Hong Kong’s currency finds strength in testing times By Reuters

© Reuters. Illustration photo of a Hong Kong dollar note

By Noah Sin

HONG KONG (Reuters) – The Hong Kong dollar is bumping against the top end of its narrow 7.75-7.85 band against the U.S. dollar and is among the best-performing currencies this year even as the city’s economy struggles to contain the fallout of the coronavirus.

The Hong Kong Monetary Authority (HKMA) spent HK$7.7 billion ($993.45 million) last week to defend the peg as the currency rose to its upper limit for the first time in more than four years.

Analysts say what’s driving the currency is Chinese money chasing cheap Hong Kong-listed stocks, its favourable yields and the city government’s spending plans.


Traders often borrow in currencies with lower interest rates to fund purchases in higher-yielding markets, such as Hong Kong currently, creating inflows and strengthening a currency.

As part of the peg arrangement, Hong Kong’s official “base rate” follows U.S. Federal Reserve policy. But once the Fed’s main rate loses its 50 basis points lead over the 5-day average of borrowing costs between Hong Kong’s banks – as it did in March – the HKMA’s policy tracks the local interbank rate.

The Fed Funds Target (NYSE:) Rate is at 0-0.25% and Hong Kong’s base rate was 1.19% on Monday, indicating a rich yield cushion for the Hong Kong dollar.

Rates at which Hong Kong banks lend to each other are leading their U.S. equivalents by the most since 1999. They are also more prone to spikes with less cash around. Interbank cash levels, measured by the aggregate balance , are down 84% from a 2015 peak of HK$426 billion.

For a graphic on World FX rates in 2020, click https://graphics.reuters.com/GLOBAL-CURRENCIES-PERFORMANCE/0100301V041/index.html


Hong Kong’s stock market is one of Asia’s largest.

Initial public offerings, such as the heavily subscribed recent listing of Akeso (HK:), have locked up cash and kept interest rates elevated, said Carie Li, economist at OCBC Wing Hang Bank.

Chinese investors have poured cash into Hong Kong shares, many of which trade cheaper than peers on the mainland and () “Southbound” net purchases through the Stock Connect link reached a record $17.93 billion in March.


The Hong Kong government is spending record sums to prop up the economy, battered by months-long protests in 2019, and in partial lockdown now to fight the coronavirus.

It could finance some of this spending with deposits it holds with the HKMA. With limited HKD to hand, the central bank may meet this demand by selling foreign currency assets, said Chi Lo, senior economist at BNP Paribas (PA:) Asset Management.

The HKMA’s chief executive, Eddie Yue, has acknowledged higher fiscal spending will likely increase HKD demand.


Lebanon’s currency peg is creaking under economic pressure and Argentina’s fell apart in 2002 as reserves were depleted.

But even if Hong Kong spent all the cash parked at the HKMA, it would still have enough foreign currency reserves to buy all the HKD 1.6 times over, said BNP’s Lo.

Hao Zhou, analyst at Commerzbank (DE:), noted that the HKMA tends to be prudent and spent only $16 billion of its $437 billion FX reserves in 2018 and 2019 to defend the peg as the HKD weakened.

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Hong Kong’s Wheelock Announces Privatization Plan; Share Prices Surge 40% By Investing.com

© Reuters.

By Alex Ho

Investing.com – Hong Kong-listed property developer Wheelock and Co Ltd (HK:)’s share prices surged 40% on Thursday after the company announced its privatization plan.

Wheelock said in a statement that the privatization could release more value for shareholders by eliminating he historical holding company discount of Wheelock’s stake in Wharf REIC and Wharf, increasing dividend and cash returns.

Wheelock currently holds 66.5% of the issued shares of Wharf REIC, and approximately 70.7% of the issued shares of Wharf.

The company’s shares last traded at HK$66.30, up 40.1%, after jumping as much as 50% earlier in the day. They hit an all-time high since its listing in January 1980. The shares had been suspended from trading since Monday.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Coronavirus could be knockout blow for Hong Kong’s once-thriving tourism, retail sectors By Reuters

By Sarah Wu and Donny Kwok

HONG KONG (Reuters) – Tom Bennell’s olive oil distribution business took a heavy beating during months of pro-democracy protests that emptied Hong Kong hotels and restaurants, his major customers. Now he fears a knockout blow as the city fights the coronavirus.

