Consumers upbeat on 6-month outlook: survey
Grace Lam, Hong Kong Standard
January 7, 2005

Hong Kong's consumer confidence soared in the final quarter of last year, aided by an influx of free-spending mainland tourists and the healthy stock market, a survey by MasterCard International has found.

The SAR scored 79.2 on the MasterIndex, up from 71.2 in the second quarter of last year. A reading of more than 50 denotes growing confidence. Respondents expressed optimism for the next six months in all five areas measured - employment, the economy, regular income, the stock market and quality of life.

Hong Kong ranked fourth in the Asia-Pacific region in confidence terms, after Indonesia, Vietnam and China.

MasterCard Asia-Pacific economic adviser Yuwa Hedrick-Wong forecast Hong Kong's gross domestic product growth would moderate to 6.6 percent in 2005 and unemployment would fall to 4.5 percent. He predicted an inflation rate of 2.5 percent and said the tsunami disaster would have little impact on consumer confidence in the SAR.

Hong Kong November Retail Sales Rise 7.3 Percent on Tourism

Jan. 7 (Bloomberg) -- Hong Kong's retail sales rose in November for a 16th straight month, boosted by a tourism boom and improving consumer confidence.

Sales rose 7.3 percent from a year earlier to HK$15.2 billion ($1.95 billion) after climbing 8.6 percent in October, the government said in a statement. That's less than the 8.3 percent median growth forecast among six economists polled by Bloomberg News.

Hong Kong's tourist arrivals, more than half of whom come from China, jumped 16 percent to 1.95 million in November and the city's tourism board said it expects the tally for 2004 to exceed 21.4 million, which would be a record. Sa Sa International Holdings Ltd., a cosmetics chain which runs 40 shops in the city, said sales increased a fifth in the Dec. 1 to 27 period, boosted by demand from Chinese tourists.

Domestic demand is also strengthening as falling unemployment and rising wages make households more willing to spend. Property sales rose 86 percent last year to HK$351.8 billion, the highest since 1997, as the city's real estate market continues to improve amid an economic recovery.

Consumer confidence in Hong Kong increased to a reading of 79.2 in the second half from a 71.2 in the previous six months, a survey by MasterCard International Inc. published yesterday showed. Among 13 Asian nation surveyed, only Indonesia and Vietnam showed higher readings.

The jobless rate stayed at a three-year low of 6.7 percent in November and companies including Standard Chartered Plc say they are raising wages.

By volume, retail sales rose 6.8 percent in November from a year earlier, the government report said.

HK falters in brand-new world
A city that lacks a clear identity can be daunting for building consumer awareness
25 January 2005
South China Morning Post

Over the next 12 months, companies in Hong Kong will spend up to $35 billion attempting to get their name, reputation, message and product through to consumers. Yet if a recent survey is anything to go by, the majority of these firms will be doing so in vain.

Of the notable homegrown brands out there - the poll included 84 of them across 18 industries - just 29 per cent managed to make the cut among nearly 500 executives and managers surveyed by The Brand Company in October last year.

Among the leading lights, there was a distinct international feel and lack of everyday products. It was not a brand-new world of local contenders, despite companies pouring billions into their advertising and marketing budgets each year.

Those who work in the industry are nevertheless pragmatic and optimistic about Hong Kong's evolving contenders. But as companies attempt to build their brands, they do so against the debilitating backdrop of a city itself scratching to find an identity and sell it on the global stage.

According to the survey, Hong Kong consumers hold luxury hotels, airlines and shopping malls in the highest regard, as far as their brands are concerned. At the bottom of the list are retailers, telecommunications companies and broadcasters.

At the top of the list was the Peninsula, followed by Cathay Pacific and Pacific Place. The only financial services firm in the upper echelon was HSBC, despite furious competition among its peers in the marketing stakes. Swire Properties was the only property company in the top 10.

What stands out among the top 10 is a pervading international tone, which can be explained partly by Hong Kong's evolution itself, according to The Brand Company partner James Stuart.

An entrepreneurial spirit and ability to reinvent itself often does not translate into long-term plans. This is evident at the company level where there is a constant shift into different product areas: a process that may not be credible or relevant to a particular brand.

A lack of appetite for patience, he explains, is the "enemy of brands". Throwing money into advertising does not simply create a brand: it takes a clear vision of what the company is about, what it can deliver and how it invests in its own people to meet these promises. A brand is "not what you say it is; it's what people think it is".

Hong Kong is thus full of logos, but short on focused brands, Mr Stuart says: "It's partly people not wanting to stick their necks out, but mainly they don't know how to stick their necks out, they don't understand singularity. It's never really mattered in the past."

Chris Jacques, chief executive of Y&R and Wunderman's Asia-Pacific operations, describes a culture of short-termism: "Hong Kong grew up as a trading post, as a property post, as a financial post and an entrepreneurial place, so everything has been built up for the maximum benefit in the short term [as opposed to other countries such as Japan and Taiwan which have stronger core brands]."

It is also a small customer market, and one that is saturated, making it difficult to differentiate between brands. Notably, the luxury travel brands such as the Peninsula and the Mandarin are occasional products in nature. Their high rankings contrast with other countries, where mass-market brands tend to top the lists.

Customers in Hong Kong are highly pragmatic - getting a deal is inherent in the consumer culture, brand loyalty often giving way to a desire for "badges". "Because everyone came here with nothing, it's an immense consumer culture in terms of the desire for badge as the obvious symbol," says Mr Jacques.

"I didn't look at the survey and find anything that blew me away with surprise. It was by and large a direct reflection of where brands are in Hong Kong, by the nature of the place and environment, and the way it grew up."

To David Ketchum, founder and chief executive of Upstream Asia, market pressures have not been such in the past that branding became a core issue. "It's just the business environment that hasn't made the brand a useful attribute in the past," he explains.

Having come out of a recession, this is slowly changing for many companies which face growing pressure to develop brands as competition intensifies.

The mobile-phone market is one example. Mr Stuart ranks SmarTone Telecommunications as a brand-savvy firm. He cites Towngas as a company that is "very relentless in what they deliver". The Post Office likewise has a simple promise about timeliness and efficiency that it meets.

Rebounding corporate confidence moreover gives much room for a brand rethink or revamp.

One brand, however, that is failing to meet the mark is Hong Kong itself. Constant changes of focus where tourism campaigns are concerned, for example, are endemic of a government that seems to be unsure as to where it is going.

"The government is a brand, its leaders are a brand," notes Mr Stuart. "Tung [Chee-hwa] doesn't understand his brand."

This national lack of direction can be a sapper in a market trying to sell a Hong Kong identity. "There has never been any government leadership for trying to create brands," explains Mr Jacques.

Hype over deals such as the Closer Economic Partnership Agreement and government doctrine on the Pearl River Delta is just tactics, he believes, and not the stuff of brands. Hong Kong has been going through its options: "How about this, how about that {hellip} as opposed to the way it developed, through there being a general view of what direction the place is heading in. In my mind there should be a crystal clear position for Hong Kong to develop."

The Peninsula for example knows exactly what it is and what it is offering, he stresses. "It starts with what you are in business for, and Hong Kong hasn't answered that question. Without answering that question, you cannot really build a brand."

Constant changes in the government's message statement - from Asia's World City to a City of Life do little to foster a concise picture of what Hong Kong stands for.

As Mr Ketchum notes: "Hong Kong is an open question."

Hong Kong sees blue skies ahead, 3 surveys reveal
Nick Gentle
1 February 2005
South China Morning Post

Hong Kongers are becoming increasingly confident in the robustness of the city's economic recovery, with three separate surveys showing both businesses and employees are feeling positive about 2005.

The surveys - two focusing on businesses and one on employee sentiment - show that many expect some tempering of growth as the year unfolds, but most remain upbeat about their prospects.

Only in the manufacturing, construction and transport sectors was there any negative sentiment, with the Census and Statistics Department's quarterly business expectations survey showing a persistent level of pessimism in the three areas.

Respondents from the construction industry were particularly downbeat about their prospects, with 24 per cent expecting a worsening of the situation against just 4 per cent who thought things would improve.

However, the negative sentiment was heavily outweighed by overwhelmingly positive results received from tourism and personal services-related firms.

In the financial and insurance sector, 60 per cent of respondents saw blue skies ahead, while just 1 per cent did not.

It was a similar story in the restaurant and hotel, wholesale and retail, and property, business services and telecommunications sectors, where positive sentiment far exceeded the negative.

"You can see that global economic growth and Hong Kong economic growth have been quite strong in recent months and this has made people a bit more positive," said Hong Kong Productivity Council general manager Vincent Li Kai-lun, whose organisation yesterday issued its own survey showing improving levels of sentiment among small and medium-sized enterprises (SME).

It showed the number of respondents feeling upbeat about first-quarter prospects outweighed those who did not by 14 percentage points, an increase of 6 percentage points on the results of its October 2004 survey.

But while businesses are looking forward to an improvement in their financial well-being, they should bear in mind that their employees are most likely doing the same after a prolonged period with little improvement in wages.

An online survey of 956 full- and part-time employees conducted by market information consultants TNS revealed that 36 per cent were expecting a pay rise this year.

And perhaps of more concern for employers was the fact the survey found just 57 per cent of respondents were satisfied with their jobs.

Number of Hong Kong Millionaires Hits 274,000


http://the-sun.com.hk/channels/news/20050224/img/a10224a_big.jpg

Translation
In 2004, there were 274,400 millionaires in Hong Kong. The average asset base is $3.4 million.

http://the-sun.com.hk/channels/news/20050224/img/a10224c_big.jpg

Translation
The average age of a Hong Kong millionaire is 37 years old. The largest percentage of millionaires falls into the age 35-39 group.


Kelvin Wong
24 February 2005
South China Morning Post

The number of people with more than $1 million in liquid assets rose to more than 274,000 last year from about 260,000 in 2003, according to a Citibank survey.

Aggregate liquid holdings - including cash, stocks and bonds but excluding physical property - held by Hong Kong millionaires jumped more than 16 per cent to $932 billion.

A typical millionaire, according to the study, is male, married, 45, - and receives no salary. After all, if you are rich, why work?

More than a third of Hong Kong's most prosperous people are retired or simply not interested in working.

That number has dropped since 2003, however, when 44 per cent of Hong Kong millionaires were not receiving salaries.

But the proportion of business owners among the wealthy has risen.

"As the economy improves, many wealthy individuals who stopped working during the downturn are finding it worthwhile to come back to work," said Weber Lo Wai-pak, chief operating officer and director of retail banking at Citibank.

Mr Lo credits Hong Kong's improving investment environment - particularly the local bourse - with swelling the ranks of the rich.

The proportion of millionaires investing in the Hong Kong stock market increased to 73 per cent, from 61 per cent in 2003.

Buoyant equity markets boosted the average holding of individual millionaires to $3.4 million, up from $3.1 million in 2003.

The millionaire head count posted its largest increase between 2002 and 2003, as Hong Kong emerged from the slump in technology stocks in 2000 and 2001.

The number of millionaires plunged to just 189,000 in 2002 from more than 251,000 in 2001.

Steep fall in US exports as quotas end
Hong Kong apparel shipments drop 35% while mainland emerges as dominant garment manufacturer
Toh Han Shih
14 March 2005
South China Morning Post

The end of global textile quotas, which came on January 1, is turning out to be the final nail in the coffin for Hong Kong's decades old garment manufacturing industry as the mainland becomes the world's most dominant player.

Latest figures from the United States Department of Commerce show Hong Kong's apparel shipments to the US had fallen by a steep 35 per cent in January compared with a year earlier.

Countries such as Indonesia, Mauritius, Malaysia and Mexico also saw textile and apparel shipments to the US drop in January.

At the same time, China's textile and apparel shipments to the US grew 19.8 per cent, including a 47 per cent increase in apparel.

The drop in Hong Kong's shipments is due to the fact that many garments no longer have their final production done locally. Instead, they were entirely produced and shipped from the mainland, explained Henry Tan, chief executive of Luen Thai Holdings, the largest locally listed garment maker.

Under the now-defunct World Trade Organisation quota system, many apparel products were "finished" locally to qualify as being "made in Hong Kong" under the Outward Processing Arrangement (OPA).

There were pluses and minuses in the death of Hong Kong's garment manufacturing, Mr Tan said.

"If Hong Kong loses its garment shipments to China, it is negative for the manufacturing side, but can create lots of jobs in logistics and services. Also, Hong Kong garment companies like us benefit from having more efficient production in China."

The textile industry is Hong Kong's second biggest, after electronics, but most of the manufacturing relocated to China long ago, leaving behind services such as design and logistics. During its peak, in the 1960s and 1970s, Hong Kong's textile manufacturing industry employed hundreds of thousands of workers.

There may be a temporary reprieve for Hong Kong's OPA status as the explosive rise in Chinese exports may prompt the US government to impose one-year "safeguard quotas" on mainland apparel items under an "anti-surge" mechanism, Mr Tan said.

But after 2008, when the anti-surge mechanism expires, Hong Kong's garment shipments would fall even more significantly, predicted Peter Liu Sin-shing, chairman of the textile and apparel committee of the American Chamber of Commerce in Hong Kong.

It would not have a significant impact on workforces, as only a relatively small number of people were employed in the industry here, Mr Liu said.

But China's impact elsewhere is causing more concern. Central America's share of US textile and apparel imports dropped half a percentage point in January from the same month last year.

"The January statistics provide continuing evidence that a shift away from Central American is accelerating," said Kevin Burke, president of the American Apparel and Footwear Association.

He appealed to the US government to speed up the creation of the Central American Free Trade Association (Cafta).

