Archive for 一月, 2012

Cnooc to increase oil production by 2.4% to 340m barrels

Cnooc Ltd, the largest offshore oil and gas producer in China, said it is set to produce 330 to 340 million barrels of oil equivalent (BOE) in 2012, up 2.4 percent from last year, along with the launch of several new offshore projects in the mainland drivers of future production growth coming on stream.

Net production last year is estimated to stand around a total of 331 to 332 million barrels of oil equivalent, the oil refiner announced in Hong Kong on Wednesday.

It is at the lower end of Cnoocs revised target of 331 million to 341 million for 2011, in comparison with an output of 328.8 million barrels of oil equivalent in 2010, according to its annual report released in March last year.

Cnooc maintains the target to achieve 6 to 10 percent compound annual growth rate (CAGR) on production from 2011 to 2015, Li Fanrong, chief executive officer of the company said at a media briefing on Wednesday.

Four new projects in offshore China are expected to be put into operation this year two in western South China Sea and two in eastern South China Sea and the Long Lake oil-sands project in Canada and the Missan oilfield in Iraq are due to start contributing to production this year, according to the company.

Capital expenditure is expected to rise to $9.3 to $11.0 billion in 2012, an increase up to 63 percent from the forecast for last year, to accelerate the exploration and development of deepwater and unconventional energy, which have huge resource potentials, said the company.

Zhong Hua, chief financial officer of the company, said the governments favorable policies will nevertheless aid Cnooc to save cost as the threshold of the special oil gain levy was increased to $55 per barrel from the previous $40 per barrel effective from Nov 1, 2011.

Shares of Cnooc climbed HK$0.14 or 0.90 percent to close at HK$15.76 in the city on Wednesday, compared with the 0.30 percent gain of the benchmark Hang Seng Index.

The stock has slumped about 18 percent in Hong Kong trading throughout 2011, lagging behind its competitors China Petroleum & Chemical Corp and PetroChina Co, which gained 18 percent and 4.8 percent respectively.

Cnoocs price-earnings ratio (P/E ratio), which used to be among the top three Chinese oil producers, is now the worst as investors are cautious about its prospects due to the slower production progress, according Louis Wong, director of Phillip Securities.

The market may also worry that the company will again (become) involved in serious oil leaks as it did last year, Wong told China Daily in a telephone interview.

Cnooc cut its annual production target by as much as 9.3 percent from 365 million barrels of oil equivalent on Aug 25 as it was ordered to shutdown the Penglai 19-3 field 51 percent owned by the company – after a serious oil leak occurred in June, 2011. The incident caused a loss of 5.9 million barrels of oil equivalent, and production in the field has yet to be resumed, the company said on Wednesday.

China National Offshore Oil Corp, parent of Cnooc, said earlier this month that 29 fishermen had sued the company for 234 million yuan ($34 million) for economic losses following the oil leaks. Li said the outcome is hard to estimate or comment.

China National Offshore Oil Corp, on the other hand, set up a foundation aimed at environmental protection in December 2011. Li added that the Hong Kong-listed Cnooc has contributed 500 million yuan ($79 million) as initial capital for the foundation.

1st forex quarterly decrease in decade

Drop reflects outflow of foreign capital amid global economic woe

BEIJING / HONG KONG – China’s foreign exchange reserves declined on a quarterly basis for the first time in more than a decade, a sign analysts said underpins the need for the country to shore up market liquidity.

The world’s largest holdings of foreign wealth fell to $3.18 trillion at the end of last year from $3.2 trillion at the end of September, according to data released on Friday by the People’s Bank of China, the central bank.

The value of the portfolio dropped in November and December, the first consecutive monthly fall since the first quarter of 2009, because of a shrinking trade surplus and accelerating capital outflows.

Trade surplus and foreign direct investment are the two major contributors to foreign exchange reserves.

“The change from a monthly drop to a quarterly fall points to an accelerated outflow of speculative capital, as the European debt crisis worsens,” said Ding Zhijie, dean of the School of Banking and Finance at the University of International Business and Economics in Beijing.

