well as imported inflation will lead Hong Kong’s inflation to stay at the upper end throughout the whole year – and which may further hit 6 percent or more in the third quarter of the year,” said Fan.

http://www.chinadaily.com.cn/hkedition/2011-04/22/content_12373626.htm

China Daily

(HK Edition 04/22/2011 page2)

People cross a busy intersecton in the Central district in Hong Kong. Driven by strong economic expansion, total employment in the city increased to 3.58 million. Mike Clarke / AFP

Unemployment falls to 3.4% in January-March

Hong Kong’s jobless rate fell to 3.4 percent in the January-March period, the lowest level since September 2008, driven by strong economic expansion which spurred job growth in the city.

The rate was down a further 0.2 percentage point from the 3.6 percent recorded during the previous three-month December-February reporting period, the Census and Statistics Department said on its website Tuesday.

The figures beat the 3.5 percent median estimate of 13 economists in a Bloomberg News survey and the median 3.6 percent forecast of 10 economists surveyed earlier by Dow Jones Newswires.

“Hong Kong’s unemployment rate again surprised on the downside, not only moving further below the long-term trend of 4.2 percent but also returning to pre-crisis levels,” Donna Kwok, Greater China economist from HSBC wrote in an e-mail report released the same day.

Total employment in the city increased by 1,800 to 3,577,300 during the January-March period, signaling “the unemployment situation continued to improve,” Secretary for Labour and Welfare Matthew Cheung Kin-Chung said, commenting on the latest figures.

New jobs were mainly seen in postal and courier activities, wholesale, and cleaning and similar activities sectors, according to the government.

The underemployment rate, nevertheless, increased by 0.1 percentage point to 1.8 percent for the three months through March 31 from the previous three months.

Cheung added that the unemployment rate is likely to remain at low levels in the near term due to strong economic performance and positive hiring sentiment in the job market.

Irina Fan, senior economist from Hang Seng Bank, said the better-than-expected three-month unemployment rate was aided by the blowout of sales activities in the first two months this year because of the Chinese New Year.

Fan told China Daily that with the side-effect of Japan’s earthquake yet to be reflected in unemployment figures, shrinking exports to the country will make it harder for the city’s trade and logistic sectors that are involved in business with Japan.

“The implementation of a minimum wage will also increase operating costs and squeeze the profit margin of companies, and employers will be more careful with new hiring due to the higher costs,” said Fan, who anticipated the jobless rate in Hong Kong will rebound to 3.7 to 3.8 percent in the following months.

HSBC’s Kwok wrote that the strong domestic demand in the city will keep consumer spending buoyant to sustain the economy’s growth momentum.

She also expects the tight labor market conditions and wage growth to contribute to inflation, as businesses pass on higher operating costs.

Hong Kong’s gross domestic product grew a more-than-estimated 6.8 percent in 2010. The city’s consumer price index – the main gauge of inflation – rose 3.7 percent in February compared with a year ago.

Cheung said in the official release that the Hong Kong government remains vigilant in monitoring any economic and employment implications arising from the implementation of the statutory minimum wage, and the recent earthquake and nuclear crisis in Japan.

China Daily

(HK Edition 04/20/2011 page2)

http://www.chinadaily.com.cn/hkedition/2011-04/20/content_12358773.htm

Inflation on the mainland is expected to continue to rise at least through the second quarter and is likely to affect Hong Kong via higher import prices, economists said.

The mainland’s consumer price index (CPI) – a main gauge of inflation – rose to a 32-month high to stand at 5.4 percent in March from a year ago, the National Bureau of Statistics (NBS) said Friday.

And inflation on the mainland will affect Hong Kong consumer prices as increased costs for agricultural products and daily necessities will also drive up those in the city, Sheng Laiyun, spokesman for the NBS, said at a press conference in Beijing Friday.

According to a survey released by the city’s Consumer Council on the same day, the 200 most popularly sold products in Hong Kong’s supermarkets rose by an average price of 1.7 percent in 2010.

Forty-five percent of the surveyed items have recorded price increases, among which the price of eggs surged 14.6 percent and milk powder and infant formula also increased at a double-digit pace.

This compares with an 11 percent hike in food prices in March year-on-year on the mainland.

Paul Tang, chief economist at Bank of East Asia, told China Daily that fast-rising food prices on the mainland will inevitably have an effect on Hong Kong as the city imports much of its food from there.

“Counting in the city’s residential rent which is growing even faster in 2011 than last year, we forecast Hong Kong’s inflation growth to parallel that of the mainland, both being set to grow by 4.7 percent for the whole year of 2011,” said Tang.

