LI, Tao @ Hong Kong

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

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 Cnooc’s 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 government’s 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.

Cnooc’s 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.

litao@chinadailyhk.com
http://www.chinadailyapac.com/article/cnooc-increase-oil-production-24-340m-barrels

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 region’s 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 Asia’s 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 Asia’s 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.

Asia’s 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 IMF’s management team, according to Lipton. Singapore’s Deputy Prime Minister and Minister for Finance Tharman Shanmugaratnam had also become the International Monetary and Financial Committee chairman in 2011.
Despite the region’s economies showing strong growth momentums today, problems in the rest of the world, particularly in Europe, have become a threat to Asia’s prosperity, Lipton said.

Given today’s interconnected global economy, no country or region will be immune from that catastrophe, which is especially true for Asia, Lipton said, citing the region’s 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.

http://www.cdeclips.com/en/hongkong/fullstory.html?id=71578