The two-decade-old Olives and Oils supplies more than 20 five-star hotels, as well as clubs, delis and restaurants in Chinese-ruled Hong Kong, where retail and tourism act like balance wheels for an economy running on trade and finance.

The coronavirus, which has killed more than 1,700 people across the border in mainland China and one of 60 patients in Hong Kong, has reduced tourist arrivals to a trickle and kept residents away from shops at a time when the city is mired in its first recession in a decade.

Business is so bad that Bennell has pulled his two teenage sons out of international school to cut costs. If things don’t turn around, he might be forced to leave the city that has been home since 1993.

“This is the straw that’s going to break the camel’s back. It’s horrific,” said the 46-year-old. “This is the worst I’ve ever seen it. It’s unbelievable.”

Hong Kong retail sales have been in free-fall for a year as the economy contracted for three consecutive quarters, dropping 19.4% in December as protesters, angry with Beijing’s perceived tightening grip over the city, clashed with police in shopping malls.

Communist Party rulers in Beijing deny meddling with the former British colony’s freedoms, guaranteed when it returned to Chinese rule in 1997.

Retail sales are expected to post their steepest fall on record in January at around 30%. Tourist arrivals in Hong Kong in February fell to under 3,000 a day on average, from around 100,000 in January, which was already less than half the traffic from January 2019.

(Graphic – Hong Kong retail sales, tourism, GDP: https://fingfx.thomsonreuters.com/gfx/mkt/13/2113/2081/Hong%20Kong%20retail%20sales,%20tourism,%20GDP.jpg)


The Hong Kong Federation of Restaurants and Related Trades said more than 100 restaurants had closed.

Kwok Wang-hing, who works as a cook at a dim sum restaurant and chairs the Eating Establishment Employees’ General Union, said the restaurant business had dropped 30-50% during the protests, but the coronavirus had raised that to 70-80%.

“It’s quite depressing. People in the industry … keep wondering when they’ll lose their jobs,” Kwok said.

The Travel Industry Council of Hong Kong said a wave of closures of travel agents and related businesses had put more than 40,000 jobs at risk.

“We are very worried and not sure how long we can hold on without any business,” council executive director Alice Chan told Reuters.

The Hong Kong Retail Management Association said it had entered “a super-cold winter” threatening its survival. The first 10 days of the Lunar New Year, the biggest holiday of the year, saw business falling 30-50% on average from last year’s equivalent period, with sales of jewellery, watches, cosmetics and clothing plunging as much as 80%.

Restaurant chain LH Group Limited (HK:) said it had temporarily closed all its On-Yasai and Mou Mou Club restaurants from Feb 13. Chow Tai Fook Jewellery (HK:), the city’s $11 billion purveyor of precious gems and watches, temporarily closed 40 points of sale in Hong Kong and neighboring Macau, with the rest operating shorter hours.

Cosmetics chain Sa Sa International (HK:) has closed some stores and said it will trim its Hong Kong workforce by up to 3% and cut salaries by 10-40% between March and May, aiming to cut costs by a third.

Unemployment, now at 3.3%, is expected to pick up sharply this year.

(Graphic – Hong Kong unemployment: https://fingfx.thomsonreuters.com/gfx/mkt/13/2112/2080/Hong%20Kong%20unemployment.png)

Owen Kwok, head of the Retail Frontline Union, said 800 of its 3,000 members had been asked to take unpaid leave.

Cat Hou, 28, chairwoman of the Bartender & Mixologists Union, lost her own job at a central cocktail lounge. The owner said either she or the manager had to be laid off and she decided to take the plunge.

She said the lounge survived last year with “after-protest people” turning up after police cleared the crowds from the streets.

“There is no one at all now,” Hou said.

Cheung Kwok-tsing, 61, used to work two weeks a month at restaurants and venues owned by the Peninsula Group and he could earn up to HK$800 ($100) a day. His income helped pay his HK$1,900 ($245) rent for four square meters in a subdivided flat and barely covered living expenses.