"Without Cafta, apparel companies are reducing their operations in Central America. And when they stop making garments in Central America, they stop buying US cotton, US yarn and US fabric. The US textile industry needs Cafta now."

Retailers in drive against sales tax
Lee Yuk-kei, Hong Kong Standard
March 15, 2005

An overwhelming majority of businesses and most tourists believe a sales tax will kill Hong Kong's reputation as a "shoppers' paradise,'' according to a group.

The Coalition Against Sales Tax, made up of companies and 36 associations from 10 service and retail industries, said a survey found that more than 90percent of firms are opposed to the sales tax.

It found 62 percent of tourists in another survey agreeing that such a tax will mar Hong Kong's reputation as a top shopping destination.

With the release of the survey findings two days ahead of tomorrow's budget speech, the coalition urged the government to shelve proposals for a sales tax.

Financial Secretary Henry Tang set up an internal committee to appraise the sales tax proposal after delivering his budget speech last year.

The coalition's trade survey, which took in 651 retailers of different sizes and sectors,

found most companies feared there would be a big drop in their business if a sales tax was introduced.

About two thirds of the respondents were also concerned about costs for administering the tax.

More than 80 percent said a sales tax would deter consumption, slow down the economic recovery, and "tarnish Hong Kong's reputation as a shopping paradise.''

The other survey, conducted in November, also found that about half of the 205 tourists would spend less if they were charged sales tax.

"We expect the government to tone down its intention of introducing a sales tax in the coming year given its budget will record a surplus this fiscal year,'' coalition member Vincent Fang, who represents the wholesale and retail sector in the Legislative Council, said.

HK: A city with bright future
19 April 2005

[The author David Eldon is chairman of The Hongkong and Shanghai Banking Corporation Ltd. The article is an abbreviation of his speech delivered at a recent luncheon held by the Hong Kong Chamber of Commerce.]

Much has been said about Hong Kong, both prior and subsequent to its return to China in 1997.

At one end of the spectrum are the perpetually pessimistic. Think the gloomy medical prognostications such as Fortune magazine's infamous "The Death of Hong Kong" cover to morbid biology lessons.

It is said, for example, that if you drop a frog into a pot of boiling water, it will immediately jump out. However, if you put a frog in a pot of cold water and slowly turn up the heat, it will continue to paddle around blissfully. As the heat intensifies, the frog will eventually become part of the broth.

Some pessimists equate Hong Kong to such a frog. And, they say, the temperature is slowly rising.

The other extreme, of course, are those who are overly optimistic, those who believe Hong Kong should and will automatically benefit from Chinese mainland rapid economic expansion.

I am neither a raving pessimist, nor a naive optimist. Rather, I'm a realist. I want to draw your attention to four realities related to Hong Kong:

Hong Kong is no longer the gateway into or out of Chinese mainland.

Earlier, I referred to Fortune's erroneous prediction that Hong Kong was destined to become a global backwater. In the 10 years since making that bold, but misguided forecast, Fortune has made other pessimistic statements about Hong Kong's future.

A few years ago, for example, Fortune used a cover story to pose the rhetorical question: "Who needs Hong Kong?"

The existential pondering in the article was straightforward sort of. The premise being if Chinese mainland is opening under the World Trade Organization (WTO), barriers for foreign companies must be coming down, and Hong Kong's exclusive franchise will no longer be exclusive.

If Hong Kong's franchise is no longer exclusive, more foreign companies will set up their shops in Shanghai, and nobody really will need Hong Kong as a gateway.

Let me deal with the two key assertions Hong Kong's decline and Shanghai's rise in reverse order.

Certainly, Shanghai is well placed geographically to gain considerable momentum from China's continued economic expansion. Shanghai is rapidly building on its physical infrastructure, and it is also becoming increasingly international.

However, Shanghai faces a number of challenges in its efforts to become an international financial and business centre.

The city must increase the flow of unfiltered information that is so vital to financial decision-making and the confidence of international markets.

It must adopt international codes of conduct, develop a full range of qualified people in critical areas such as legal, finance, accounting, trading, regulatory and support services and maintain the appropriate pace of reform to allow markets to develop while minimizing the side effects.

It must also overcome at least for the foreseeable future the lack of convertibility of China's currency, the renminbi.

Personally, I do not believe there are many advantages in Shanghai attempting to try to duplicate Hong Kong. And I do not think officials in Shanghai, or elsewhere in Chinese mainland, do either.

What I do believe is in the longer term, Hong Kong and Shanghai will continue to build on their respective strengths.

Some suggest and I share the view Shanghai is destined to be more like the "Tokyo of China," mainly dedicated to serving the country's massive domestic economy.

Hong Kong, on the other hand, will be more akin to London. It too will continue to play a key role in the domestic economy, but it will also maintain its status as an international and offshore financial centre.

As a result, the relationship between the two centres will be more about mutual co-operation and less about direct competition. In fact, Hong Kong and Shanghai represent a natural pairing of financial centres, which together can make considerable contributions to the further growth of China.

Hong Kong has multiple personalities.

Hong Kong has been described as a "congested, crazy, wall-to-wall skyscraper piece of capitalistic ingenuity;" a "midwife to an economy of 1.3 billion people;" a place where East meets West; and a blend of old and new akin to a "spice rack."

But the adjectives don't end there, as Hong Kong means different things to different people.

To numerous companies from Chinese mainland, and those who lead them, Hong Kong will always be, first and foremost, a place to raise capital. This is not surprising given the Hong Kong stock market was ranked first in Asia and third in the world in terms of capital raised last year.

To many other Chinese mainland firms, Hong Kong is more much more than a prime fund-raising centre. It is also a source of talented managers with international experience; a place where Chinese mainland companies can access market intelligence and access other markets; and a "window to the world" to use the words of one Chinese business person.

Meanwhile, to an ever-increasing number of multinational companies, Hong Kong is still seen as the ideal base for their regional headquarters and offices. The city, at last count, was home to more than 3,600 such headquarters and offices.

Overseas, Hong Kong is, of course, still seen as a leading international financial centre and regional trade hub. At the end of last year, there were 208 authorized banks and 84 representative offices operating in Hong Kong.

Hong Kong remains home to the world's busiest airport, in terms of international air cargo, as well as the world's busiest container port.

To many companies in many other parts of Asia, Hong Kong is also seen as a troubleshooter. As one Japanese business person noted a while back: "When I've got a problem in Chinese mainland, I send my Hong Kong managers." To many international companies just entering the Chinese mainland market, Hong Kong is the ultimate tour guide.

Hong Kong is changing and staying the same.

Most people in business and in government in Hong Kong recognize the city must change to survive. We must find ways to attract investment. We must also strengthen economic synergies with the Pearl River Delta, in particular, and all of China in general.

By this, I am referring to enhancing transportation and other links to ensure the smooth flow of goods and services, products and people, and, of course, capital.

The signing of the Closer Economic Partnership Arrangement (CEPA) is a case in point. The two phases of CEPA grant tariff-free treatment on some 1,100 products.

In addition to opening doors for certain products, CEPA also provides a two-way street for business. Hong Kong companies can promote their businesses in the Chinese mainland easier. Mainland companies can identify suitable business partners in Hong Kong faster.

The latter, of course, makes it easier for Chinese mainland companies to expand their business networks into overseas markets.

As for the other side of this third and paradoxical reality, Hong Kong also recognizes it has certain strengths that must not change.

Those strengths include a strong, transparent and well-regulated financial system, a well-developed transportation and telecommunications infrastructure, the rule of law, the free flow of trade, capital and information, a level playing field for all companies, and low and predictable taxes.

Hong Kong is not just another Chinese city, nor is it about to become one.

Recently, a visitor to Hong Kong described the city as being "Chinese, but not very Chinese." This is, as others observed, a welcomed, albeit somewhat backhanded, compliment.

After all, one of the things that make Hong Kong attractive is Westerners see it as having many Chinese characteristics. Meanwhile, many Chinese find Hong Kong to be quite Western.

Despite the rebound, HK still needs a sales tax
5 May 2005
South China Morning Post

The economic good times are rolling again. The news gets better and better as the rebound continues. It is becoming easy to forget the dark days of the downturn.

Deflation has gone, the budget deficit is going and the property market is buoyant again. Yesterday, credit rating agency Standard & Poor's reacted to these developments by upgrading Hong Kong's foreign currency rating from stable to positive. The move came a day after record salaries and profits tax receipts were revealed by the Inland Revenue Department. More than $96 billion was collected in the last financial year, a 20 per cent increase on 2003-04.

A higher rate of profits tax played a part, but the surge was due mainly to increased economic activity. The property market was a big source of the extra income - the receipts from stamp duty increased more than 40 per cent. Stock market transactions contributed almost $6.4 billion. Total tax revenue came in at more than $127 billion.

These strong figures confirm an outcome Standard & Poor's described as a boost both to the government's revenues and its fiscal prospects. But the agency's report also carried a note of caution. It is one which should focus minds as we look ahead.

The report noted that much of the improvement in Hong Kong's fiscal position can be attributed to "cyclical factors" such as rising land sales and increasing economic growth. What goes up can, of course, also go down. This is why we should not be too quick to forget the economic downturn.

If the property market takes a turn for the worse or the days of deflation return, the government will be back to square one. The budget deficit would start to grow again.

As Standard & Poor's points out, there is a need to put our city's finances on a firmer footing by establishing a more stable source of revenue. This means broadening Hong Kong's narrow tax base. Currently, only 300,000 income earners pay around 90 per cent of salaries tax revenue received by the government. Most wage-earners pay no tax at all.

A goods and services tax (GST) is the preferred option. During the downturn it was easy for the government to justify moves to introduce this new tax. All officials had to do was to point to the spiralling deficit. They frequently did.

This is understandable. But it is no longer possible. By the time a GST is introduced, we will probably not have a deficit any more. The real reason for bringing in the new tax is to tackle structural problems. Financial Secretary Henry Tang Ying-yen conceded this in November, when he said the GST was about reform, not eliminating the deficit.

It would be tempting for the government to sit back and do nothing except watch the revenue roll in. But it must get on with the job of broadening the tax base - and that means a GST.

A public consultation on the tax will not be launched until after the new chief executive is in place. Officials have spoken of the need to listen to the views of the public. But it will be more a question of selling the need for the tax and persuading the public that it is in Hong Kong's best interests. People do not generally accept new taxes easily.

Other countries have found that the extra revenue which a GST brings allows other tax concessions to be made. This should be possible in Hong Kong. The government has made it clear that the GST will be revenue neutral. Such a step could prove invaluable in convincing the public that the new tax should be accepted.

The introduction of a GST should also lead to a big reduction in the government's reliance on land sales - and all the volatility such a dependency involves.

Hong Kong requires an efficient, modern and equitable tax system which ensures a steady flow of revenue. We cannot rely on the economic news always being so good.

Trade Sector Boosts Hong Kong Economy
Fri May 27, 8:07 AM ET

HONG KONG (AP) - Hong Kong's economy expanded moderately in the first quarter of 2005, the government said Friday, driven by robust domestic consumption and a buoyant trade sector.

Compared with the same period last year, gross domestic product grew 6 percent during the period that ended in March, down from 7.1 percent in the previous quarter, the government said.

"The latest data shows that the economy is still expanding nicely," said Tai Hui, an economist at Standard Chartered Bank. "The growth is supported by both domestic and external demand."

Exports rose 8.9 percent on year in the first quarter, thanks to strong trade flows from China and the earlier weakness of the U.S. dollar, said K. C. Kwok, a government economist. Exports rose 12.6 percent in the fourth quarter last year.

"Consumption demand held firm along with the more entrenched economic recovery, improving labor market conditions and a strong property market," Kwok said.

June 4, 2005
Government Press Release
Hong Kong 2005 GDP growth forecast at 4.5% - 5.5%

If the economy continues to thrive the forecast GDP growth for 2005 will be 4.5% to 5.5%, Government Economist Kwok Kwok-chuen says, adding property prices and interest rates may not see drastic adjustments.

Speaking on a radio talk show, Mr Kwok noted Hong Kong's economy has bounced back from the 1997 financial crisis, with strengthened domestic economic activities.

Despite a number of risks in the external environment, Mr Kwok said the economic outlook will be fine as Hong Kong is an outward-oriented economy and the Government has been upholding the "big market, small government" principle.

However, he said Hong Kong's population is aging, and there is a need to attract overseas talent and professionals to work here. The move also may help bring in more low-skilled jobs.

On the recent surge in property prices, Mr Kwok noted the increase relates to economic improvements rather than speculation. If there is any adjustment in property prices, the revision will not be drastic, he added.

Mr Kwok revealed studies are underway to cut red tape on licensing of cinemas and facilitate business operation, stressing the Government will strike a balance between public safety and business facilitation.

The outlook's sunny for HK consumers
Nick Gentle
10 June 2005
South China Morning Post

After 18 months of solid economic growth, Hong Kong consumers are now among the most optimistic in the world, an online survey shows. Only consumers in India and the mainland are more enthusiastic about their prospects.

The survey, conducted by research firm ACNielsen, found that 75 per cent of Hongkongers felt the economy had improved in the preceding six months, and 71 per cent believed it would continue to improve over the next year.

Eighty-eight per cent of Indians and 80 per cent of mainlanders believe things will get better in the next 12 months.

Three-quarters of Hong Kong respondents felt their job prospects to be good or excellent during that time.

But those good feelings did not necessarily translate into optimism about personal finances, with just 57 per cent considering them to be good or excellent. Respondents in India, New Zealand and the mainland were the happiest in this department.

The survey of 21,261 consumers was conducted in 38 markets from April 11 to May 10. There were 501 respondents in Hong Kong and 1,009 on the mainland.