In September, the reserves witnessed the first drop for a single month in 16 months by shrinking $60.8 billion, but by the end of the third quarter the total value had still increased compared with three months earlier.

Chinese banks’ yuan positions for foreign exchange purchases, an indicator of capital flows, fell for the first time in four years in October, and declined consecutively in November and December, according to the central bank.

The figure dropped by more than 100 billion yuan ($15.8 billion) in December, compared with a decline of more than 20 billion yuan in October and November.

“Declines in foreign reserves and yuan positions reflect the fluctuation of the foreign exchange market as the debt crisis in the eurozone is prompting investors to sell their emerging market assets,” Ding said.

Kevin Lai, analyst with Daiwa Capital Markets, said money outflows from China will continue this year due to expected slower economic growth and higher macroeconomic risk.

“Together with a slowdown of foreign direct investment, we are likely to see a decline of foreign exchange reserves through the year.”
The decline in Chinese foreign reserves has drained money from the domestic market, said Yao Wei, China economist at the French bank Societe Generale SA.

The People’s Bank of China said last week that it will suspend sales of central bank bills and conduct reverse repurchases before the Chinese New Year on Jan 23, moves that allow banks to have more money to lend.

The announcement significantly reduced the probability that China would cut the required reserve ratio for banks – another instrument often used to boost liquidity – in the next two weeks, Yao said.
Required reserves are the money commercial banks have to hold as a guarantee. A reduction of the required reserve ratio means commercial banks have more money to lend.

“Capital outflows from China reflect the change of the direction of global capital flow in the past two or three months seeking safe haven in the US dollar,” said Qu Hongbin, chief China economist and co-head of Asian Economic Research at HSBC.

The departure of foreign money will also stymie liquidity in China and the central government may need to further ease its monetary policy then, he said.

“Following December’s 50-basis point cut in the required reserve ratio, authorities will free more cash for banks to increase lending, as already seen in December’s money supply data,” said Matthew Circosta, economist at Moody’s Analytics, a subsidiary of Moody’s Corporation.

A total of 640.5 billion yuan in loans were lent out in China in December, an amount higher than expected, while M2, a broad measure of money supply, rose by 13.6 percent.

Circosta said China will still allow the yuan to appreciate to placate China’s trading partners, but at a slightly slower pace than in 2011, to support manufacturing and export growth.

China Daily
(China Daily 01/14/2012 page1)

Asian voice in IMF to become increasingly more influential

Asia is set to play a bigger role at the International Monetary Fund (IMF) in view of its buoyant economies, particularly as the global economy is haunted by the deepening debt crisis, a top executive of the IMF, which is tasked to stabilize the global monetary system, said on Monday.

Speaking at the Fifth Asian Financial Forum in Hong Kong, David Lipton, first deputy managing director of the IMF, said the fund is looking to work ever more closely with Asian economies to lessen the impact of the global economic turbulence as well as to promote stronger growth ties globally.

As Asia goes forward, the IMF stands ready to be a partner, Lipton said.

Lipton recognized that the regions strong economies had emerged from the 2008 financial crisis and are showing great promise these days partly due to these countries courageous reforms a lesson these Asian countries had learned from the previous downturns.

But now it is problems in the rest of the world, Europe in particular, that pose a risk to Asian prosperity. (So), Asia has a stake in seeing Europe solve its problems and even playing a role in that process, said Lipton.

He added that the IMF had also learned from Asias experience and it was now applying those lessons to programs across the globe, including Europe.

Given its rise as an economic powerhouse, Lipton said it is natural that Asias voice in the IMF should become increasingly influential.

Consensus has been made since 2010 that Asian members would play an increasingly important role within the IMF. Japan and China are now the second- and third-largest shareholders in the organization while India was also among the top 10, according to the deputy managing director.