Those restaurants were only open for two days in February.

“Even if I don’t have enough to pay for food, there’s nothing I can do,” Cheung said. “Sometimes… I just eat a few slices of bread.”

Hong Kong’s Wealthy Aren’t Giving Up on the City Just Yet By Bloomberg

© Reuters. Hong Kong’s Wealthy Aren’t Giving Up on the City Just Yet

(Bloomberg) — Is Hong Kong’s run as one of the world’s most important financial hubs coming to an end?

It’s an understandable question after one of the city’s most turbulent stretches since pro-democracy demonstrations erupted in June. The past few days have brought a drumbeat of bad news, raising concerns about the independence of Hong Kong’s judiciary, the future of its trading relationship with the U.S. and the prospect of more violence between police and protesters.

Yet interviews this week with investors, lawyers, bankers, diplomats and businesspeople suggest things will have to get significantly worse before Hong Kong’s moneyed classes give up on a city that has defied doubters time and again.

Optimists say that Hong Kong still offers a unique, if diminished, gateway between China and the rest of the world, and that both sides have too much riding on the city to stand by and watch it crumble.

That sanguine outlook may ultimately prove wrong, of course, and there are plenty of pessimists. But for all the talk of contingency plans and capital outflows, signs of a mass exodus have so far failed to materialize. Here’s what people have been saying about Hong Kong’s future:

Richard Harris, founder of Port Shelter Investment Management, who has been in the city for 50 years

There’s been no change to the taxation regime and there’s likely to be almost no change to corporate law. Those are the sort of things that impact businesses. I think in terms of Hong Kong’s economic framework, it’s still extremely good for doing business, and I can’t see how that would be changed by whatever’s happened.

Henry Kissinger, former U.S. Secretary of State, speaking at Bloomberg’s New Economy Forum in Beijing

I hope that the issue will be settled by negotiation that maintains the principles by which decolonization was carried out some period ago. I believe that this is possible, and it should be likely.

Bill Winters, CEO and executive director at Standard Chartered (LON:) Plc

Not much money has actually moved. We’ve seen clients open accounts in Singapore, Malaysia and Taiwan, in that order, but while the accounts were set up, not a lot of money has actually moved. We’re not seeing a crescendo.

The biggest impact of the Hong Kong protests by us has been on our staff. It’s been hard for them to get to work and there’s elements of stress with conflicts at home between people who disagree. We’ve been in Hong Kong 162 years, we’ve been through SARS, the financial crisis, and our business will keep going.

Ronnie Chan, Hong Kong-based chairman of Hang Lung Properties

I don’t think Hong Kong itself can resolve the situation. Every problem eventually will pass, and the same thing with Hong Kong, it’s just a matter of what form and shape it will be. Hong Kong will recover, how much can we recover is the question.

Fraser Howie, author of “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise”

No one thinks China is about to collapse so there is a need still for a gateway and only Hong Kong offers that. Free flow of money, capital and people is all still possible in Hong Kong, and there still is a strong commercial law framework.

Hong Kong will be a thorn in Beijing’s side. How that escalation comes I am still unsure but there is no chance of going back. The Hong Kong bubble has popped and will not be re-engineered.

Stephen Innes, chief Asia market strategist at Axitrader Ltd.

After the constant weekend carnage in the streets, financial market concerns must play second fiddle to employer safety and welfare, so I can only assume relocation discussions are happening. When you think about it these days, most non-customer facing jobs are pretty much location-agnostic, so there is little holding back foreign businesses from possibly relocating a bulk of their staff.

Piyush Gupta, CEO of DBS Group Holdings Ltd., on clients slowly moving money to Singapore, the U.K. and other locations

People want an insurance policy on Hong Kong.

Phillip Hynes, head of political risk and analysis, ISS Risk

People were horrified by the violence of last week. But the protests couldn’t survive without sustainable support from the working class, and there’s a surprising amount of support from the middle class.

I’d caution against businesses establishing in Hong Kong now. My assessment of the protest movement is that it will continue for a long time; Hong Kong will never return to the Hong Kong it was before, it’s changed already. We’ve yet to see the impact of societal divisions created here. District elections may further polarize that.