HK: A city with bright future
19 April 2005
...
After all, one of the things that make Hong Kong attractive is Westerners see it as having many Chinese characteristics. Meanwhile, many Chinese find Hong Kong to be quite Western.

Interesting... I wouldn't say quite Western. But, HK does show a more modern and cosmopolitan outlook than other Chinese cities in general.

CIBC hooks up with Bank of East Asia
Canadian Press
10 June 2005

Canadian Imperial Bank of Commerce has announced a co-operation agreement with Hong Kong-based Bank of East Asia to provide CIBC commercial clients with BEA services in China.

The accord "directly supports CIBC's Canadian clients with access to China-based corporate deposit accounts in both local and foreign currencies as well as trade finance facilities," the banks said in a statement yesterday.

The Bank of East Asia, whose international operations include six branches in Toronto and Vancouver, will provide services to CIBC commercial banking clients, who will deal through CIBC relationship managers in Canada.

"Many of our clients have, or are in the process of establishing, a presence in mainland China," said John Hunkin, chief executive of CIBC. "This agreement with BEA will better enable us to assist our clients in identifying and leveraging opportunities in China, and it furthers our objectives of providing our clients with access to a wide range of financial services and products to help them meet their unique business goals."

BEA chairman David Li said the link between his bank, with assets of $27.1 billion (U.S.) at the end of 2004, and CIBC, with its $288 billion (Canadian) at April 30, is "of great importance given the number of investors in Canada who are keenly interested in exploring business opportunities on the mainland." The banks said they intend to explore other areas of co-operation.

June 20, 2005
Q1 gross national product up 3.3%
Government Press Release

Hong Kong's first-quarter GNP surged 3.3% over a year earlier to $322.3 billion, while GDP, estimated at $314.2 billion, rose 4%.

The external factor income inflow and outflow remained sizeable in the quarter, equivalent to more than and nearly one third of Hong Kong's GDP. This reflected not only the highly externally-oriented nature of the Hong Kong economy, but also its positions as an international financial centre and a regional business hub.

The Census & Statistics Department said today that GNP grew solidly in the quarter, amid sustained strong growth in the economy and continued net inflow of external factor income.

Compared with GDP, the value of Hong Kong's GNP was larger by $8 billion, representing a net external factor income inflow of the same amount, and equivalent to 2.6% of GDP in the quarter.

After netting out the effect of price changes, Hong Kong's GNP grew 5.2% in real terms over a year earlier, lower than the corresponding increase of 6% recorded for GDP in the same quarter.

Investment returns improving

The slightly slower growth in GNP than in GDP was mainly attributable to a surge in direct investment income outflow, which signified improved investment return from Hong Kong in tandem with its robust economic performance.

Both the inflow and outflow of external factor income continued to register robust growth in the quarter, albeit at a less rapid pace than in the preceding quarter.

Total factor income inflow into Hong Kong, estimated at $110.6 billion and equivalent to 35.2% of GDP in the quarter, went up 16.2% over a year earlier.

Total factor income outflow, estimated at $102.5 billion and equivalent to 32.6% of GDP of the same period, recorded a 20.4% year-on-year increase.

Taking the inflow and outflow together, the net external factor income inflow was $8 billion. The income surge was particularly notable in other investment income flows due to higher interest rates on entering the US interest rate uptrend.

Mainland largest source of external factor income inflow

Analysed by country or territory, the Mainland was the largest source of Hong Kong's external factor income inflow, accounting for 24.1%.

The British Virgin Islands came next, with a share of 20.1%, reflecting continued investment income inflow from this tax haven economy where Hong Kong companies have set up a considerable number of holding companies. Other major sources were the UK and the US, at 12.1% and 9.4%.

The Mainland and the British Virgin Islands were also the most important destinations for Hong Kong's external factor income outflow in the quarter, accounting for 24.5% and 17.2%. Other major destination countries or territories included the US, at 12%, and the Netherlands, at 9.9%.

Inflation Climbs in Hong Kong in May
Thursday June 23, 6:36 am ET

HONG KONG (AP) -- Hong Kong's consumer inflation rate climbed 0.8 percent in May from the year before, the government said Thursday. It rose from 0.5 percent in April.

The government attributed the higher rate to price hikes for package tours, jewelry and fresh vegetables.

However, "overall inflationary pressure remained modest," the government statement said.

It said prices are expected to advance gradually in the coming months as consumer demand strengthens.

June 27, 2005
Value of total exports up 16.9% in May
Census & Statistics Department

The value of total exports of goods surged 16.9% in May, over the same month last year, to $193.4 billion after a year-on-year increase of 7.8% in April.

Within this total, the value of re-exports rose 18% to $183.5 billion, while the value of domestic exports fell 0.5% to $9.9 billion.

In the same period, the value of imports of goods soared 16% over a year earlier to $202.7 billion in May, after a year-on-year increase of 3.8% in April.

A visible trade deficit of $9.3 billion, equivalent to 4.6% of the value of goods imports, was recorded in May.

Across-the-board growth

The Census & Statistics Department said the growth in merchandise exports accelerated notably in May. The strong growth occurred virtually across-the-board among all major markets, including the Mainland, Japan, the EU and the US.

Comparing the three-month period ending May with the preceding three months on a seasonally adjusted basis, the value of total exports of goods rose 0.3%.

Within this total, the value of re-exports rose 0.6%, while the value of domestic exports fell 4.9%. Meanwhile, the value of goods imports rose 1%.

The department said the increase in value of total goods exports suggested export growth has regained some momentum lately, despite the increasing uncertainties in the external environment.

Trade outlook caution

It cautioned that a number of developments likely to affect the near-term trade outlook still deserve close monitoring, including the recent strengthening in the US dollar, rising protectionism from the US and EU against Mainland imports, the impact of high oil prices on the world economy, and growing pressure on renminbi revaluation from the US.

For the first five months this year, the value of total goods exports rose 11.4% over the same period last year. Within this total, the value of re-exports rose 12.5%, while the value of domestic exports fell 6.1%.

In the same period, the value of imports of goods surged 8.8%. A visible trade deficit of $44.5 billion, equivalent to 5% of the value of goods imports, was recorded in the first five months of 2005.

Exports to Australia up 96.3%

In May, year-on-year increases were registered in the values of re-exports to all major destinations, in particular the Netherlands (+59.8%), France (+31.7%), Germany (+25.8%), the UK (+23.9%) and the Mainland (+23.2%).

At the same time, values of domestic exports to some major destinations fell, in particular to Germany (-50.3%) and the UK (-49.9%).

But significant growth was registered in the value of domestic exports to Australia (+96.3%), Singapore (+75%) and the Netherlands (+53.6%).

Also, there was growth in the value of imports from most major suppliers, in particular the US (+24.7%), Thailand (+23%), Singapore (+23%), India (+21.5%) and the Mainland (+18.5%).

Exports to Germany down 54.9%

For the first five months this year, year-on-year growth was registered in the value of re-exports to most major destinations, particularly the Netherlands (+29.5%), Germany (+25.5%), France (+19.4%), the UK (+18.4%) and Singapore (+13.3%).

At the same time, falls were registered in the value of domestic exports to some major destinations, such as Germany (-54.9%) and the UK (-42.7%).

But significant growth was registered in the value of domestic exports to Australia (+54.8%), the Netherlands (+35.4%) and Singapore (+35.3%).

Moreover, there were increases in the value of imports from most major suppliers, in particular India (+20.5%), the Mainland (+14.3%), Thailand (+13.7%) and Singapore (+13.3%). But a fall was registered in the value of imports from Germany (-13.2%).

Office machine exports soar 168%

In May, year-on-year increases were registered in the value of re-exports of most principal commodity divisions, in particular office machines and automatic data processing machines (by $8.4 billion or 51.1%), electrical machinery, apparatus and appliances, and electrical parts (by $7.5 billion or 23.3%) and telecommunications and sound recording and reproducing apparatus and equipment (by $4 billion or 18.6%).

During the month, values of domestic exports of many principal commodity divisions fell, in particular clothing (by $1.9 billion or 41.3%). But there were increases in the value of domestic exports of electrical machinery, apparatus and appliances, and electrical parts (by $814 million or 75.2%) and office machines and automatic data processing machines (by $679 million or 168%).

Also, there were increases in the value of imports of most principal commodity divisions, in particular electrical machinery, apparatus and appliances, and electrical parts (by $8.2 billion or 20.7%), office machines and automatic data processing machines (by $4.6 billion or 26.7%) and telecommunications and sound recording and reproducing apparatus and equipment (by $2.6 billion or 12.3%).

Clothing exports fall

Comparing the first five months this year with that of 2004, the value of re-exports of most principal commodity divisions grew, particularly office machines and automatic data processing machines (by $26.6 billion or 33.1%), electrical machinery, apparatus and appliances, and electrical parts (by $17.5 billion or 11.8%) and clothing (by $15.5 billion or 33.9%).

During the period, falls were registered in the value of domestic exports of some principal commodity divisions, in particular clothing (by $7.4 billion or 37.3%). But there was growth in the values of domestic exports of office machines and automatic data processing machines (by $2.3 billion or 115.2%) and electrical machinery, apparatus and appliances, and electrical parts (by $1.5 billion or 29.9%).

The value of imports of most principal commodity divisions also grew, particularly office machines and automatic data processing machines (by $15.6 billion or 19.3%), electrical machinery, apparatus and appliances, and electrical parts (by $13.9 billion or 7.7%) and non-metallic mineral manufactures (by $7.9 billion or 29%).

Constant Price Gross Domestic Product by Economic Activity for the first quarter of 2005
Government Press Release
Tuesday, June 28, 2005

The Census and Statistics Department released today (June 28) the preliminary figures of constant price Gross Domestic Product (GDP) by economic activity for the first quarter of 2005.

2. GDP by economic activity shows the value of production for individual economic activities. The value of production is measured by net output or value-added, which is calculated by deducting intermediate input consumed in the process of production from the gross value of output. Constant price GDP by economic activity enables analysis of the growth profiles of individual economic sectors in real terms, by removing the effect of price changes. It also enables analysis of the contributions of different economic activities or sectors to the overall economic growth in real terms.

3. Gross Domestic Product (GDP) increases by 6.0% in real terms in the first quarter of 2005 over a year earlier, compared with the 7.1% growth in the fourth quarter of 2004.

4. Analysed by constituent sector and on a year-on-year comparison, net output in all the service sectors taken together rose by 6.2% in real terms in the first quarter of 2005 over a year earlier, after a 7.4% increase in the fourth quarter of 2004.

5. Net output in the wholesale, retail and import and export trades, restaurants and hotels increased by 9.4% in real terms in the first quarter of 2005, following a 9.9% increase in the fourth quarter of 2004. Sustained growth in consumer demand, continued surge in offshore trade, and buoyancy in inbound tourism all contributed to the growth.

6. Net output in transport, storage and communications increased by 11.8% in real terms in the first quarter of 2005 over a year earlier, after a 15.0% rise in the fourth quarter of 2004. This was related to a continued expansion in transportation services, on the back of the strong trade flows.

7. Net output in financing, insurance, real estate and business services rose by 3.8% in real terms in the first quarter of 2005 over a year earlier, moderating from a 6.6% increase in the fourth quarter of 2004. The growth was partly attributable to improved performance of the real estate sector.

8. Net output in community, social and personal services increased by 1.6% in real terms in the first quarter of 2005 over a year earlier, after a 2.7% rise in the fourth quarter of 2004.

9. Net output in the local manufacturing sector fell back slightly by 0.6% in real terms in the first quarter of 2005 over a year earlier, having picked up to a 5.0% rise in the fourth quarter of 2004. The decline was related to a plunge in domestic exports of textile and clothing products to the US and European markets in the first quarter upon the removal of quotas on such products as from January 2005.

10. Net output in the construction sector increased modestly by 2.5% in real terms in the first quarter of 2005 over a year earlier, after nine straight quarters of fall-off. The pick-up in private sector building output underpinned the moderate rebound in building and construction activity in the first quarter of 2005. Meanwhile, output in the public sector registered a lesser decline in the first quarter, attributable to the intensified works on several major civil engineering projects.

11. As to the electricity, gas and water sector, net output rose by 4.7% in real terms in the first quarter of 2005 over a year earlier, after an increase of 1.1% in the fourth quarter of 2004.

Further information

12. The year-on-year percentage changes in constant price GDP by economic activity from the first quarter of 2004 to the first quarter of 2005 are shown in Table 1 (http://www.info.gov.hk/gia/general/200506/28/gdp_t1_e_text.htm) . For enquiries about statistics on GDP by economic activity, please call the National Income Section of the Census and Statistics Department at telephone no. 2116 5115.

13. The figures on constant price GDP by economic activity for the first quarter of 2005 are only preliminary. When more data become available, the preliminary figures will be revised. Users may obtain a copy of this press release at the Website of the C&SD (http://www.info.gov.hk/censtatd/). More detailed figures can also be found at the Frequently Asked Statistics section of the website.

CEPA creates 29,000 jobs, says financial secretary
9 July 2005
South China Morning Post

The Closer Economic Partnership Arrangement (Cepa) has created 29,000 jobs in Hong Kong in the past two years, Financial Secretary Henry Tang Ying-yen told a trade forum yesterday.

Guangdong vice-governor Tang Bingquan told the same event that the province had issued 7.5 million visas for individual travellers to Hong Kong by the end of last year, of which 6.7 million had already taken their visits to the city.

Salaries taxes and duties raise surplus to $21.4b

A $21.4 billion surplus has been recorded for the 2004-05 financial year, largely a result of additional receipts from land premiums, salaries tax and stamp duty.

