LI, Tao @ Hong Kong

Hong Kong’s export sector performance deteriorated notably in January, with total exports sliding 8.6 percent year-on-year compared with the 7.4 percent increase in December — the biggest decline since 2009, leading to a government warning of a bleak economic outlook this year.

The city’s total export registered at HK$259.3 billion in January, down from HK$283.7 billion in the same month a year earlier, the Census and Statistics Department reported on Thursday. Total imports decreased 10.5 percent year-on-year to HK$268.2 billion in January, leaving a visible trade deficit of HK$8.9 billion.

A government spokesman said the lackluster export figure mirrored deceleration seen across all the major markets.

Total exports to Asia as a whole fell by 11.8 percent last month, with shipments to the mainland, which account for more than half of external demand for Hong Kong goods, dropping 12.6 percent in January from a year earlier, compared with a 13.8 percent export growth to the mainland registered in December.

Exports to other Asian economies also fell notably, with those to Taiwan slumping 27.3 percent and those to Singapore tumbling 26 percent in January versus the corresponding month last year. Trade with the major economies in the West also painted a gloomy picture. Export to Germany was down 8.6 percent while those to the United States declined 4 percent.

Substantial decreases in import values were also seen from most major suppliers, with a 10.6 percent decrease from the mainland last month. Imports from Thailand, Taiwan and Korea slipped 36 percent, 23.9 percent and 19.3 percent respectively in January.

The overall deterioration was also due to the distortions brought about by the difference in timing of the Lunar New Year, which fell in late January this year and in early February last year, the government spokesman noted.

“It would be more meaningful to compare the trade figures for January and February combined for a clearer picture of the underlying trend,” said the spokesman.

However, apart from the holiday factors, Kevin Lai, an analyst at Daiwa Capital Markets told China Daily that he believes the “soft global demand” should take most of the blame for the decline in January exports.

“I don’t see the situation improving in the near future,” said Lai, adding that he believes the city’s exports will continue to slip on weakening external demand.

“We will likely see negative growth (in Hong Kong’s exports) in the first two quarters,” said Daniel Chan, chief economist at BWC Capital Markets, who forecasts that exports to the mainland will slacken further as the US and Europe economies continue to deteriorate.

The Hong Kong government has also foreseen a tough year for external trade activities this year. Financial Secretary John Tsang in his Budget Speech earlier this month said he was “not optimistic” about Hong Kong’s export performance in the first half of 2012 due to the deterioration of the external environment.

In its latest economic monitor released by Hang Seng Bank on Feb 12, economists Ryan Lam and Joanne Yim, citing slowing mainland economy and global uncertainties, estimated that the city’s export will record a 7 percent gain this year, compared with the 10.1 percent growth in 2011.

http://www.chinadailyapac.com/article/government-warns-bleak-economic-outlook-2012

Power supplier CLP Holdings Ltd, which generated 64 percent of its total operating earnings in Hong Kong last year, is facing pressure to raise its tariffs in the city, the company said on Monday.

Betty Yuen, vice-chairman of CLP Power Hong Kong Limited, said that the city’s electricity tariff is still facing upward pressure due to government’s environmental requirements.

CLP Power supplies electricity to users in Kowloon and the New Territories, while Hongkong Electric supplies power to Hong Kong Island.

“We now need to double the usage of natural gas, but at gas prices which were fixed 20 years ago,” Yuen told at a media briefing when announcing the group’s annual result.

“The newly contracted gas prices are inflated these days,” Yuen added.

CLP imposed a tariff of 97.7 cents, representing an average 4.9 percent increase over last year. The levy became effective on Jan 1, 2012. The company cut a planned electricity tariff increase twice last year from the originally planned 9.2-percent- and 7.4-percent increase following protests against the hikes from political parties and the public as well as objections from the government.

According to CLP’s annual result released on Monday, the group’s 2011 net profit for the 12 months ended Dec 31 fell 10 percent to HK$9.3 billion from HK$10.3 billion in 2010, due to a write-down of its Australian power assets after Australia passed new carbon pricing legislation which required polluters to pay for carbon emissions.

Revenue, nevertheless, rose 57 percent to HK$91.6 billion from HK$58.4 billion bolstered by higher contributions from its energy businesses in Hong Kong and Australia.

CLP’s Hong Kong operations, which accounted for 64 percent of its total operating earnings, rose 3.3 percent last year to HK$6.3 billion from HK$6.1 billion, driven by a 0.8 percent increase in power sales.