Hong Kong will be an unwelcoming investment and business environment over the next few years, and very volatile.

Pauline Loong, a veteran China watcher and managing director at Asia-analytica in Hong Kong

Hong Kong will always have an international role regardless of political developments. But without confidence that its systems are not being subsumed into that vast opacity of mainland practices, its role would increasingly be confined to one of providing China-related services.

China is too big a market and Hong Kong too important a conduit for Chinese capital flows for anyone to make a move without a war plan on the scale of the invasion of Normandy, and that takes time.

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Hong Kong’s SFC Releases Regulations for Crypto Fund Managers By Cointelegraph

Hong Kong’s SFC Releases Regulations for Crypto Fund Managers

Hong Kong’s securities regulator, the Securities and Futures Commission (SFC), has officially released regulations for crypto fund managers. The SFC published the regulatory circular on its website on Oct. 4.

In the 37-page document titled “Proforma Terms and Conditions for Licensed Corporations which Manage Portfolios that Invest in Virtual Assets,” the SFC provided terms and conditions for corporations managing portfolios that invest in virtual assets.

Continue Reading on Coin Telegraph

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Hong Kong’s sky-high property prices prove resilient in face of protests By Reuters

By Clare Jim and Felix Tam

HONG KONG (Reuters) – While months of Hong Kong protests have scared away tourists, sent jitters across the financial center and cast a dark cloud over the local economy, there’s one thing residents of the city are confident they can bank on – sky-high property prices.

Home prices in the former British colony have rocketed over 200% in the past decade, driven by limited housing supply and large capital flows from mainland Chinese buyers, angering many residents who can’t afford to get on the property ladder.

And despite the worst protests since Hong Kong reverted to China rule, property prices have hardly budged.

Lily Chow, a 32-year-old clerk, is among the lucky ones. She and her husband recently snapped up a two-bedroom apartment off the plans for HK$7.5 million ($957,000) in the New Territories.

“I am not confident in the government, outlook or economy. I am only confident that Hong Kong property prices will not drop,” Chow told Reuters in the sales office of the development.

Property firm Wheelock (HK:) has sold 80% of the 816 flats in its projects since late August, lower than sales at other launches this year, but “still good” given the current environment, property agents said.

As Hong Kong gears up for yet another anti-government protest on Oct. 1 – the 70th anniversary of the founding of the People’s Republic of China – there was scant sign the prospect of further violence had dampened homebuyer demand.

Hundreds of prospective buyers queued on Thursday in a sales office in the gleaming International Commerce Centre (ICC) skyscraper for a development near Mong Kok district, the site of some of the most violent protests in recent months.

“The political environment is shakeable, but I am pretty sure the property market is unshakeable,” said office assistant Candy Lau, 32, as she queued for an HK$8 million, 273 sq ft, one-room apartment in the development by Sun Hung Kai Properties (HK:), Hong Kong’s largest developer by market value.

A week earlier, Sun Hung Kai launched its first batch of 352 flats in the same development in Kowloon district, selling all but one to underscore the strong demand.


A traditional belief in bricks and mortar investment and a history of strong returns from property has helped Hong Kong home buyers keep the faith.

Official data showed Hong Kong property prices rose close to 10% in the first seven months of the year, including a tiny 0.1% decline in July after the mass protests intensified in mid-June.

One reason for the smaller-than-expected drop was low transaction volumes during July, caused by a mismatch of price expectations between sellers and buyers.

But with signs last month that sellers were more willing to reduce their initial asking prices, volumes have stabilized, according to realtors.

“There’s still much real demand, and when sellers became more willing to cut prices by 10-20%, some buyers chose to enter the market,” said Derek Chan, realtor Ricacorp’s head of research. He estimates a 5% rise in prices for the full year, down from an earlier forecast of 10%.

August house price data is due on Monday and agents are expecting a bigger fall than July.

Two other buyers told Reuters they expect home prices will climb in the long run, despite any short-term softness, because a fundamental supply shortage simply won’t go away.