The surplus was $9.4 billion above the revised estimate of $12 billion announced in the 2005-06 budget, with spending $7.5 billion lower than forecast. Revenue amounted to $263.6 billion while spending totalled $242.2 billion. Fiscal reserves stood at $296 billion on March 31, $20.7 billion more than in the previous year.

Hong Kong's Jobless Rate Probably Fell to 5.6 Percent in June

July 18 (Bloomberg) -- Hong Kong's unemployment rate, already at a 3 1/2-year low, probably fell further in June as companies involved in tourism and financial services expanded.

The seasonally adjusted jobless rate probably fell to 5.6 percent in June, according to the median forecast of 10 economists surveyed by Bloomberg News. That would be the lowest rate since October 2001. The government is due to release unemployment data at 4:15 p.m. local time today. The rate was 5.7 percent in May.

Improved employment prospects are encouraging Hong Kong's citizens to spend more freely, helping sustain growth in the $164 billion economy. The government estimates that the September opening of Hong Kong Disneyland will create 18,000 jobs, helping reduce unemployment further.

"The big hope is Disneyland," said Standard Chartered Bank economist Mike Moran, who predicts the jobless rate will fall as low as 5.2 percent by year-end. "The new jobs will come from the retail and tourism sectors."

The city received a record 21.8 million visitors last year, and the government expects the number to rise again in 2005. Hong Kong's retail sales rose 7.2 percent from a year earlier to HK$17.7 billion ($2.3 billion) in May.

Hong Kong's consumer confidence ranked second among 13 Asia- Pacific economies in the past quarter, MasterCard International Inc. said July 14, citing a biannual survey of shoppers around the region. The credit-card company said confidence in the city was the second highest it's been since the surveys began in 1993.

Financial Services

A surge in initial public offerings is helping create jobs in the financial services industry, said Henry Tsoi, an economist at Hang Seng Bank Ltd. China Cosco Holdings Co., China's biggest container shipping line, raised HK$9.52 billion in its first share sale in Hong Kong last month. Bank of Communications also plans to sell shares in Hong Kong this year.

Still, Tsoi said he expects the unemployment rate to have risen to 5.8 percent in June.

"We're expecting a bigger rise in the size of the labor force because starting in June more school leavers joined the job market," Tsoi said. "The increase will be larger than accounted for in the seasonal adjustment."

The jobless rate will resume its decline later in the year, and should fall to 5.5 percent by year-end, Tsoi said.

The following table shows economists' estimates for Hong Kong's seasonally adjusted unemployment rate for the three months ended June 30. All figures, except the number of forecasts, are in percentages.

Jobless Rate
-----------------------------------------
Median 5.6
Average 5.7
High 5.8
Low 5.6
Number of forecasts 10
------------------------------------------
Action Economics 5.7
Bank of East Asia 5.6
Capital Economics 5.7
Citibank NA Hong Kong 5.6
DBS Bank 5.6
JPMorgan Chase 5.6
Standard Chartered 5.6
Hang Seng Bank 5.8
Thomson IFR 5.6
UBS 5.7

Hong Kong Records 12.6 Percent Export Growth
Tuesday July 26, 7:08 am ET

HONG KONG (AP) -- Hong Kong recorded export growth of 12.6 percent in June from the same period a year ago, as the territory shipped more goods to nearly all major markets, the government said Tuesday.

The total value of Hong Kong's exports last month stood at 189.5 billion Hong Kong dollars (US$24.3 billion; euro20.3 billion), the government said. Imports increased 10.5 percent over June 2004.

In May, exports increased 16.9 percent on-year, while imports were up 16 percent, leaving a trade deficit of HK$7.1 billion (US$910 million; euro761 million).

Despite the growth drop from May, "June's export performance was still very strong," Tai Hui, an economist at bank Standard Chartered said.

Hui attributed the strong performance to the robust China trade. The government said double-digit gains were recorded in shipments to China, Japan, Taiwan and countries in the European Union.

The government maintained a positive near term view for exports, saying "the outlook for the external environment remains fairly favorable."

Economists are also generally positive about continued exports growth, but as global economic expansion is expected to enter a cyclical slowdown period, trade activities will likely follow a similar pattern.

HK export growth heads for slowdown
Dennis Eng and Vivienne Chow
24 August 2005
South China Morning Post

Hong Kong's export growth is expected to slow to single digits in the second half of the year, says Trade Development Council chief economist Edward Leung Hoi-kwok.

But he tips growth for the full year at 8.5 per cent as global demand for electronic goods and precious jewellery remains robust.

The city recorded surprisingly strong export growth of 11.6 per cent for the first six months of the year. The council warned that may slow to between 8 and 10 per cent in the second half but is sticking to its full-year forecast of 8.5 per cent.

Mr Leung said consumption and import demand in the US were poised to cool amid interest rate rises and surges in oil prices.

"Hong Kong's export competitiveness in the European Union and Japan will also be hurt by a strong dollar," Mr Leung said.

However, Hong Kong is still expected to perform quite strongly with healthy demand for electronics and jewellery. Electronics exports accounted for 68 per cent of first-half export growth.

Jewellery exports, buoyed by rising prices for gold and precious stones, recorded 26.7 per cent growth for the first half of the year.

Hong Kong's GDP Growth Probably Slowed to 1% in Second Quarter

Aug. 25 (Bloomberg) -- Hong Kong's economic growth probably slowed in the second quarter as Chinese tourists postponed visits to the city ahead of next month's opening of a Walt Disney Co. theme park.

Gross domestic product likely rose a seasonally adjusted 1 percent from the previous three months after climbing 1.2 percent in the first quarter, according to the median of six economists' forecasts in a Bloomberg News survey. The government is due to report second-quarter growth at 4:15 p.m. tomorrow.

Mainland Chinese, who account for half of all visitors to the city, may have delayed trips until after Hong Kong Disneyland opens Sept. 12, curbing demand for hotel rooms, restaurant meals and luxury goods. The government predicts the park, which cost more than $3 billion, will lift tourism and add about 18,000 jobs in its first year.

"We think the Disneyland factor was important, but obviously we have to wait until next month to confirm that,'' said Ben Simpfendorfer, an economist at JPMorgan & Chase Co. in Hong Kong. "We should see arrivals bounce back in September. Nonetheless it will be a drag on second-quarter growth.''

The April-June period would mark an eighth straight quarter of sequential growth, the longest run since the Asian financial crisis began in 1997. From a year earlier, Hong Kong's $165 billion economy likely expanded 5.3 percent following 6.1 percent growth in the first quarter, the Bloomberg survey showed.

Arrivals from China rose 3.8 percent in the first half after soaring 46 percent in 2004, according to the Hong Kong Tourism Board. The number of mainland tourists increased 2.1 percent in June, the most recent month for which statistics are available, after falling 0.1 percent in May.

Retail Sales

The slowdown in mainland arrivals took a toll on retail sales, which grew less than economists had forecast in both May and June, rising 7.1 percent and 6.2 percent respectively from a year earlier. Tourists account for as much as a quarter of Hong Kong's retail sales, said Hang Seng Bank economist Henry Tsoi.

China loosened visa restrictions on Hong Kong visits in July 2003, unleashing a tourism boom that revived the city's economy after the outbreak of the severe acute respiratory syndrome virus emptied stores and hotels. Retail sales have climbed every month since August 2003.

Hong Kong's government, which funded part of the Disney park, is betting Asia's growing affluence will fuel demand for vacations in the region, helping make 2005 another record year for tourism. The city hosted 21.8 million visitors last year, the highest ever.

Clothing, Cosmetics

Businesses are also gearing up for the park's opening. Clothing retailer Giordano International Ltd. on July 21 began selling T-shirts, tops and sweatshirts featuring Disney characters such as Mickey and Minnie Mouse.

Bonjour Holdings Ltd., a Hong Kong-based cosmetics chain, is investing HK$16 million ($2 million) this year to open as many as 10 new shops to coincide with Disneyland's opening. The company says mainland tourists account for almost a third of its sales.

Economists including Tao Dong at Credit Suisse First Boston said the park's impact may be smaller than the government estimates. Paul Tang, a Hong Kong-based economist at Bank of East Asia, said its effect may be akin to China's decision to loosen visa rules, which helped boost consumer and business confidence.

"It's more a confidence thing than a direct contribution to the economy,'' Tang said.

Exports

Exports weathered rising energy prices and mounting trade tensions between the U.S. and China, rising 12.5 percent in the second quarter after climbing 8.9 percent in the prior three months.

Hong Kong's economy has benefited as demand in the U.S. and Europe increased for Chinese-made toys, clothes and electronics shipped through the city's sea and air ports. Still, export growth may cool in the second half as higher energy costs damp global demand and currency appreciation makes Chinese goods less competitive, the Hong Kong Trade Development Council said Aug. 23.

The cost of crude oil in New York reached a record $67.10 a barrel on Aug. 12 and has surged about 50 percent since the end of 2004. The yuan, which was revalued July 21, has appreciated 14 percent against the euro, 10 percent versus the yen and 2.2 percent against the U.S. dollar this year.

Rising spending by local consumers, buoyed by low unemployment and rising wages, is helping take up the slack as exports moderate. The jobless rate fell to 5.7 percent in July, the lowest since October 2001, from 6.6 percent at the beginning of the year.

Consumer Confidence

Hong Kong's consumer confidence ranked second among 13 Asia- Pacific economies in the second quarter, MasterCard International Inc. said July 14, citing a biannual survey of shoppers around the region. The credit-card company said confidence in the city was the second highest it's been since the surveys began in 1993.

The consumption boom may ebb in coming months as higher interest rates eat into residents' disposable incomes, said Credit Suisse's Tao.

The Hong Kong Monetary Authority has raised its benchmark overnight lending rate 10 times since June 2004, to 5 percent from 2.5 percent, tracking increases by the U.S. Federal Reserve. Hong Kong's currency is pegged at about 7.8 to the dollar, meaning rates in the city typically follow those in the U.S.

HSBC Holdings Plc, BOC Hong Kong (Holdings) Ltd. and Standard Chartered Plc, on Aug. 11 raised their benchmark lending rates by 25 basis points to 6.75 percent, the highest in four years. One basis point is 0.01 percentage point.

Mortgage Rates

HSBC, Hong Kong's largest bank, on June 6 raised its residential mortgage rate for new customers by a quarter percentage point to 2 percent less than its prime lending rate of 5.75 percent. It was the third increase in two months. Mortgage rates may climb another two percentage points by the end of 2006, Tao said.

"That will probably be a surprise to many people,'' he said. "And that's one reason for me to believe that we shouldn't be too hyped up about the economy at this moment.''

The following table shows forecasts for the change in second- quarter GDP from the previous quarter and from a year earlier. All figures are in percentages.


QoQ YoY
-------------------------------------------
Median Forecast 1.0 5.3
Average Forecast 1.0 5.4
High 1.5 6.4
Low 0.8 4.5
Forecasts 6 14
-------------------------------------------
Action Economics 1.5 5.4
Capital Economics -- 5.7
Citigroup 0.8 --
Credit Suisse -- 5.1
DBS Bank -- 6.1
Deutsche Bank -- 5.2
Hang Seng 1.0 5.3
IDEAglobal 0.8 4.7
ING Bank -- 5.3
JPMorgan 1.0 4.9
Lehman Brothers 1.0 4.9
Morgan Stanley -- 5.5
Standard Chartered -- 6.4
Thomson IFR -- 5.9
UBS -- 4.5

Hong Kong Economy Grows 3 Percent in 2Q
AP
Fri Aug 26, 9:33 AM ET

HONG KONG - Hong Kong's economy grew an unexpectedly strong 3 percent in the second quarter from the previous quarter and 6.8 percent from a year ago on strong exports and a sustained rise in domestic consumption and investment, the government said Friday.

Analysts were anticipating a 1 percent rise in gross domestic product from quarter-to-quarter and a 5.2 percent jump from a year ago.

The new figures compared to the first quarter's
GDP growth of 1.2 percent from the previous quarter and 6.2 percent from a year earlier.

GDP for the first half is up 6.5 percent over the same period of 2004, the government said in a statement.

Despite the better-than-expected results for the second quarter, the government didn't change its forecast of economic growth of 4.5 percent to 5.5 percent for the full year.

"Indeed, it is believed that given the upbeat output in the first half of 2005, for the year as a whole GDP growth is likely to be closer to the upper end of the range forecast," the government said.

Officials also maintained their forecast for a 1.5 percent inflation for all of 2005.

"On the whole, local price pressures are expected to be well contained through the end of 2005," the government said.

Analysts Optimistic Over Hong Kong Economy
Friday September 2, 8:37 pm ET
By Andrew Batson, Associated Press Writer

HONG KONG (AP) -- Private-sector analysts are now significantly more optimistic about the outlook for Hong Kong's economic growth this year, which already has handily beaten expectations in each of the past two quarters.

Outside economists had previously been largely in agreement with the government's forecast of an expansion in the range of 4.5 percent to 5.5 percent for 2005. But two straight quarters of growth in excess of 6 percent seem to have convinced them that the official view isn't sufficiently bullish.

A Dow Jones Newswires survey found that several economists have revised their forecasts upward after the second-quarter data was released about a week ago. Expectations now center on a 5.9 percent expansion in gross domestic product in 2005, up from the previous consensus view of 5 percent growth.

With GDP already growing 6.5 percent in the first half from a year earlier, that forecast means economists still expect the expansion to lose a bit of steam over the rest of the year. But the revisions indicate that most don't expect Hong Kong to feel much of a crunch from the combined effects of rising interest rates, high oil prices and slower growth in China trade.