The Tariff Stabilization Fund, which could be deployed as a choice to cushion price rises and the utility’s expenditure, has declined to HK$637 million by the end of 2011 from HK$1.5 billion a year earlier, according to CLP.

As the fund is affected by electricity sales and fuel costs, Yuen said it is difficult to forecast the fund’s future balance.

Earlier reports said the group has lowered the balance to a historic record low of HK$100 million.

Secretary for Environment Edward Yau on Monday told the legislators that the government will closely monitor the city’s power suppliers’ operating expenses to avoid unreasonable electricity tariff hikes.

Yau said the government expects the power utilities not to make excessive investment to enable the reserve capacity to reach a higher level.

Shares of CLP declined HK$0.30 or 0.45 percent to close at HK$66.15 on Monday, compared with 0.88 percent of the city’s benchmark Hang Seng Index.

http://www.chinadailyapac.com/article/electricity-tariff-faces-upward-pressure

Cash-rich mainland financial services companies are scouting for opportunities to expand their operations and market shares in Hong Kong as their overseas peers like Samsung Securities are scrambling to downscale operations.

Yim Fung, chief executive officer of Guotai Junan International, told China Daily that its Hong Kong-listed subsidiary Guotai Junan Securities Co Ltd — one the largest mainland-based securities houses, does not have any plans to axe staff, but instead is preparing for future expansion as well as considering hiring more staff.

“We plan to take the opportunity to enhance our investment banking business, develop institutional clients and initiate more products, particularly bonds and derivatives,” said Fung.

CCB International, the investment-banking arm of China Construction Bank has a similar plan. Zhang Xueqing, deputy chief executive officer of CCBI, said the bank will not lay off any employees despite the gloomy economic outlook.

“We might also consider hiring some highly-qualified personnel, although the number wouldn’t be (so) big,” Zhang told China Daily on Friday.

The cautious expansion plan of mainland investment banks and brokerages in Hong Kong is in sharp contrast with several international financial institutions in the city, which are either busy with layoffs or downscaling their business.

Local reports said around 100 staff from investment banking and technology support of Europe’s largest bank HSBC Holdings Plc will be fired in the second round of layoffs starting on Feb 9.

Since November last year, HSBC has started to eliminate hundreds of jobs at its investment bank as part of its plan to control costs. The bank in August announced that it will cut 30,000 jobs worldwide in the next few years, including 3,000 in Hong Kong.

South Korea’s largest brokerage by market value Samsung Securities Co on Feb 1 shut its equity sales and research operations in Hong Kong. Samsung said in a statement that it will more than halve staff numbers in the city as the company focuses its global operations on the sale of Korean shares.

Daiwa Securities Group Inc, Japan’s second-largest brokerage firm by revenue, reported losses for the fourth consecutive quarter.

Daiwa said it will lay off staff mainly in Europe and Asia. It will eliminate an additional 200 jobs on top of the 300 positions that were previously announced.

Mo Pak-hung, associate professor of Economics from Hong Kong Baptist University, said these international investment banks, which were opportunists seeking money-making opportunities particularly in developing economies, find that there are less loopholes for them to exploit due to continually improved financial systems. Hence the layoff is not a surprise under the current economy after the fast expansion in the past few years.

While riding on the booming economy as well as taking advantages of new opportunities including the yuan’s internationalization, Mo said Chinese financial institutions are still in the growing stage. A continued expansion is still well expected in the future.

Tapping on the global market, a great number of mainland banks and brokerages have set up their branches in Hong Kong, including ICBC International Holdings Ltd and BOC International Holdings Ltd.

Mainland banks, parents of their Hong Kong-based subsidiaries, were good performers. Profit of ICBC stood at 166 billion yuan in 2010, making it the most profitable bank in the world. Net profit of CCB and BOC were recorded at 135 billion yuan and 110 billion yuan in 2010, respectively.

http://www.chinadailyapac.com/article/mainland-financial-services-firms-chase-opportunities-hk

Hong Kong’s private sector returned to growth in January after deteriorating for five consecutive months, according to HSBC’s latest survey on purchasing managers.

The HSBC Hong Kong Purchasing Managers Index climbed to 51.9 in January from 49.7 in December, the bank report released on Friday shows. A reading above 50.0 indicates expansion, while a figure below that level signals contraction. January PMI registered above the no-change benchmark for first time since last July.

“Overall demand strengthened again in January to tip the headline PMI back above 50,” Donna Kwok, Greater China economist with HSBC commented on the latest release. “The sustained strength of Hong Kong’s job market is clearly helping to underpin local consumption and offset the impact of the still tepid mainland demand.”