Every day, Hong Kong grants 150 residential permits to mainland Chinese, according to the government, adding to a population of 7.4 million crammed into just 1,100 sq km (425 square miles), of which 40 percent is country parks or nature reserves.

Tiny living spaces have become increasingly common in the world’s most expensive property market where some of the city’s poorest people live in cage homes – wire mesh hutches stacked on top of each other.

Long-standing frustrations over unaffordable housing have spilled onto the streets during recent protests, which started over a now-suspended extradition bill and have evolved into calls for greater democracy, among other demands.

“7K for a house like a cell and you really think we out here scared of jail,” reads graffiti scrawled near one protest site. HK$7,000 ($893) is what the monthly rent for a tiny room in a shared apartment could cost in Hong Kong, which reverted from British to Chinese rule in 1997.

Making housing more affordable has been among every post-colonial Hong Kong leaders’ top priorities, but each administration has been unable to rein in skyrocketing prices that have fueled discontent in the city.


Sun Hung Kai Properties deputy managing director Victor Lui told an earnings conference this month that even though the company’s schedule for new launches was slightly delayed due to the protests, the company planned to keep pushing out new home sales in coming months.

He expects property prices to be flat for the full year.

Agents said the most sought-after properties are small to medium-sized apartments below 600 square feet, while the luxury segment continues to slow due to a drop-off in Chinese buyers and caution over the U.S.-China trade war.

Citi Hong Kong’s latest survey showed interest in property ownership in the third quarter – 20% of respondents – was little changed from the preceding quarter, even though more respondents expected prices to fall than rise in the next 12 months.

Taking a “wait and see” approach, around 5% of would-be buyers were now opting to rent, agents said, sending average rents in August 4.5% higher than January.

Thanks to tighter debt servicing requirements in recent years, most home owners are expected to be able to continue meeting repayments even in the case of a big correction, avoiding systematic pressure, analysts say.

While JP Morgan predicts a 30% slide in prices in a worst-case scenario, many people remain confident in the market.

“The protests are only a small incident happening in Hong Kong,” said Josephine Tsang, a 57-year-old retired teacher, who recently bought an apartment for her 28-year old son. “If I don’t buy now, the price will keep rising.”

Amid Hong Kong’s protests, when to list? By Reuters

By Jennifer Hughes and Julie Zhu

HONG KONG (Reuters) – Hong Kong’s political unrest is posing a dilemma for Alibaba Group Holding Ltd (N:) on the timing of its planned $15 billion listing in the city, with sources saying China’s biggest e-commerce company is now considering several timetables.

New York-listed Alibaba was most likely to launch the offer – potentially the world’s biggest of the year – as early as the third quarter, sources have said, and late August, after its first-quarter earnings, was widely viewed as the most likely window.

In preparation for the giant offer, bankers advising other large listings in Hong Kong have been careful to avoid planning their launches around that period, fearing that a clash of timing would crowd out their offerings.

But not a word was mentioned by Alibaba on the Hong Kong listing when it released estimate-beating earnings on Thursday nor did the offer come up in the hour-long discussion with analysts after the results.

Two sources involved in the deal and one other briefed on Alibaba’s discussions described the company’s thinking on the deal as “fluid” and said Alibaba was considering several timetables.

Alibaba declined to comment.

The Hong Kong listing deal was estimated at up to $20 billion, but is more likely, according to sources close to the deal, to raise between $10-$15 billion.

The listing was always expected to be a complex affair because of China’s tight control of cross-border share trading, but Hong Kong’s unrest has taken the complexity several notches higher.

More than 10 weeks of confrontations between police and pro-democracy protesters have plunged Hong Kong into its worst crisis since it returned to Chinese rule in 1997 and presented President Xi Jinping with his biggest popular challenge since taking power in 2012.

Tear gas has been used frequently by police while more than 700 people have been arrested.

This week protesters effectively closed the city’s airport on two successive days, disrupting tens of thousands of travelers and posing a practical problem to any company considering launching a deal roadshow in Hong Kong.

Under the circumstances, when Alibaba lists becomes crucial as it sends a signal to the rest of the world on the state of Hong Kong as a business and financial center and provides a window into China’s reading of the situation.