"Hong Kong has benefited mainly from the sustained, strong export trade and also the revival in investment growth," said HSBC economist George Leung. Sustained demand from the U.S. for imported goods is thus the key to the territory's continued economic growth, he said.

The biggest wild card is the still-unknown effect of record-high oil prices on global demand. For now, economists are penciling in only a mild slowdown in trade volume, which is a major driver of economic activity in the port city. And even so, the continuing tourist boom and local consumer spending are expected to support the economy.

While consumption isn't growing as quickly as exports, it has still been relatively robust, and the unemployment rate continues to fall. Consumer spending should continue to be "underpinned by strong wealth effects of the asset markets, a steady improvement in labor market conditions, and a further boost to tourism by the opening of Disneyland," said Deutsche Bank economist Jun Ma.

Interest rates in Hong Kong rose sharply in the second quarter, in a delayed catch-up to the past year of hikes by the U.S. Federal Reserve, and the hot local property market has started to cool a bit in response. However, economists argue that since the higher rates were so widely expected, the increases haven't had a significant impact on local business or consumer confidence.

Most businesses do in fact seem to feel that economic prospects are bright enough to warrant spending more on capital goods. Total investment spending in Hong Kong grew by 3.5 percent in the second quarter, picking up noticeably from the 0.4 percent increase in the first quarter.

Andrew Batson is a correspondent for Dow Jones Newswires.

October 21, 2005
Government Press Release
CPI up 1.6%

The Composite Consumer Price Index rose 1.6% in September over the same month last year, and was also up on August's 1.4% increase, the Census & Statistics Department says.

As the increase in private housing rents enlarges, and the rise in Towngas charges resulting from the fuel cost variation charge adjustment, the CPI rise widened slightly.

The climb in consumer price inflation continued, in tandem with the increasingly entrenched economic recovery and the gradual feed-through of higher private housing rents for fresh lettings into the CPI rental component.

Consumer price inflation is expected to move up further, along with the gradual rise-back in private housing rentals and in business costs and with the further pass-through of higher oil prices to the retail level. But overall price pressure will likely remain moderate through to year's-end.

Price rises widened

Analysed by sub-index and on a year-on-year comparison, the CPI(A), CPI(B) and CPI(C) rose 1.5%, 1.7% and 1.7% in September, also larger than the corresponding increases of 1.3%, 1.4% and 1.5% in August.

Amongst the CPI components, year-on-year rises in prices were recorded for electricity, gas and water (4.1% in the Composite CPI), miscellaneous goods (2.9%), food - excluding meals bought away from home (2.4%), clothing and footwear (2.1%), transport (2.1%), housing (1.6%), meals bought away from home (1.2%), miscellaneous services (1.2%) and alcohol and tobacco (0.4%).

Year-on-year falls were recorded for durable goods (-1.6% in the Composite CPI).

For the three-month period ending September, the average monthly rates of change in the seasonally adjusted Composite CPI was 0.1%, same as that of the three-month period ending August.

In the first nine months this year, the Composite CPI rose 0.9% from a year earlier. For the three months and 12 months ending September, the index rose 1.4% and 0.7%.

http://www.news.gov.hk/en/category/businessandfinance/051021/html/051021p006jpg.jpg

October 21, 2005
Government Press Release
HK ranks 2nd in int'l investment position

Hong Kong's net international investment position was US$430.4 billion last year, indicating the city is a net creditor economy, ranked second to Japan, the Census & Statistics Department says.

Comparing Hong Kong with 11 selected economies, the department found the figure compared favourably with the international investment position statistics of those economies. Among them, France, Germany, Japan and Singapore were net creditors, while Australia, Canada, Italy, New Zealand, Thailand, the UK and the US were net debtors.

At the end of last year, Hong Kong's total external financial assets and liabilities were US$1.38 trillion and US$952 billion. The ratios to GDP were 833% and 573%. This shows Hong Kong is a highly externally-oriented economy and also a major financial centre in the region with substantial cross-territory investment.

The ratio of Hong Kong's net international investment position to GPD was 259%, much higher than those of the selected economies.

HK August domestic exports up 17.7 pct on year

HONG KONG, Oct 25 (Reuters) - The volume of Hong Kong's domestic exports in August 2005 rose 17.7 percent from a year earlier, while re-exports increased by 13.0 percent, the Census and Statistics Department said on Tuesday.

The total volume of the territory's exports, including re-exports through China, rose 13.3 percent while total imports climbed 11.9 percent, the department said in a statement.

The volume of domestic exports for the first eight months of 2005 decreased by 3.5 percent while that of re-exports rose 11.4 percent. Total exports increased by 10.5 percent and imports increased by 6.7 percent.

Prices of domestic exports meanwhile rose 0.5 percent in August 2005 from a year earlier and re-export prices increased by 1.1 percent. Total export prices were up 1.0 percent and import prices also increased by 2.2 percent, the data showed.

Prices of domestic exports for the first eight months of 2005 were 3.7 percent higher, while those of re-exports increased by 1.6 percent. Total export prices were up by 1.7 percent and import prices increased by 3.3 percent.

The department said prices are based on unit values which do not take into account changes in the composition or quality of goods traded, except for some selected commodities for which specific price indices are available.

China to widen HK banks' yuan business soon-paper

HONG KONG, Oct 25 (Reuters) - China's central bank may announce later this week that it will allow Hong Kong banks to offer more yuan services in the territory, a Hong Kong newspaper reported on Tuesday.

The new measures would include raising the daily exchange limit for each yuan depositor in Hong Kong to 50,000 yuan ($6,180) from the current 20,000 yuan, the Wen Wei Po daily quoted media reports as saying.

The People's Bank of China may also allow companies to open yuan deposit accounts in Hong Kong, the paper added.

Hong Kong's new chief executive Donald Tsang had said in his maiden policy speech earlier this month that China had agreed in principle to expand the yuan-denominated businesses of Hong Kong banks, including raising exchange limits.

Hong Kong banks have been providing personal banking services such as yuan deposits, exchange and remittance services since February 2004.

Yuan deposits in Hong Kong banks totalled 22.4 billion yuan in August, up from 21.9 billion yuan in July, according to the Hong Kong Monetary Authority.

More individuals and companies are using yuan in the territory as its economy becomes increasingly integrated with that of mainland China, but China tightly controls the exchange of the yuan for foreign currencies.

(US$1=HK$7.8=8.09 yuan)

October 27, 2005
Government Press Release
Exports up 17%

The value of total exports of goods rose 17% in September over the same month last year to $210.2 billion, after a year-on-year rise of 12.7% in August.

The Census & Statistics Department said within this total, the value of re-exports grew 16.5% to $195.8 billion, while the value of domestic exports rose 24.2% to $14.4 billion.

Concurrently the value of imports grew 15.1% over a year earlier to $214.4 billion, after a year-on-year rise of 12.9% in August.

A visible trade deficit of $4.2 billion, equivalent to 2% of the value of imports of goods, was recorded in the month.

Increases were registered in the values of re-exports to all major destinations, particularly France (+33.4%), Japan (+22.6%), the Netherlands (+19.8%), the Mainland (+19%) and Germany (+13.8%).

Concurrently, significant increases were registered in the values of domestic exports to most major destinations, particularly Australia (+100.7%), the Netherlands (+92.5%), Germany (+49.3%), Japan (+48.7%) and the UK (+34.4%).
Over the same periods of comparison, increases were registered in the values of imports from all major suppliers, particularly India (+66.8%), Thailand (+44.8%), Germany (+32.1%), Singapore (+30.8%) and Malaysia (+18.3%).

Increases were registered in the values of re-exports of all principal commodity divisions, particularly telecommunications and sound recording and reproducing apparatus and equipment (by $8.5 billion or 32.7%), office and automatic data processing machines (by $7 billion or 32.6%) and electrical machinery, apparatus and appliances, and electrical parts thereof (by $5 billion or 15%).

Concurrently, increases were registered in the values of domestic exports of many principal commodity divisions, particularly clothing (by $1.3 billion or 19.7%), office and automatic data processing machines (by $758 million or 168.9%) and electrical machinery, apparatus and appliances, and electrical parts thereof (by $325 million or 27.9%).

Over the same periods of comparison, increases were registered in the values of imports of most principal commodity divisions, particularly telecommunications and sound recording and reproducing apparatus and equipment (by $8.1 billion or 35.1%), electrical machinery, apparatus and appliances, and electrical parts thereof (by $7.4 billion or 18.3%) and office machines and automatic data processing machines (by $4.7 billion or 22.8%).

Favourable outlook

The department said the near-term outlook for Hong Kong's external trade is fairly favourable, on the back of the continuous expansion of the global economy and sustained growth in the Mainland's trade flow.

But there are still risks in the external environment, including the possible dampening impacts of the earlier surge in international oil prices and higher interest rates on the global economy, the lingering protectionist threats from the US and EU against the Mainland's exports, as well as the recent strengthening of the US dollar.

There was faster growth in domestic exports of clothing in recent months. Some local manufacturers have enlarged their clothing production in Hong Kong, in view of the safeguard measures imposed by the US and EU on certain Mainland items.

Domestic exports of non-clothing items taken together performed well. This trend, if continued, should help create jobs for local manufacturing workers.

Business expectations for the fourth quarter of 2005
Monday, October 31, 2005
Government Press Release

The Census and Statistics Department (C&SD) released today (October 31) results of the Quarterly Business Tendency Survey (QBTS) for the fourth quarter (Q4) of 2005.
　　　
2. According to the QBTS conducted by C&SD for Q4 2005, all sectors covered expect an increase in volume of business/output in Q4 2005 over the third quarter (Q3) of 2005. These include the manufacturing; construction; wholesale and retail; import and export trade; restaurants and hotels; transport and related services; banks, financing and insurance; and real estate, business services and telecommunications sectors.

3. In the manufacturing sector, more respondents expect an increase in their volume of production, as compared to those expecting a decrease, in Q4 2005 over Q3 2005. On the other hand, respondents generally expect their employment and selling price to remain broadly unchanged.

4. In the construction sector, slightly more respondents expect an increase in their volume of construction output, as compared to those expecting a decrease, in Q4 2005 over Q3 2005; while significantly more respondents expect an increase in their employment, as compared to those expecting a decrease. On the other hand, respondents generally expect their tender price to remain broadly unchanged.

5. In the wholesale and retail sector, a significant proportion of respondents expect their volume of sales to increase, in Q4 2005 over Q3 2005. Also, significantly more respondents expect an increase in their employment, as compared to those expecting a decrease. As to selling price, more respondents expect it to increase, as compared to those expecting a decrease.

6. In the import and export trade sector, more respondents expect an increase in their volume of sales, as compared to those expecting a decrease, in Q4 2005 over Q3 2005. On the other hand, respondents generally expect their employment to remain broadly unchanged. As to selling price, respondents generally expect it to remain broadly unchanged or to decline.

7. In the restaurants and hotels sector, significantly more respondents expect an increase in their volume of business and selling price of food and services provided, as compared to those expecting a decrease, in Q4 2005 over Q3 2005; while more respondents expect an increase in their employment, as compared to those expecting a decrease.

8. In the transport and related services sector, more respondents expect an increase in their volume of business, as compared to those expecting a decrease, in Q4 2005 over Q3 2005. Also, significantly more respondents expect an increase in their employment, as compared to those expecting a decrease. As to price of services rendered, respondents generally expect it to remain broadly unchanged or to decline.

9. In the banks, financing and insurance sector, significantly more respondents expect an increase in their volume of business and employment, as compared to those expecting a decrease, in Q4 2005 over Q3 2005. Also, more respondents expect an increase in their price of services rendered, as compared to those expecting a decrease.

10. In the real estate, business services and telecommunications sector, significantly more respondents expect an increase in their volume of business, as compared to those expecting a decrease, in Q4 2005 over Q3 2005; while more respondents expect an increase in their employment, as compared to those expecting a decrease. On the other hand, respondents generally expect their price of services rendered to remain broadly unchanged.

11. It has to be noted that in this type of survey on expectations, the views are affected by the events in the community occurring around the time of enumeration. The enumeration period for this round of the survey was from 12 September 2005 to 5 October 2005.

12. This survey gathers views on the short-term business outlook from the senior management of about 500 prominent establishments in various sectors in Hong Kong. Views collected refer only to those of the respondents on their own establishments rather than those on the respective sectors they are engaged in; and are limited to the expected direction of quarter-to-quarter change (i.e. "up", "same" or "down") but not magnitude of change. In collecting views on the quarter-to-quarter comparison, if the variable in question may be subject to seasonal variations, respondents are asked to provide the expected changes after excluding the normal seasonal variations.

13. Results of this survey are generally presented in the form of "net balance", which is the difference between the percentage of respondents choosing "up" over that choosing "down". The "net balance", with its appropriate sign, indicates the direction of expected change in the variable concerned. A positive sign indicates a likely upward trend, while a negative sign, a likely downward trend. However, the magnitude of the "net balance" reflects only the prevalence of optimism or pessimism about the near future, but not that the variable would go up or down in magnitude to that extent, as the magnitudes of expected changes are not collected in the survey.

14. Table 1 shows the net balances on views on expectations in respect of different variables.

15. A spokesman of the Department cautioned that, in a survey of this nature, the results should be interpreted with care, as it is difficult to establish precisely the extent to which respondents' perception of the future accords with the underlying trends.