“Excessive credit, food and oil price surges and the Japan quake have all complicated the inflation and growth pictures on the mainland. Combating high inflation growth is the main theme for the central government this year,” said Qu Hongbin, chief economist of Asian economic research at HSBC, at a press briefing in Hong Kong Friday.

Since October, the central government has introduced a basket of policy measures including supply-side measures, quantitative tightening, rate hikes and some specific property cooling rules, in a bid to fight inflation.

Though Qu said government policies are now working, particularly in regards to overheating credit and economic growth, he said it is still too early to ease tightening measures as inflation is still increasing.

Qu forecast one more 25 basis point (bps) interest rate hike and two more 50 bps reserve requirement ratio hikes in the second quarter to anchor inflation expectations, and he expects CPI to start tailing off in the second half of this year after inflation growth hits around 6 percent in June.

“Given the escalating inflationary pressure and maintained strength of growth momentum, monetary policy is set to tighten further,” Liao Qun, chief economist of China banking for Citic Bank International, wrote in an email report Friday. He agrees that one more hike in interest rates and two more rises in reserve requirement ratio are expected in the current quarter, with one of the latter likely to take place in the near future.

China Daily

(HK Edition 04/16/2011 page2)

http://www.chinadaily.com.cn/hkedition/2011-04/16/content_12336323.htm

A person walks past a HSBC branch in Hong Kong. The bank said high-yield bonds can provide attractive returns despite the current low interest rate environment. Mike Clarke / AFP

Issuance to top $80b this year, 58% of which is said to be high-yield

Asian high-yield bonds could be promising investments in the next few years, HSBC said Wednesday.

Fast-growing economies, attractive fundamentals, ample global liquidity as well as strong global demand for emerging market assets will all support an increase in the issuance of Asian high-yield bonds, said Cecilia Chan, chief investment officer of fixed income, Asia-Pacific, at HSBC Global Asset Management.

New issuance of Asian bonds is expected at $80 to $90 billion in 2011, among which high-yield corporate bonds will account for 58 percent of the gross supply, according to Chan.

Asian companies have sound financials with leverage lower than their US and European counterparts, the bank said. Strong growth in domestic consumption will help the upgrading of both sovereign and corporate credit rating, according to HSBC.

However, high-yield bonds are also normally considered to be a higher credit risk. Their credit ratings are usually marked as being either speculative-grade or below-investment grade, both of which embed a greater chance of default.

Wallace Lam, managing director of debt capital markets at HSBC, emphasized that high-yield bonds are not junk bonds, and that they can provide attractive returns despite the current low interest rate environment.

In comparison with equities, Lam said bonds provide more certainty of income via coupon payments, as opposed to equity dividends, although the latter also experiences less volatility.

However, Catherine Cheng, an analyst at Imperial Dragon Asset Management, told China Daily that the main reason for the popularity of high-yield bonds is because many companies are encountering trouble in raising capital from the bank.

“Apart from a higher risk, high-yield bonds also take on the liquidity issue – as the holders of these bonds will find it hard to sell them readily,” said Cheng.

The Asian high-yield portfolio is growing in terms of the number of issuers as well as in diversity. In 2010, as much as $13.7 billion of new assurance was seen in the region, in sharp contrast to a total of $3.7 billion in 2008 and 2009.

The strong momentum has continued in 2011. In the first quarter of this year, total new issuance was recorded at $6.9 billion. However, it was predominately driven by mainland corporate issuers, especially property developers. This sector alone issued almost $5.5 billion worth of bonds in the first three months, according to data provided by rating agency Moody’s.

Laura Acres, senior credit officer from Moody’s Investors Service said the wave of high-yield bonds issuance from mainland property developers this year is a result of the central government’s tightening policies in the property market.

Evergrande Real Estate Group Ltd, the second-largest developer by sales on the mainland, in January raised 9.25 billion yuan ($1.40 billion) in a sale of synthetic yuan-denominated bonds, paying a coupon of 7.50 percent on its three-year notes and 9.25 percent on the five-year tranche.

Other mainland developers, including Shimao Property, Shui On Land Ltd and China SCE Property Holdings Ltd, have all sold high-yield bonds to replenish their capital this year.

In February, Standard and Poor’s released a statement which points out that the surge in bond sales by mainland property firms would weaken their credit profiles.

China Daily

(HK Edition 04/14/2011 page3)

http://www.chinadaily.com.cn/hkedition/2011-04/14/content_12322444.htm