Asias links with the IMF are being strengthened also through the selection of key IMF personnel from the region. Zhu Min from China and Naoyuki Shinohara from Japan have been appointed as the deputy managing directors of the Fund in 2011 and 2010, respectively.

Asian nationals now account for 40 percent of the IMFs management team, according to Lipton. Singapores Deputy Prime Minister and Minister for Finance Tharman Shanmugaratnam had also become the International Monetary and Financial Committee chairman in 2011.
Despite the regions economies showing strong growth momentums today, problems in the rest of the world, particularly in Europe, have become a threat to Asias prosperity, Lipton said.

Given todays interconnected global economy, no country or region will be immune from that catastrophe, which is especially true for Asia, Lipton said, citing the regions tight trade and close financial links with Europe.

Lipton also warns that Asia still has its own challenges, both in the near and longer term. However, by working together more and better than in the past, Asia and the IMF can help ensure stability and prosperity for the region and for the world, he said. IMF will also adopt sharper economic and financial surveillance to prevent a crisis, and will strengthen the global financial safety net to enhance protection of interests of the Asian economies, according to Lipton.

Housing Society to offer 5 projects to build 1,200 flats

The Hong Kong Housing Society said it will launch five residential projects for sale, which will offer as many as 1,200 small-to-medium-sized flats to the public from this year to 2016.

The first real estate, Heya Green at Po On Road in the Sham Shui Po district, will start pre-sales between April and June this year, the organization said on Thursday, adding that this two-building real estate is expected to be completed by the end of 2013.

Heya Green will provide 327 units of two- and three-bedroom flats, ranging from 570 to 780 square feet, according to the housing society.

Over 60 percent of the units are two-bedroom flats to meet the markets needs. All the homes will be sold at market prices, Wong Kit-long, chief executive offer of Hong Kong Housing Society said on Thursday.

While the pricing is yet to be determined, Wong noted that the average home prices in the area currently was in the range of between HK$6,000 to HK$7,000 per square foot.

Wong added that these homes will be sold to Hong Kong residents as a priority. If the organization receives too many purchase applications, it may apply, among other methods, the ballot approach to dispose the flats.

The five development projects, which were initially under the citys Urban Renewal Authority (URA), were later transferred to the Housing Society as the URA has too many projects at hand.

The five lots were acquired at fairly high prices 10 years ago, Wong told China Daily, but did not give details.

Even if these flats are priced in line with the market price, we can barely break even unless home prices rise in the next few years, said Wong.

Centaline Property Agencys Director of Research Wong Leung-sing said these delayed real estate projects could still be attractive to the public as the usable area will reach up to 80 percent of the building area.

Compared with residential homes launched by the citys private developers, flats constructed by the Housing Society are designated in a simple and practical way with more usable spaces, said Wong Leung-sing.

The construction quality will be examined after the buildings completion. As many Hong Kong people still prefer to live in mature places, sales prospect of these projects are quite positive, he added.

Hong Kong government has set a target to ensure an annual supply of 20,000 apartments in the city to meet the peoples needs and to counter anti-speculative activities.

The Lands Department on Thursday said on its website that tender for a site at Tseung Kwan O, New Territories, has been sold to Fortune Precision Limited on a 50-year land grant with a premium of HK$1,860 million.

The site covering an area of some 8,246 square meters is designated for construction of 590 to 620 residential flats, according to the government.

Property market to face a grim year

As negative factors, including a sagging economy, rising mortgage rates, increasing land supply and tightening government measures are in play, Hong Kongs property market is likely to be grim in 2012, agencies and analysts believe.

Property consulting firm DTZ on Tuesday forecast the citys mass flat prices will drop by around 5 to 10 percent this year while luxury homes will face a correction limited to below 5 percent due to the purchasing powers of the rich.

The slow market was apparently due to the global economic downturn, which resulted in buyers remaining cautious even though the unemployment rate was low and the local economy was buoyant, Alva To, DTZs head of consulting, said during a media briefing on Tuesday.