“How do you think Beijing feels about giving Hong Kong a $15 billion gift like this, right now?” asked one capital markets professional not involved in the Alibaba deal.


A listing by Alibaba is a big deal for Hong Kong, which loosened its rules last year specifically to lure overseas-listed Chinese tech giants to list closer to home.

Alibaba would be the first to test the new system.

Asked this week whether Hong Kong’s turmoil would affect its listing, Hong Kong stock exchange chief executive Charles Li avoided directly acknowledging the company’s application, which is still technically confidential.

But Li added: “I am confident that companies like that ultimately will find a home here, because this is home and I think they will come. I don’t know when though.”

Alibaba’s Hong Kong listing is also sensitive for China, which has been working to give mainland investors a bigger role in funding the country’s fast-growing tech sector.

Officials are conscious that capital controls and the U.S. listing preference of most of China’s first-generation tech giants mean that international shareholders have profited far more from their success than local investors.

Mainland investors can buy Hong Kong shares through the so-called Stock Connect, which allows investors in Shanghai, Shenzhen and Hong Kong to trade shares listed on each others’ exchanges.

But the inclusion of Alibaba’s Hong Kong shares in the Stock Connect is not guaranteed because the scheme does not yet allow mainland buying of companies which have weighted their voting rights in favor of founders, such as smartphone maker Xiaomi (HK:) and Meituan Dianping (HK:), the online food delivery-to-ticketing firm. Both took advantage last year of another Hong Kong rule change to float in Hong Kong with weighted voting rights structures.

While Alibaba has a single class of shares with equal votes, its governance is not considered standard since its board is controlled by a self-selecting group of company insiders.

Chinese regulators have said they will allow local investors to trade companies with weighted voting rights, but have not yet set a date for doing so.


Alibaba’s deal must also overcome one other technical hurdle: it must gain the approval of the city’s listing committee, a 27-strong independent group of industry professionals whose consent is needed for all first-time share sales.

The company has been in discussions with the committee but has not yet appeared before the group at one of its regular Thursday hearings for formal approval, according to three sources.

So far only Credit Suisse (SIX:) and CICC, the Chinese investment bank, have been mandated for the mega-listing, sources said, although several other banks are jockeying for a role on the deal, they added.

All are expected to be urging caution on the listing given the size of the deal and the political and market considerations.

One senior banker not involved said it made no sense to move too quickly.

“Why would Alibaba rush to kick it off?” he asked.

Hong Kong’s Economy Starts to Feel the Hit from Protest Chaos By Bloomberg

© Reuters. Hong Kong’s Economy Starts to Feel the Hit from Protest Chaos

(Bloomberg) — Hong Kong is beginning to reckon with the economic cost of ongoing protests against the government’s extradition bill, as the disruption risks driving away local shoppers and deterring tourists from mainland China.

The Hong Kong Retail Management Association said Tuesday that “most members” reported a single-to-double-digit drop in average sales revenue between June and the first week of July, when multiple demonstrations converging on major office and retail districts took place.

The threat to Hong Kong’s vital retail sector will hit its economy at a time when it is already slowing. Retail sales data for June is due for release on August 1, with the value of goods sold having contracted every month since February.

The “industry is worried that these events will damage Hong Kong’s international image as a safe city, a culinary capital, and a shopping heaven,” the association said in a statement.

Chief Executive Carrie Lam’s bid to ease extraditions to the mainland prompted hundreds of thousands of protesters to take to the streets in a wave of historic protests that has brought parts of the city to a halt since early last month.

Hong Kong Financial Secretary Paul Chan said at a briefing July 15 that second quarter economic output is expected to be “slow,” though there haven’t been obvious capital outflows amid the demonstrations.

Sales Drop

Sa Sa International Holdings Ltd., a seller of cosmetics, reported a 15.3% drop in same store sales in Hong Kong and Macau for the three months through June. The company said the demonstrations had affected some stores, as had a high comparison from the previous year.

For the same period, Chow Tai Fook Jewellery Group Ltd. reported an 11% decline. The political backdrop and a decline in mainland visitors increases the likelihood of a two percentage-point reduction in its first-half operating margin, Catherine Lim, an analyst at Bloomberg Intelligence in Singapore, wrote in a note.