16. The survey results are published in greater detail in the "Report on Quarterly Business Tendency Survey, Q4 2005". This publication is now on sale at HK$20 per issue. Both print version and download version of the publication can be purchased online at the "Statistical Bookstore, Hong Kong" (http://www.statisticalbookstore.gov.hk). Download version of the statistical publication can be purchased at 75% of its original price exclusively at the online Statistical Bookstore (http://www.statisticalbookstore.gov.hk). Print version if purchased online is also offered a discount, at 85% of its original price also at the Statistical Bookstore as well as the Government Bookstore (http://www.isd.gov.hk/eng/bookorder.htm).

17. For purchase of print version, this can be done through mail order by returning a completed order form which can be downloaded from the C&SD's website (http://www.censtatd.gov.hk/eng/prod_serv/forms_index.html). Purchase can also be made in person at the Publications Unit of the C&SD (Address: 19/F, Wanchai Tower, 12 Harbour Road, Wan Chai; Tel.: 2582 3025).

18. Enquiries about the survey results may be directed to the Business Expectation Statistics Section of the C&SD (Tel.: 2805 6112).

November 1, 2005
Government Press Release
Expanded RMB business in the works: HKMA

The People's Bank of China has agreed to provide clearing arrangements for renminbi business in four newly designated categories, while renminbi business in Hong Kong is set to expand in several other key ways, the Hong Kong Monetary Authority has announced.

Transportation, communication, medical services and education have been added to the list of designated merchants for renminbi business. It already includes retail sales, catering and accommodation.

Designated merchants can open renminbi deposit accounts and exchange their renminbi deposits into Hong Kong dollars.

The authority also noted that when arrangements and technical preparatory work is done, Hong Kong consumers will be able to open renminbi current accounts and pay for their shopping in Guangdong Province by cheques, subject to a daily limit of RMB80,000 per account.

Hong Kong residents' renminbi cash-exchange limit is increasing to RMB20,000 per person, per transaction, up from RMB6,000. That for renminbi remittances by Hong Kong personal depositors to savings accounts under the same name at banks on the Mainland will increase from not more than RMB50,000 per person per day to RMB80,000.

Participating banks are removing the RMB100,000 cap on renminbi credit cards and will determine credit limits according to market practice.

Financial Secretary Henry Tang, welcomed the arrangements.

"These measures will further facilitate cross-border spending by Mainland and Hong Kong residents and promote economic integration between the two places," he said.

"The agreement of the State Council to expand renminbi business in Hong Kong helps strengthen Hong Kong's role as an international financial centre."

HKMA Chief Executive Joseph Yam said the expansion of renminbi business would help improve the channel for renminbi fund flows between the Mainland and Hong Kong, paving the way for banks in Hong Kong to diversify their renminbi business.

Mr Yam added the authority would continue to work with the People's Bank of China in exploring the proposals for trade settlement in renminbi and the issuance of renminbi bonds in Hong Kong.

HK Q3 GDP up 2.7 pct on Q2, extends robust trend

HONG KONG, Nov 25 (Reuters) - Hong Kong's economy grew by a stronger-than-expected 2.7 percent in the third quarter, building on robust growth between April and June thanks to healthy exports, investment and consumer spending.

The rise in seasonally adjusted gross domestic product, which prompted the government to lift its full-year 2005 growth forecast to 7 percent, followed an upwardly revised second-quarter expansion of 3.4 percent.

"The Hong Kong economy is showing a lot of vitality," said Rob Subbaraman, senior economist at Lehman Brothers. "Consumption is benefitting from a tighter labour market and positive effects from rising asset prices. These two effects counteract the negative effects of higher interest rates."

The economy has now expanded for nine straight quarters, its longest growth cycle since an economic boom in the early 1990s.

But rising interest rates, an expected slowdown in the global economy and the potential threat of bird flu, should it become a human pandemic, posed risks for the economy in coming quarters, economists said.

From a year earlier, the economy grew 8.2 percent in the third quarter, outpacing the annual growth seen in some other Asian economies, including Singapore, Taiwan and South Korea.

Four analysts in a Reuters survey had forecast quarterly growth for July-September of between 0.9 and 1.6 percent and 10 analysts forecast annual growth of 5.9 percent.

The government data showed private consumption expenditure rose 2.2 percent in the third quarter from the previous quarter, and exports expanded by 2 percent.

Third-quarter investment spending was 2.4 percent higher than a year earlier.

Financial Secretary Henry Tang said the economy's third-quarter performance was robust and broad based. However, he said there were still risks and he would leave a decision on tax cuts until his annual budget in February.

"I cannot make that decision today because there are many other external factors that remain concerns, for example avian flu or other external shocks that can dampen our economic situation," Tang told reporters.

CONSUMPTION

Rising interest rates, a result of Hong Kong's currency peg to the U.S. dollar, have started to hurt consumption and halted a property market rebound.

Economists expect growth to slow in the fourth quarter although China's economic boom will still provide support and the third-quarter performance of Hong Kong's economy could boost consumer confidence, analysts said.

Tang said the government's forecast for 7 percent growth this year, revised up from 4.5 to 5.5 percent previously, assumed fourth-quarter GDP would rise 6.2 percent on a year ago.

Exports have been particularly strong but they are expected to cool next year in tandem with a slowdown in the global economy.

A recent Reuters poll forecast 2006 GDP growth at 4.6 percent.

"Next year interest rates will peak in the first half and the strong employment growth we are seeing will result in wage growth, which will boost consumption," said Paul Tang, senior economist at Bank of East Asia. "But I think the trade performance will not be as good as this year."

Tame inflation supports economic growth. On Friday the government lowered its forecast for average inflation in 2005 to 1.2 percent from 1.5 percent. Analysts see it topping 2 percent in 2006. (Additional reporting by Donny Kwok, Wendy Lim and Tan Ee Lyn)

Hong Kong Oct exports seen up 14 pct on year before

HONG KONG, Nov 25 (Reuters) - Hong Kong exports in October probably rose 14 percent in value from a year earlier, a Reuters survey showed, with growth slowing slightly and possibly set to slow further next year if the U.S. and Chinese economies cool.

In September, exports were 17 percent higher than a year earlier, the strongest annual growth since January.

Most of Hong Kong's exports are re-exports to or from China. The territory's second-biggest export market is the United States.

Both economies are expected to slow next year, particularly the United States, thereby weakening demand for shipments through Hong Kong, analysts said.

"American households' purchasing power is being eroded by high energy prices and rising interest rates," said Joe Lo, senior economist at Citigroup. "We expect China's economic growth to moderate next year as well, so overseas demand for Hong Kong exports will be weaker next year."

Citigroup forecasts 7.7 percent growth in the value of Hong Kong exports in 2006, down from an estimated 11 percent this year.

The survey of eight economists forecast the territory's imports in October were probably 13.2 percent higher by value than a year earlier, which would give a trade deficit of HK$1.9 billion (US$243.6 million), narrowing from a HK$4.2 billion deficit in September.

In September, imports rose 15.1 percent by value from a year earlier.

The government is due to release October trade data on Monday after 4:15 p.m. (0815 GMT).

A robust trade sector has provided a cushion for Hong Kong's economy this year and offset a slowdown in growth in consumer spending as households appear more cautious after interest rate rises.

Exports have outperformed expectations and since May annual growth in shipments has ranged between 8.1 percent and 17 percent.

Friday, the day after the Thanksgiving holiday, traditionally marks the start of the Christmas shopping period in the United States and should give some indication of the strength of Christmas demand.

If it is good, Hong Kong's exports could surge in December as U.S. retailers rush to take in more goods at the last minute, analysts said.

Forecasts for October trade by value (percentage changes from a year earlier):

Exports Imports
UBS 18.4 19.0
Bank of East Asia 15.0 13.0
DBS Bank 15.0 16.0
ING Financial Markets 14.0 14.5
Standard Chartered Bank 14.0 13.0
JP Morgan 13.1 13.3
Citigroup 13.0 12.0
Hang Seng Bank 12.0 12.8
____________________________________________________
Median 14.0 13.2

Monday November 28, 7:19 PM
DATA VIEW: HK Oct Exports Slow But Momentum Still Strong

HONG KONG (Dow Jones)--Growth in Hong Kong's exports moderated in October, government figures issued Monday showed, though the expansion still continued at double-digit rates thanks to robust trade with mainland China.

Economists expect the city's exports to maintain a similar level of growth in the final months of 2005, before slowing to single-digit levels next year as a result of an anticipated slowdown in the global economy.

The Census and Statistics Department said October exports rose 11.6% from a year earlier to HK$213.5 billion, slower than the 17% expansion in September.

Growth in imports also slowed during the month, to 9.7% on year to HK$210.0 billion, compared with a 15.1% rise in September. The October trade surplus was HK$3.5 billion.

The latest results were below economists' expectations, which centered on export growth of 15% for the month For the first 10 months of 2005, the total value of exports rose 11.9% over the same period in 2004, the government said.

"While export growth was below our forecast, the fundamentals are still very strong," said George Leung, an economist at HSBC in Hong Kong. "This rate of growth should be maintained for the rest of this year on a strong Christmas season."

He said Hong Kong continues to benefit from surging global demand for Chinese products, as about 95% of the city's exports are re-exports of goods produced in mainland China.

Office and automatic data processing machines posted the strongest growth among re-exports in October, surging 70% on year to HK$11.5 billion.

October's export figures reflect the third consecutive month of double-digit expansion following slower growth in the earlier months of the year.

"The key here is that exports are still expanding at quite an impressive level in Hong Kong's standards," said Tai Hui, an economist at Standard Chartered. "Double-digit growth is more the exception rather than the norm."

But with an expected slowdown in the global economy in 2006 as a result of high oil prices and interest rates, Hui said China's exports growth will likely moderate from this year's level.

"Hong Kong's re-exports will also slow as a result, leading to high single-digit growth for next year," he said.

On the domestic front, the slowdown in import growth is a sign of moderating domestic demand, said Hui.

"With interest rates rising and the property market in a quiet period, this will have a moderating impact on consumption; the slower imports do reflect that."

December 5, 2005
Government Press Release
Economic outlook positive: Henry Tang

Financial Secretary Henry Tang is upbeat about Hong Kong's outlook saying the economy has performed better than expected despite oil price and interest rate hikes.

Speaking at the Legislative Council Financial Affairs Panel today, Mr Tang said forecast GDP growth for this year has been revised upward to 7% from 4.5 to 5.5%, giving due allowance for some moderation in global and regional demand in the fourth quarter.

Noting the economic outlook for next year will be affected by a range of uncertainties, Mr Tang said details of the economic forecast will be announced in his Budget Speech in February.

The International Monetary Fund forecasts Hong Kong's economy to grow 4.5 to 5% next year while private sector analysts are predicting 4% to 5%. The forecasts essentially expect GDP growth to ease back to a level which is more commensurate with the trend of GDP growth in the past.

Tax cut requests noted

Mr Tang said the Government's operating revenue fluctuates often and the need to broaden the tax base should be explored. While it is too early to say whether there will be any tax cut, Mr Tang said he is aware of public opinion on the issue.

He said the number of jobless is about 200,000 due to economic restructuring, low wages and job mismatches, adding the Government's cost-effective procurement policies will not affect employment opportunities.

With the revival of the property market, he said the construction sector's employment situation will improve. Measures to enhance Hong Kong's business-friendly environment are also being studied to create more jobs.

Job vacancies up 40%

Secretary for Economic Development & Labour Stephen Ip said the number of job vacancies from the private sector for this year's 11 months rose 40% over a year earlier.

While the construction sector's jobless rate fell from 20% to around 10%, he pledged the Government will spend $2.9 billion a year in infrastructural projects. More rural public projects and building repair works will be available to boost jobs.

Bank of China Expands Renminbi Services in Hong Kong

HONG KONG, Dec 6 Asia Pulse - Bank of China (Hong Kong) Limited (BOCHK) Monday expanded its Renminbi (RMB) services in Hong Kong, allowing designated merchants to open RMB accounts and raising maximum limit for locals to exchange and remit the currency.

Merchants of various business, including retailing, catering, accommodation, transportation, communication, medical services and education, now can open deposit RMB accounts in RMB and exchange their RMB to HK dollars.

In addition to the enlarged service to businessmen, the bank on Monday also uplifted the limit for personal RMB cash exchange and remittance.

Hong Kong people now can exchange 20,000 yuan (US$2,476) per person per transaction, up from the previous 6,000 yuan. They can now remit 80,000 yuan per person per day, up from the former limit of 50,000.

The new RMB service in Hong Kong proved the bank's determination to further enlarge its RMB business, Deputy Chief Executive of BOCHK David Lam told reporters at a brief ceremony on Monday.

"In view of the anticipated further expansion of RMB business and increasing customer needs, BOCHK is committed to providing Hong Kong people with the most professional, comprehensive and quality RMB services by exploring more diverse and innovative products," he said.

The bank has reported growing business in Hong Kong over the past two years. The number of ATMs that can provide RMB cash withdrawal has increased from 83 in 2003 to this year's 242 in Hong Kong.

Meanwhile, transactions for RMB cash via ATMs in Hong Kong has increased by 170 per cent from May 2004 to October 2005, according to data provided by the bank.

BOCHK first launched its personal RMB service in Hong Kong on February in 2004.

(XIC)

HK October domestic exports up 30.3 pct on year

HONG KONG, Dec 23 (Reuters) - The volume of Hong Kong's domestic exports in October 2005 rose by 30.3 percent from a year earlier, while re-exports increased by 11.9 percent, the Census and Statistics Department said on Friday.

The total volume of the territory's exports, including re-exports through China, rose 13.1 percent while total imports climbed 10.5 percent from a year ago, the department said in a statement.

The volume of domestic exports for the first ten months of 2005 increased by 3.5 percent while that of re-exports rose by 12.1 percent. Total exports were up 11.6 percent and imports increased by 7.9 percent.