Unlike the robust 2010 which saw booming residential transactions, the citys property sales were subdued since the beginning of 2011, with home transactions in the first half of 2011 declining by around 8.6 percent to 71,868, from 78,649 in the same period a year earlier, data provided by DTZ shows.

After home prices started retreating in mid-2011, the governments anti-speculation measures, particularly the special stamp duty (SSD) which capped short-term reselling showing effect, the transaction numbers further slumped to only 39,702 in the second half last year, representing a 54.3 percent decrease from 2010.

To said he expects the existing borrowing costs and the increased interest spread to continue in the short term. Potential home buyers may continue to wait for possible downward adjustment particularly when property prices had risen by a steep margin last year pushing the citys average affordability ratio 24 percentage points higher over 2010.

Yannis Kuo, a property analyst from Daiwa Securities Capital Markets Co, also estimates that average home prices will continue its downward trend this year, given that the decline in 2011 had only achieved half of the estimated target.

We forecasted that prices will tumble around 10 percent from the peak, Kuo told China Daily. As home prices only declined about 5 percent in 2011, we believe the descending momentum will continue in 2012 but do not expect a great correction, she added.

But a number of property outlook reports released last month expect an even bigger market adjustment. Standard Chartered Plc on Dec 13 indicated that Hong Kong home prices may need to fall as much as 10 percent in 2012 before buyers are lured back. Knight Frank in mid-December said the citys home prices are set to fall by 10 to 15 percent in 2012.

But none of these is as pessimistic as Barclays Capital Asia, which expects Hong Kongs residential market to slump 25 to 30 percent, head of its property sector research Andrew Lawrence said on Dec 19.

Developers are holding a similar but more positive view. Henry Cheng, managing director of New World Development Co is convinced that the prices glissade will be limited within 10 percent as the Hong Kong government is regulating the supply and demand through the land supply in a bid to avoid large market fluctuations.

I believe the government is striving to achieve long-term healthy and stable development of the property market. Cheng said.

According to the citys largest real estate broker Centaline, home prices in Hong Kong gained more than 70 percent since early 2009 and peaked in June 2011, surpassing the previous high in 1997.

It, nevertheless, started declining afterwards, as the multiple government measures took effect and gloomier economic outlook for the year stymied investors appetite for the market.

The governments vow to maintain a relatively fast pace of increasing land supply in Hong Kong also contributed to stabilize the citys home prices last year. Adding the ongoing and upcoming land tenders, the government has sold 22 pieces of land during the first three quarters of this fiscal year which will end on March 31, 2012. The land is estimated to provide 7,400 units of residential flats.

Together with the estimated 14,000 units from the railway-linked property projects, the city has already provided more than 20,000 units this year a target to ensure the annual supply of 20,000 apartments set by Chief Executive Donald Tsang during his Policy Address in October 2010 is reached.

The Hong Kong government nowadays is more flexible in operating the market through the effective adjustment of the land supply pace, according to Daiwas Kuo, who added that the government is also less willing to witness property prices slump in Hong Kong as opposed to skyrocketing prices.

Property is the major asset that Hong Kong people own. For the sake of the societys stability, the government is not willing to see a substantial devaluation of homes values in the city, said Kuo.

Vincent Cheung, Cushman & Wakefields national director for valuation and advisory services, told China Daily that Hong Kong people these days are more mature in coping with market fluctuation after several previous collapses.

As long as Hong Kongs unemployment rate remains high while interest rate stands at current low level, most people in Hong Kong will hardly hurry to axe prices to sell homes as theyve seen the markets ups and downs, said Cheung.

But transaction volume in Hong Kong will stay low in 2012 due to the prices deadlock, which, will at the most decline by 15 percent in the mass market, Cheung added.

Measures to boost financial markets

BEIJING / HONG KONG – Financial markets will be developed and the securities industry opened further to foreign participants in a bid to diversify risk in the banking sector, a leading financial official said.