The index is derived from a variety of business aspects, measuring changes in output, new orders, employment, suppliers’ delivery times and stocks of goods purchased. Outcome is based on a survey of about 300 companies, the bank claims.

Output and new order growth were both at eight-month highs, with readings of 51.7 and 53.7 last month compared with 49.7 and 50.4 in December, supporting the PMI which rebounded from the gloom in the previous few months.

Hong Kong’s private sector employment increased modestly last month as companies hired more staff on greater production requirements, ending a five-month stretch of job losses, according to the report.

New business inflows from the mainland, however, contracted again for the third straight month, despite an improvement in the reading to 49.1 in January, up from 47.8 in the previous month. Kwok said the resilience of the Hong Kong domestic demand is acting as a critical counterbalance against the influence of the mainland’s continued slowdown and ongoing turmoil in Europe as well as in the global financial markets.

Companies responding to the survey also indicated further rises in input prices on purchases and labor costs in January which were above the long-run series average, also the fastest in three months, the report indicated.

“Slowing global trade flows will weigh upon growth this year, but this promising start to 2012 underscores our expectations for gross domestic product to stay in expansion mode this year,” Kwok estimates.

Hong Kong’s economy would retreat in the first quarter this year if exports are hit by the lackluster worldwide economy, Financial Secretary John Tsang said during his budget speech in Hong Kong on Wednesday, forecasting that the 2012 economic growth would slip to between 1 to 3 percent, down from the 5 percent expansion last year.

“I’m not optimistic about Hong Kong’s export performance in the first half of this year, and if exports of goods were to plunge in the first quarter, the overall economy might take a downturn in that quarter,” Tsang said, adding that he expects the external sector to witness improvement in the second half this year.

Hong Kong is quite likely to encounter a “shallow” recession in the first half, according to UBS AG, which expects the economy to expand just 1.6 percent this year, in comparison with growth predictions of Standard Chartered Plc and Hang Seng Bank Ltd of 2.9 percent and 4.0 percent respectively.

Unemployment may climb this year, the financial secretary said during the budget speech. DBS Bank Hong Kong Ltd forecasted that the city’s jobless rate will reach 4.4 percent by the end of 2012 from 3.3 percent in the fourth quarter last year.

http://www.chinadailyapac.com/article/private-sector-sees-growth-trend

Private housing construction in the city has jumped 80.9 percent to 9,762 units last year, up from 5,397 units in 2010, indicating that developers are accelerating their development pace as the government boosts land sales to curb property prices.

According to the Buildings Department’s Monthly Digest released on Tuesday, work in four projects to produce 1,461 units had started in Hong Kong in December. Together with commencement of the work to develop 8,301 units in the first 11 months, the total 9,762 new units in 35 projects last year were the highest number recorded in the past four years.

Previously, there were only 6,988 and 7,366 units developed in 2008 and 2009 respectively following the economic crisis.

The increased number of new housing construction last year implies that the government’s effort in boosting land supply has borne fruit, Buggle Lau, chief analyst at the Midland Realty told China Daily.

To ensure an annual supply of 20,000 flats in the city, the Hong Kong government has vowed to maintain a relatively fast pace of increasing land supply in the city, a move which has contributed to stabilizing the city’s home prices. During the first three quarters of this fiscal year ending on March 31, 2012, it has sold 22 pieces of land that is estimated to provide 7,400 units of residential flats.

Despite new home construction last year on land that were sold earlier, Lau indicated that the government’s active land sales will also accelerate the city’s developers’ progress in building flats as more new supplies are due to come.

However, Wong Leung-sing, associate director of research at Centaline Property Agency Limited said the faster housing construction last year is also a result of developers’ generous purchases before 2008 when the city’s property market was in another boom.

Since the housing construction period lasts between four to seven years, developers are unlikely to forecast the market prospects when construction is underway. Wong believes the number of new home construction each year is more like an automatic reflection of the land sales situation half-decade ago.

“We will see even more construction activities in 2012 as land sold in the past few years are likely to be put into use, and the peak of new completed home supply is expected to come about in 2016,” said Wong. Both Lau and Wong nevertheless hold similar views that the faster new home supply in the future will not hit the city’s property market despite the present decline of home prices.

However, a Cushman & Wakefield report released on Monday estimates that the city’s mass home prices will fall by up to 15 percent this year, while the luxury properties costing over HK$30 million will experience an adjustment of 5 to 10 percent over the period.

http://www.cdeclips.com/en/hongkong/Private_housing_soars_to_record_high/fullstory_71762.html