Prices of domestic exports meanwhile fell 0.7 percent in October 2005 from a year earlier and re-export prices increased by 0.7 percent. Total export prices were up 0.6 percent and import prices also increased by 1.4 percent, the data showed.

Prices of domestic exports for the first ten months of 2005 were 2.7 percent higher, while those of re-exports increased by 1.4 percent. Total export prices were up 1.5 percent and import prices increased by 3.0 percent.

The department said prices are based on unit values which do not take into account changes in the composition or quality of goods traded, except for some selected commodities for which specific price indices are available.

04 Jan 2006
HKU Press Release
HKU Predicts a Moderate Growth for Hong Kong Economy

Hong Kong Economic Outlook

The APEC Study Center of the University of Hong Kong (HKU) today (January 4) released its quarterly Hong Kong Macroeconomic Forecast. According to its High Frequency Macroeconomic Forecast, real GDP growth in Q1 of 2006 is forecast to moderate to 6.2%.

The real GDP growth in Q4 of 2005 is estimated to be 6.6% on a year-on-year basis, which is indeed an upward revision of the 6.0% forecast released on October 5, 2005 due to stronger GDP growth of 8.2% in 05Q3.

Professor Richard Wong Yue-Chim, Director of the APEC Study Center at HKU, said: "Despite further tightening of monetary conditions with the Federal Fund Rate increased by 8 times, and the 40% increase in oil prices, the global economy has not been derailed from its robust growth path."

Following the rapid real GDP growth of 8.2% in 2004, the Hong Kong economy is forecast to grow by 7.1% last year. The growth was mainly driven by external trade, with the net exports of goods and services contributed 5.2 percentage points to the overall growth." Professor Wong added.

"Global economic growth is expected to slowdown this year. Due to a weaker external environment, real GDP growth is forecast to moderate to 5.0%, with consumer inflation rate rising to 2.5% by year-end, and unemployment rate averaging around 4.8%," said by Dr Alan Siu, Executive Director of the APEC Study Center at HKU.

Forecast Highlights

The forecast details are in Table 1 and Table 2, and the forecasts of selected monthly indicators are in Table 3. All growth rates reported are on a year-on-year basis.

For Chart 1 please click here : http://www.hku.hk/eroesite/html/press/table1.doc

- Boosted by continued robust economic growth, private consumption spending rose by 4.6% in 05Q3. Positive outlook on employment growth and the holiday seasons provided further support for growth in private consumption in the last quarter, with private consumption spending projected to grow by 4.8%. For the year as a whole, private consumption grew by 4.1%. In the Q1 of 2006, private consumption spending is forecast to grow by 4.4%

- Total exports grew by 12.8% in 05Q3, faster than the 11.1% growth in 05Q2. The growth momentum is expected to moderate. It is estimated to be 10.2% in Q4 of 2005 and 10.8% for year 2005 as a whole. Total exports growth is forecast to be 10.4% in Q1 of 2006.

- After falling by 9.6% and 8.3% in 05Q1 and 05Q2 respectively, domestic exports strongly rebounded to a 14.2% growth in 05Q3, flipping the trend back onto the growth track. Domestic exports is projected to preserve its momentum to surge by 18.1% in Q4 of 2005 and 4.9% for the whole year. It is forecast to growth by 13.0% in Q1 of 2006.

- Re-exports grew by 12.7% in 05Q3 and expected to remain strong. It is estimated to grow by 9.6% in 05Q4 and 11.2% for 2005 as a whole. In the Q1 of 2006, it is projected to grow by 10.3%.

- Service exports grew by 8.2% in 05Q3. The number of visitor arrivals increased by 6.4% in October 2005, when compared with the same period in 2004. Service exports is forecast to expand by 6.5% in 05Q4 and by 8.0% for 2005 as a whole. The growth in the Q1 of 2006 is estimated to be 7.3%.

- Imports of goods grew by 11.0% in 05Q3. The growth of imports of goods is estimated to be 10.7% in 05Q4 and 8.3% for the year 2005 as a whole. The growth is forecast to be 10.4% for the current quarter.

- Import of services grew by 3.7% in 05Q3. As expected, the growth in travel related service imports was dampened by rising oil prices in Q3 and grew by only 0.3%. Service imports is forecast to grow by 6.1% in 05Q4 and 3.9% for the year of 2005. It is estimated to grow by 3.2% in the Q1 of 2006.

- The trade balance, as measured by the net exports of goods and services, is estimated to be 18.5% of GDP in 05Q3. It is forecast to be 18.0% of GDP in 05Q4 and 13.0% for the year 2005. It is projected to be 14.4% of GDP in the current quarter.

- Gross fixed investment rose by 2.4% in Q3 of 2005. The growth is expected to be 3.2% in 05Q4 and 2.6% for the year of 2005. In the Q1 of 2006, it is expected to grow by 2.1%.

- Investment in land and construction dropped by 6.7% in Q3 of 2005. Due to the lack of the commencement of major projects, the investment in land and construction is forecast to drop by 8.1% in 05Q4 and by 4.7% for the year of 2005. It is estimated to fall by 7.5% in Q1 of 2006.

- Investment spending in machinery, equipment and computer software increased by 8.1% in Q3 of 2005, and is projected to grow by 11.3% in Q4 of 2005. It is forecast to go up by 7.7% for the whole year of 2005, and up by 9.3% in the current quarter.

For Chart 2 please click here : http://www.hku.hk/eroesite/html/press/table2.doc

- Inflation, as measured by the year-on-year percentage change of the Composite CPI, grew by 1.4% in 05Q3, rising further from the 0.8% increase in 05Q2. The strength of the US dollar and the easing of increases in oil prices softened the upward pressure on consumer prices. Inflation rate is estimated to be 1.8% in 05Q4 and to be 1.1% for the year of 2005. Inflation is expected to increase slightly to 2.0% in the current quarter.

For Chart 3 please click here : http://www.hku.hk/eroesite/html/press/table3.doc

- The provisional seasonally adjusted unemployment rate stood at 5.3% in the three months average ending in November 2005, unchanged from the previous estimate for the three months ending in October 2005. Employment situation kept improving. The median duration of unemployment dropped significantly to 76 days in 05Q3 as compared to the high level of 99 days recorded in 04Q3. The unemployment rate is forecast to be 5.2% in Q4 of 2005, and to drop to 5.0% in the current quarter.

Concluding Remarks

As a small open economy, the economic outlook of Hong Kong depends critically on the external trade environment. Riding on the strong global economy in the past two years, with world output increasing by over 5% and 4% in 2004 and 2005 respectively, Hong Kong's economy has rebounded quickly from its trough brought on by SARS in the first half of 2003. Despite an expected further tightening in the monetary conditions in the first half by around 50 to 75 basis points, 2006 is forecast to be another year of robust growth, albeit at a slower pace. Hong Kong's real GDP growth will slow from 7% in 2005 to around 5% this year. Pushed up by increasing rentals, imported prices and nominal wages, consumer inflation rate will increase to 2.5% in 2006, up from an estimated 1.1% in 2005. The labour market will continue to improve, with the unemployment rate dropping from 5.6% in 2005 to an average of 4.8% this year.

For the presentation slide please click here : http://www.hku.hk/eroesite/html/press/presentation.pdf

About Hong Kong Macroeconomic Forecast Project

The Hong Kong Macroeconomic Forecast is based on research conducted by the APEC Study Center of the HKU's Faculty of Business and Economics. It aims to provide the community with timely information useful for tracking the short-term fluctuations of the economy. The current quarter macro forecasts have been released on a quarterly basis since 1999.

The high frequency forecasting system was originally developed in collaboration with Professor Lawrence Klein of the University of Pennsylvania in 1999-2000. Since then, the system has been maintained and further refined by the HKU APEC Study Center.

The project is sponsored by the HKU Foundation for Educational Development and Research. The Steering Committee is chaired by Dr Chow Yei-Ching, Chairman & Managing Director of Chevalier International Holdings Ltd, with Mr Michael Leung, Executive Chairman of Onwel Group, as Deputy Chairman. Both Dr Chow and Mr Leung are members of the Board of Directors of the HKU Foundation.

The Hong Kong Centre for Economic Research at HKU provides administrative support to the project. Researchers at the APEC Study Center are solely responsible for the accuracy and interpretation of the forecasts. Our quarterly forecasts can be accessed at http://www.hku.hk/apec/.

For media enquiries, please contact Elsie Leung of HKU's External Relations Office at tel. 2859 2600.

^^ Thank you for providing us with the latest news! :bow:

Hong Kong may cut tax burden on offshore funds by March
9 January 2006

KUALA LUMPUR, Malaysia (AP) - Hong Kong expects to approve a legislation exempting offshore funds from paying profit tax by March in a move aimed at luring foreign investors to set up operations in the Chinese territory, a top Hong Kong government official said Monday.

Frederick Ma, secretary for financial services and the treasury, said plans to abolish the 17.5 percent profit tax on offshore funds trading in Hong Kong securities would be a "big attraction" for foreign investors and help deepen liquidity in the stock market.

"We are hoping this legislation will be passed in the first quarter of this year," he told reporters here on the sidelines of an investors conference here. "This will put us at par, if not more favorable, with some financial centers like the U.K. and the U.S."

To avoid paying high taxes, many investment funds are based in places such as the Cayman Islands, the British Virgin Islands and Mauritius.

The Hong Kong stock exchange, ranked the eight largest in the world and second in Asia after Tokyo, has grown rapidly since 1983, when it allowed companies from mainland China to list on the bourse, he said.

A tight regulatory regime, strong corporate governance and low transaction costs are among other factors that have enhanced investors' confidence, he added.

More than 60 percent of funds managed in Hong Kong are from foreign investors, he said.

Ma said Hong Kong's fiscal position has "improved significantly" since last year in line with a stronger economy and that trend is expected to continue.

He declined to comment on whether the government could achieve a balanced budget earlier than expected, saying details will be announced when the government unveils its new budget on Feb. 22.

The government has revised upward its forecast for economic growth for the fiscal year ending March 2006 to 7 percent from 4.5-5.5 percent previously, he added.

HK November domestic exports rise 28.8 pct on year

HONG KONG, Jan 23 (Reuters) - The volume of Hong Kong's domestic exports in November 2005 rose by 28.8 percent from a year earlier, while re-exports increased by 12.2 percent, the Census and Statistics Department said on Monday.

The total volume of the territory's exports, including re-exports through China, rose 13.2 percent while total imports climbed 12.2 percent from a year earlier, the department said in a statement.

The volume of domestic exports for the first 11 months of 2005 decreased by 5.9 percent, while re-exports rose 12.1 percent. Total exports increased by 11.7 percent and imports increased by 8.3 percent.

Prices of domestic exports fell 0.3 percent in November 2005 from a year earlier, while re-export prices increased by 0.6 percent. Total export prices were up 0.5 percent and import prices increased by 1.9 percent, the data showed.

Prices of domestic exports for the first 11 months of 2005 were 2.4 percent higher, while those of re-exports increased by 1.3 percent. Total export prices were up 1.4 percent and import prices increased by 2.9 percent.

The department said prices are based on unit values that do not take into account changes in the composition or quality of goods traded, except for some selected commodities for which specific price indices are available.

POLL-HK's economic growth to moderate to 5.2 pct in 2006
By Susan Fenton

HONG KONG, Jan 25 (Reuters) - High interest rates and slowing export growth mean that Hong Kong's economic growth will moderate to 5.2 percent in 2006, a still-respectable rate but a step down from the pace of the last two years, a Reuters poll shows.

However, economists were more bullish on 2006 than in the previous quarterly survey in October, when their median forecast for growth in gross domestic product was 4.6 percent.

"We expect interest rates will still be at a relatively high level for most of this year and that will dampen consumption growth," said Joe Lo, senior economist at Citigroup.

"Exports will also slow because of less robust U.S. demand but other sectors should perform well, particularly finance and tourism."

For 2005, the median forecast of the 11 analysts polled was the economy grew 7.2 percent, a strong result after growth of 8.2 percent in 2004 when the territory's upswing took hold.

None of the survey respondents expected a change this year in the Hong Kong dollar's peg of 7.75-7.85 to the U.S. dollar.

As a result of the peg, Hong Kong's central bank tracks U.S. interest rate moves. But while official rates have been rising since mid 2004, commercial lending rates in Hong Kong were slower to react, only starting to rise over the last year.

The higher rates have started to take a toll on consumption, although some economists expected wage growth this year would offset that and enable still healthy growth in consumer spending.

Blue-chip companies are on course for double-digit earnings growth and in many cases are set to raise wages by more than 5 percent, economists said.

Inflation is set to rise in 2006 but should remain tame. The median forecast was for inflation to rise to 2.5 percent this year from 1.1 percent in 2005, driven by housing rents which have surged more than 10 percent in the past year.

Exports, a pillar of the economy, face slowing demand due to softer growth in the United States, Hong Kong's second-biggest export market, and as exports become a less important driver of growth in China.

Hong Kong's exports are predominantly re-exports to and from China. A think-tank with China's national planning authority has forecast a 15 percent rise in China's exports in 2006, well down from close to 30 percent growth in 2005.