China should be “highly cautious” about systemic risk in the banking sector and needs to substantially boost the scale of direct financing, such as stocks, to diversify the risk, Guo Shuqing, chairman of the China Securities Regulatory Commission (CSRC), said.

The regulator plans to launch several new products, including high-yield corporate, municipal and government agency bonds, in order to boost direct financing. The regulator will also reduce administrative procedures regarding the issuing of bonds, he added.

Three of the world’s top 10 banks, judged by assets, are Chinese. However, cash-strapped small businesses are still experiencing difficulty in raising capital.

“Some of the firms may be more suitable for stock or bond financing but they can’t get sufficient financial support because direct financing remains small-scale,” he said. “This structural problem can damage the economy seriously.”

Guo made the remarks at the regulator’s annual work conference which concluded on Monday.

The total assets of China’s securities industry stood at 4.7 trillion yuan ($744 billion) by the end of 2011, according to the regulator. This accounts for only 3.9 percent of the total assets of the country’s financial industry. The banking sector accounts for more than 90 percent.

Analysts said a vibrant bond market could help diversify risks and reduce over-reliance on the fast-expanding banking sector. But a healthy credit rating system and a mature credit culture are vital to expanding the bond market, they said.

“The development of the bond market is a key part in reducing over-reliance on the banking system,” Ivan Chung, a senior analyst at Moody’s Investor Service, said.

The regulator is also working to further open the securities market to foreign investors by raising the investment quota for Qualified Foreign Institutional Investors (QFII) in the A-share market, Guo said.
Analysts expect that the regulator may boost the current quota by as much as $50 billion and another 50 billion yuan for QFII investors using overseas yuan deposits.

Guo also noted that China needs to accelerate the development and opening of domestic market intermediaries and introduce advanced technology and personnel from developed markets.

It was reported that the regulator has approved US bank Citigroup Inc to set up a joint-venture securities firm in China.

Analysts said that the acceleration in approving the launch of joint-venture securities firms is part of the regulator’s preparation for the long-awaited international board in Shanghai. The board will allow overseas companies to raise capital in the A-share market.

“The board failed to debut in 2011 due to global turbulence,” Banny Lam, economist with CCB International Securities Ltd, said. “I believe the board will be launched in the second half of this year when the global economy should improve.”

At the annual conference, Guo also called for a greater role for long-term institutional investors such as pension and public housing funds in investing in the country’s stock market which fell more than 20 percent in 2011.

Institutional investors in the Chinese stock market only hold 15.6 percent of stocks, according to the regulator. The ratio is much lower than that for developed countries.

Lam said that facilitating long-term funds into the securities market will generate returns and stabilize the market as they are less prone to wild fluctuations.

Hong Kong’s richest get poorer

HONG KONG – Even as they continued to benefit from the mainland’s robust economic growth, Hong Kong’s richest people saw their wealth shrink last year in tandem with the sagging stock market, Forbes magazine said on Friday.

The combined wealth of the city’s top 40 richest people fell 7.4 percent to $151 billion last year from 2010 as the benchmark Hang Seng index slumped by more than 20 percent, said Forbes.

Property developers, who have featured on the magazine’s “Rich List” for many years, suffered the most.
Li Ka-shing, chairman of Cheung Kong (Holdings) Ltd, remained at the top of the list, but his personal wealth shrank by 8.3 percent to an estimated $22 billion.

Lee Shau-kee of Henderson Land Development Ltd replaced the Kwok family of Sun Hung Kai Properties Ltd to become Hong Kong’s second-wealthiest resident, with a personal fortune estimated at $17 billion, down by 13 percent from 2010. The Kwok family saw its wealth fall by almost 25 percent to $15.4 billion, according to the magazine.

Kenny Tang, a Hong Kong-based analyst from AMTD Financial Planning Ltd, said most developers saw their wealth shrink last year because their stocks had underperformed the benchmark index, which registered an average slump of 25 percent in 2011.

“But they are unlikely to post such a dismal performance again this year – although I am neutral on the market – given that the fundamentals of these developers are basically sound,” said Tang.