These Brands Are Caught in the Middle of Hong Kong’s Protests

The chances of a marked economic impact from the protests raises comparisons with the Occupy movement that blocked parts of central Hong Kong five years ago. Economic growth slowed in the fourth quarter of 2014 from the previous period, and the government at the time partially blamed that weaker performance on the protest, saying it “affected tourism, hotel, catering, retail and transport industries.”

Carry On

This year, the number of visitors to the city from mainland China has been increasing strongly, thanks in part to the opening of a new bridge linking Hong Kong with the city of Zhuhai, in Guangdong province. Arrivals in May surged 23.6 percent from a year earlier, with the June tally not yet available.

Images of protesters blocking major city thoroughfares — and retail outlets — is likely to pose a significant risk if the demonstrations continue. On July 1, a gathering that ultimately saw protesters break into and vandalize the city’s legislative building hampered retailers in the shopping district of Causeway Bay and elsewhere.

Hong Kong Turmoil Has Wealthy Eyeing Havens Beyond China’s Grasp

Yet most businesses are attempting to carry on.

“There were so many people, it was a mess, no one wanted to come in,” said Chen Yan, 30, who works at the counter of a pharmaceutical store in Causeway Bay. “But we haven’t changed our operations because of the protests. We expect it to be temporary.”

(Updates association comment in second paragraph.)

Shorting Hong Kong’s Dollar Has Suddenly Turned Unprofitable By Bloomberg

© Reuters. Shorting Hong Kong’s Dollar Has Suddenly Turned Unprofitable

(Bloomberg) — The Hong Kong dollar carry trade copped a body blow in June.

That’s because the cost to borrow the city’s currency surged, rising above the income a trader can expect on U.S. dollars for the first time in years. Companies are hoarding cash to pay quarterly dividends and a huge share sale may lock up funds, making money in Hong Kong more expensive. By contrast, U.S. interest rates are dropping as the Federal Reserve prepares to ease monetary policy.

It all added up to a rally that pushed the Hong Kong dollar to its strongest in seven months. With interbank liquidity remaining low after the city’s de facto central bank spent billions defending the peg, local rates will probably hover at elevated levels in July even when seasonal pressures ease, according to Carie Li, an economist at OCBC Wing Hang Bank Ltd.

“Given the low aggregate balance, these tightening events will keep market players cautious and prompt them to continue hoarding cash,” she said.

Li said interbank lending rates, known as Hibor, could remain relatively high this month, with one- and three-month tenors staying above 2%. One-month Hong Kong dollar Hibor stood at 2.53% on Friday and the three-month rate was 2.46%, both near the highest in a decade. Hong Kong’s financial markets were shut for a holiday Monday.

Online retail giant Alibaba (NYSE:) Group Holding Ltd. is said to have filed for a Hong Kong listing that could raise as much as $20 billion, which would make it the financial hub’s biggest share sale since 2010. The Asia-Pacific arm of Anheuser-Busch InBev is also gauging demand for a $5 billion offering. This squeezes liquidity as investors — presented with a chance to own a piece of China’s largest company or the world’s biggest brewer — set aside cash.

The Hong Kong dollar carry trade was a steady winner for years as investors borrowed the currency cheaply to invest in higher-yielding American assets. It became less of a sure thing after the Hong Kong Monetary Authority started buying the local dollar to defend the peg from April 2018.

The city’s aggregate balance now stands at just HK$56 billion, down from HK$180 billion before the HKMA began intervening. The HKMA, which effectively imports U.S. monetary policy, said in June that a higher Hibor and a stronger local dollar are “consistent” with the currency peg system, though uncertainty over the Fed’s policy was increasing.

Irene Cheung, a strategist at Australia & New Zealand Banking Group Ltd., says the Hong Kong dollar is unlikely to strengthen far beyond 7.8 per greenback. That’s the midpoint of its 7.75-7.85 trading band and hasn’t been breached since September.

“Watch 7.80, which is a key support,” she said. “Do leave some room to add if breaks 7.80.”

To contact Bloomberg News staff for this story: Claire Che in Beijing at yche16@bloomberg.net

To contact the editors responsible for this story: Sofia Horta e Costa at shortaecosta@bloomberg.net, Will Davies

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Wealth managers head to Singapore as China concerns dim Hong Kong’s lure By Reuters

Wealth managers head to Singapore as China concerns dim Hong Kong’s lure

By Sumeet Chatterjee and John Geddie

HONG KONG/SINGAPORE (Reuters) – Some foreign wealth managers are scrapping plans to open offices in Hong Kong in favor of Singapore, as the rich begin to move funds from the Chinese territory where a new extradition bill has stoked public unrest, people familiar with the matter said.

A mid-sized European private wealth advisory firm has abandoned a plan to set up its Asia arm in Hong Kong and will instead aim to launch it in Singapore, its London-based chief executive told Reuters.

“We have been watching the situation in Hong Kong for the last few weeks and what we are seeing there doesn’t give us much confidence,” said the chief executive, on condition of anonymity due to the sensitivity of the matter.

“For me, the most important thing is stability for clients because you don’t want to go and invest $1 million-$2 million to set up operations and then one day you need to shut it down because your clients don’t feel safe to operate in that market.”

Some Hong Kong tycoons have begun moving their personal wealth offshore as concerns deepen over a government plan to allow extraditions of suspects to face trial in China for the first time, Reuters reported earlier this month.

The bill, which would cover Hong Kong residents and foreign and Chinese nationals living or traveling through the city, has been suspended. But protesters are now demanding it be scrapped amid broad concern it may threaten the rule of law that underpins Hong Kong’s global financial status.

For the wealthy, a key worry is that Beijing may eventually be able to seize their assets, leading them to weigh moving their assets offshore. Wealth managers mostly go where their clients prefer to park their riches.

The uncertainty over the bill clouds the outlook for Hong Kong as a wealth management hub, one of the main pillars of growth in the former British colony, which has been losing ground to Singapore in recent years.

In a survey published by trade publication Asian Private Banker last year, 58% of the respondents ranked Singapore as the most preferred offshore wealth management hub, followed by Hong Kong and Switzerland, respectively.

The survey said Singapore had become particularly attractive because, compared to Hong Kong, it was “less connected to Mainland China from a regulatory, political, and financial perspective”.

Rahul Sen, a London-based global leader for private banking at headhunter Boyden, said three of his multi-office wealth advisory clients decided in the last few weeks to hire teams of bankers in Singapore after initially considering Hong Kong.

“New teams that are being set up, they are asking why should they align with Hong Kong when the future of Hong Kong itself as an independent wealth hub is uncertain,” Sen said.


The head of Singapore’s central bank said on Thursday that there were no signs of “any significant shift of business or funds” from Hong Kong to Singapore.

Singapore property brokers, though, said they are seeing increased inquiries and visits from Hong Kong-based groups including real estate fund managers and family offices, or private investment vehicles of the rich.

Ian Loh, head of investments and capital markets at Knight Frank Singapore, said the investors are looking at a range of properties – including offices and hotels – starting at around S$200 million ($147.74 million) and going to over S$500 million.

Real estate in Singapore is an attractive asset class for rich individuals due to its affordability and growth outlook.

Singapore prime office monthly rents climbed 24% on the year in Q1 2019 to hit $81.2 per square meter, according to research by Knight Frank. Rents in central Hong Kong rose 3.2% to $221.5 per square meter over the same period.

“The events of recent weeks are likely to add more momentum to a trend that has emerged over the last 18 months where Hong Kong-based private investors and family offices have been looking actively at Singapore property assets,” said Chris Marriott, CEO of Savills in Southeast Asia.

Some analysts said it remained to be seen if bigger financial institutions would move assets out of Hong Kong or bypass it.

“Singapore could be one of the beneficiaries as Hong Kong investors and high net worth individuals look to shift their funds out of Hong Kong,” said Jenny Ling, director of office services at Colliers International.

​”(But) the likelihood of a knee-jerk reaction among companies to immediately vacate Hong Kong en masse as a result of the unrest is probably quite low.”