Cheng Yu-tung, the chairman of New World Development Co Ltd, was the biggest gainer on the 2011 list. His personal wealth jumped to $15 billion from $9 billion in 2010, thanks to the successful IPO of his luxury-goods retailing flagship Chow Tai Fook Jewellery Group Ltd in December.

Hong Kong’s wealthiest people have been “some of the world’s biggest beneficiaries” of the economic rise of the Chinese mainland during the past three decades, Forbes said.

That’s because most of them either have heavy business exposure on the mainland, or they sell goods to the ever-growing number of visitors from the mainland.

“Now that the mainland is being pinched by the global slowdown and tighter interest rates to tame inflation, Hong Kong’s wealthiest are feeling the squeeze,” said Russell Flannery, an editor at Forbes.

As an example, Choy Kam-lok, who previously ranked No 27, fell out of the list this time. Choy’s wealth declined after the share price of his company, United Laboratories International Holdings Ltd, a pharmaceutical manufacturer, slumped almost 72 percent in 2011 after the mainland authorities capped drug prices.

In contrast, Hong Kong’s retailers have benefited from the boom in mainland outbound tourism, and have continued to do well despite a rocky ride for the Hong Kong stock market recently.

Simon and Eleanor Kwok at Sa Sa International Holdings Ltd ranked 35 on the list, with a fortune of $1.09 billion.

China Daily

Economy may worsen before getting better

Hong Kong will see its economic situation worsen as early as in the first quarter of this year, with GDP growth easing significantly to 2.2 percent from 4.3 percent in the third quarter of 2011, before it improves later this year, economists said.

According to a forecast by economists at the Hong Kong University, the jobless rate has risen further to 3.5 percent from 3.4 percent lately, as external demand weakens further.

The quarterly macroeconomic forecast released on Wednesday also revised its estimation on the GDP growth of the final quarter of 2011 to 3.0 percent from the 3.3 percent forecast made in October.

GDP growth in the second half is expected to grow by 3.6 percent, moderating from the 6.4 percent increase in the first six months last month, said the release.

For 2011, GDP is forecast to increase by 4.9 percent, from the 7.0 percent in 2010, which is “a good performance” given the slowdown of the global economy, Alan Siu, executive director of HK Institute of Economics and Business Strategy from HKU, said in a media briefing, citing the city’s competitor Singapore which encountered economic contraction last year.

The city’s economic expansion is primarily driven by an increase in domestic demand estimated to account for 4.8 percentage points of the 4.9 percent overall increase in last year’s GDP, with external demand accounting for only 0.1 percentage point of the growth, according to the forecast.

However, the job market will continue to soften in a downward economy, which is projected to rise to 3.5 percent in the first quarter of 2012 from the estimated 3.3 percent for the past three months.

Export is projected to contract by 4.5 percent in the first quarter this year, taking into account the strong 16.8 percent growth for the same period last year.

Inflation pressure is nevertheless expected to ease further in 2012 as a slower growth in aggregate demand is also expected, said Siu. The headline inflation is forecast to be 4.8 percent this quarter, down from the estimated 5.7 percent in the fourth quarter last year.

Siu said the university predicts Hong Kong’s economic expansion in 2012 will stand between 2 to 3 percent. The ongoing Eurozone debt crisis, which is haunting the global economy, is not likely to wind up happily, Siu added.

According to another Hang Seng Bank report released on Wednesday, the bank expects Hong Kong’s economic growth and inflation to ease to an average 4 percent to 4.5 percent respectively this year, adding the city’s economic slowdown appears to be continuing although the downturn has been milder than many had expected.

“Overall growth numbers will likely turn worse in the first quarter of 2012 before getting better,” Ryan Lam and Joanne Yim from the bank wrote in the report. “However, given that the global economic problems are structural and therefore can not be resolved easily, Hong Kong’s expected recovery in the second half this year is unlikely to be swift.”
China Daily
(HK Edition 01/05/2012 page2)