TABLES Historical data:



GDP CPI TRADE BALANCE
(Pct chge yr/yr) (Pct) (US$ bln)
2000 10.2 ~~~ -10.9
2001 0.6 -1.6 -11.2
2002 2.3 -3.0 -7.6
2003 3.2 -2.6 -8.1
2004 8.2 -0.4 -11.8
2005 n/a 1.1 n/a
--------------------------------------------------------
Five-year average 4.9 -1.3 -9.9
Following are the results of the latest survey:
GDP CPI TRADE BALANCE
(Pct chge yr/yr) (Pct) (US$ bln)
2005 2006 2006 2005 2006
Merrill Lynch 7.5 6.0 3.9 -9.4 -9.9
Credit Suisse 7.4 4.4 2.6 n/a n/a
Hang Seng Bank 7.4 5.3 2.3 -9.6 -9.7
UBS 7.4 5.5 2.6 -8.7 -6.1
ING Financial Mkts 7.3 5.0 2.0 -8.6 -8.2
DBS Bank 7.2 5.5 2.5 -8.0 -2.8
HSBC 7.2 4.8 2.2 -6.2 -5.6
Lehman Brothers 7.2 5.5 4.0 -8.0 -10.0
Citigroup 7.1 4.3 3.0 -8.4 -9.8
Standard Chartered 7.1 4.8 1.9 -13.5 -15.0
Bank of East Asia 7.0 5.2 2.5 n/a n/a
-------------------------------------------------------
Median 7.2 5.2 2.5 -8.6 -9.7
Median forecasts made in previous Reuters surveys:
2005 2006 2006 2005 2006
Oct 2005 5.8 4.6 2.8 -10.2 -9.8
July 2005 4.6 4.5 2.5 -13.0 -12.6
May 2005 5.0 4.5 2.6 -13.0 -12.4
Jan 2005 4.8 n/a n/a -13.5 n/a
Nov 2004 4.1 n/a n/a -16.9 n/a

Export growth slows on trade disputes

Hong Kong's exports unexpectedly slowed in December to the smallest gain in nine months, as shipments from the mainland, its major trading partner, were crimped by trade disputes with the United States.

Lee Yuk-kei
Hong Kong Standard
Friday, January 27, 2006

Hong Kong's exports unexpectedly slowed in December to the smallest gain in nine months, as shipments from the mainland, its major trading partner, were crimped by trade disputes with the United States.
Total exports rose 6.7 percent last month from a year earlier to HK$188.8 billion after an 11.5 percent gain in November, and was the slowest growth since 3.5 percent in March. Economists polled by Bloomberg had forecast a 12 percent growth.

"The worse-than-expected December exports were due to the declines in clothing and textiles," said Daniel Chan, senior investment strategist at DBS Bank (Hong Kong).

"Because of the Sino-US trade disputes last year, manufacturers delivered their goods at a much earlier period before any trade barriers were put in place," he said.

The United States and China reached an agreement in November last year to put quotas on Chinese clothing exports after three months of negotiations. The mainland's exports expanded 28 percent in 2005 but slowed to 18-19 percent in November and December.

Hong Kong is a major port to handle Chinese shipments, and re-exports account for about 90 percent of its total exports. The city is also facing rising competition from mainland ports, particularly in nearby Shenzhen where handling fees are cheaper.

"There was a slowdown in the growth of re-export trade, partly reflecting the decrease in the re-exports of textile and clothing products towards the end of the year," a government spokesman said.

Re-exports of textiles slipped 9 percent and clothing 1.5 percent in December, the government said. For the full year, clothing re-exports rose 18 percent but textile re-exports fell 3 percent.

"We expect exports growth to moderate to 9 percent in 2006 partly reflecting a moderation of China's growth," said Deutsche Bank in a research note Thursday.

Hong Kong's imports rose 10.6 percent in December over a year earlier to HK$205.6 billion, slowed from the 13.6 growth in November. It recorded a trade deficit of HK$16.9 billion last month.

For the whole of 2005, the city exported 11.4 percent more goods and imports grew 10.3 percent, resulting in a trade deficit of HK$79.3 billion, the government said.

Deloitte sees HK$20-25 bln budget surplus for HK

HONG KONG, Feb 9 (Reuters) - Hong Kong is set to post a budget surplus of up to HK$25 billion (US$3.2 billion) for the year ending March 2006 and should stay in the black in 2006/07, accountants Deloitte forecast on Thursday.

Tax revenues and income from land premiums would have been boosted by economic growth that was expected to have topped 7 percent in calendar 2005, Deloitte said, resulting in a consolidated surplus of HK$20-25 billion for 2005/06.

The estimate is much higher than a forecast by accountants' PricewaterhouseCoopers for a HK$12.7 billion surplus for 2005/06.

Hong Kong posted a HK$21.4 billion headline consolidated surplus in 2004/05, the first since 1999/2000. But excluding HK$26 billion in revenue from bond and note issues -- debt that has to be repaid -- the budget remained in deficit.

For 2005/06, Deloitte expects profits tax revenue of HK$60.5 billion and HK$34.7 billion from salaries tax.

Land sales this fiscal year have generated only HK$10.7 billion, well below a government target of HK$21.2 billion, and no more are scheduled.

"However, total income from land, including land premiums, already stood at HK$31.3 billion by mid-January so the government should meet its forecast for HK$31.9 billion," Yvonne Law, a tax partner at Deloitte, told a press briefing.

The accounting firm expects the territory to post a much smaller surplus of HK$5-10 billion in 2006/07, predicting that economic growth will slow to around 5 percent in calendar 2006. (US$=HK$7.8)

SAR to fortify status as finance capital
Michael Ng
Hong Kong Standard
Friday, February 10, 2006

Members of the executive committee of the Commission on Strategic Development have agreed to focus on ways to further promote Hong Kong as a world financial center.

After hosting a meeting Thursday chaired by Chief Executive Donald Tsang, Central Policy Unit chief Lau Siu-kai said most members of the body agreed it was important to strengthen Hong Kong's status as a financial center as well as to pay more attention to national development. Some members even suggested developing Hong Kong as an asset management center to attract more mainland private enterprises.

To this end, Lau said, questionnaires will be sent to all 35 members on the two issues and a workshop will be held next month to explore solutions.

Lau said members had not yet discussed a suggestion to form a new government department that will coordinate and implement Hong Kong's external policies and act as an ambassador to promote China's peaceful diplomacy.

Member Chan Wing-kee, a local delegate to the Chinese People's Political Consultative Conference, said a few members suggested that political development in Hong Kong could serve as an example for similar development in the mainland.

But, he added, Hong Kong should also make it clear that as a special administrative region, it will not interfere in state affairs.

"In order to consolidate the mutual trust between the two sides, Hong Kong people should not try to impose our political system on the mainland," Chan said. He was also bullish over political development in China.

"As a CPPCC member for more than a decade, I have already noticed considerable progress in the mainland. I am sure there will be even more progress in the future," Chan said.

The 152-member commission was recently revived and split into four groups by Tsang to help reach a consensus on important matters, such as political and social development.

HK's economy set for 5.5 pct growth in 2006 -IMF

HONG KONG, Feb 14 (Reuters) - Hong Kong's economy is on course for slower growth of 5.5 percent this year but should balance its budget for the first time in several years, the International Monetary Fund said on Tuesday.

Slower growth would be due to easing external demand although the IMF's forecast was higher than many economists' projections for a 5 percent expansion this year. "If global demand weakens significantly, Hong Kong's current driver of growth -- net exports -- could be threatened," the IMF said in its latest economic review of the territory, released on Tuesday. "On the upside, consumption and investment growth could be higher, reflecting higher asset prices, stronger household balance sheets and sizeable increases in corporate profits."

Hong Kong's economy has been one of Asia's best performers in the past two years, expanding 8.2 percent in 2004 and by a projected 7 to 7.5 percent in 2005 thanks to robust export growth and investment and a revival of consumption.

Fundamentals remain solid despite slowing growth and inflation is well contained, the IMF said.

The Washington-based lender praised the Hong Kong government's restraint on spending. Coupled with strong economic growth, that would enable the government to balance its budget for the fiscal year ending March 2006 after a series of massive deficits since 1997/98 and well ahead of schedule, it said. However, the organisation urged the government to address longer-term concerns about its fiscal position, including an aging population, and welcomed a plan to proceed with a public consultation on a possible goods and services tax.

Financial Secretary Henry Tang, in his annual budget on Feb. 22, is expected to announce that the government will soon launch the consultation. It would take three years to implement if the government decides to go ahead with the tax.

The IMF said any such tax should be broadly based, be introduced with minimal exemptions and low-income families could be offered assistance to cope with the tax.

Increasing migration of younger skilled workers from abroad and encouraging retirees to relocate in the region while maintaining access to their Hong Kong pensions would also ease pressure on public finances, the report said.

From News.gov.hk:
Exchange Fund foreign assets up $33.5b (http://news.gov.hk/en/category/businessandfinance/060214/html/060214en03004.htm)

IMF commends Hong Kong's macroeconomic management
Government Press Release

The International Monetary Fund (IMF), in its Staff Report on Hong Kong released today (February 14), has given a positive assessment of Hong Kong’s economic performance and commends the Government’s fiscal and exchange rate polices.

The IMF projects the economy to have grown by 7% in 2005, which is in line with the latest Government projection. For 2006, real gross domestic product (GDP) growth is expected to moderate to 5.5%, with some easing of external demand. Inflation is expected to rise modestly to 1.5% in 2006 from 1.1% in 2005.

With the recent upturn in domestic prices, the IMF believes that the adjustment of the economy to the adverse shocks of the past seven years may finally be over, and that external competitiveness has been restored to a level that is consistent with economic fundamentals.

Projecting a budget balance in financial year 2005-06, the IMF believes that this is now a good time to develop a longer-term fiscal strategy to meet the challenges of an ageing population.

In formulating the strategy, the IMF believes consideration should also be given to the level of fiscal reserves, because adequate reserves underpin market confidence in the Government’s ability to meet higher and unanticipated spending pressure without significantly changing Hong Kong’s low-tax environment.

The IMF welcomes the Government’s intention to begin public consultation on the feasibility of introducing a low-rate goods and services tax. It also supports the Government’s plans to encourage greater private sector participation in delivering health care services. However, the IMF cautions against further tax concessions before any tax and health-care reforms.

Welcoming the publication of the Staff Report, the Financial Secretary, Mr Henry Tang, said the IMF’s positive assessment was an endorsement of the macroeconomic management of the Hong Kong Government.

“I am confident that Hong Kong, with its sound fundamentals and stable policy framework, will continue to maintain its competitiveness and resilience.”

The IMF reiterates its support for the authorities’ commitment to the linked exchange rate system. The three refinements introduced since last May have successfully dampened speculative inflows related to market expectations of a renminbi appreciation and helped keep financial markets calm after the regime shift in the renminbi exchange rate last July.

The IMF welcomed the initiatives undertaken to strengthen Hong Kong’s financial market infrastructure and supervisory systems. It also welcomed progress made on the introduction of a deposit protection scheme, preparations for adopting Basel II by banks and the establishment of the Financial Reporting Council.

The IMF also noted the importance of Hong Kong playing an increasing role in the Mainland’s financial intermediation. The continued success of Hong Kong as an international financial centre hinged upon its ability to assist in the Mainland’s financial intermediation, a process in which Hong Kong was well-positioned to play given its sophisticated financial infrastructure. To this end, co-operation and coordination of financial authorities between the two economies would become increasingly important.

On maintaining Hong Kong’s status as an international financial centre, the Chief Executive of the Hong Kong Monetary Authority, Mr Joseph Yam, said efforts over the past years to encourage the Mainland to make greater use of Hong Kong’s sophisticated financial platform would consolidate and enhance Hong Kong’s position as the pre eminent financial centre for the Mainland.

The IMF mission visited Hong Kong between October 13 and October 25 last year to conduct the Article IV Consultation.

The Staff Report on the Consultation is the sixth report published by the Government, following its agreement to participate in the IMF’s exercise to increase transparency in its assessment of world economies.

The IMF’s Public Information Notice is attached as annex. The Staff Report can be obtained from the website of the Financial Services and the Treasury Bureau [www.fstb.gov.hk] or the IMF website [www.imf.org].

'Best-case' surplus $28b
16 February 2006
South China Morning Post

The government may announce it has spent as much as $20 billion less than forecast this financial year, producing a budget surplus of $28 billion and putting public finances in their best shape since the handover, says an accountant.

"This is really a best-case scenario, and I expect the financial secretary to announce a lower figure of below $20 billion next week, as the data for February and March is still unknown," PricewaterhouseCoopers tax partner Tim Lui Tim-leung said.

"But when the numbers are reported in October or November, I wouldn't be surprised if it's in the $28 billion region."

This far outstrips other surplus estimates, including Ernst & Young's $18.5 billion and the Taxation Institute of Hong Kong's $10 billion. The government estimates a $10.5 billion deficit.

Based on the latest government data, Mr Lui said he was looking at a consolidated surplus of just less than $20 billion, buoyed partly by healthy land premium receipts. Further savings on expenditure, which he expects to total about $231 billion versus the original $253.6 billion estimate, would contribute another $8 billion, he noted.

Financial Secretary Henry Tang Ying-yen is already facing mounting public pressure to return some of the wealth to taxpayers, but fiscal prudence will likely limit what he can actually do.

Hong Kong set to balance budget, offer tax reliefs
By Susan Fenton

HONG KONG, Feb 16 (Reuters) - Hong Kong is set to announce a second straight budget surplus for fiscal year 2005/06 next week after strong economic growth and higher asset prices, which may give the government leeway to cut taxes, analysts said.

Financial Secretary Henry Tang is expected to announce that the government's operating account moved into the black for the first time since the 1997/98 Asian crisis.

On the consolidated account, accountants are forecasting a surplus as high as HK$28 billion ($3.6 billion) -- about 2 percent of gross domestic product -- compared with an original estimate for a HK$10.5 billion deficit.

"The general feeling is: we've had a good year we should cut taxes," said David O'Rear, chief economist at the Hong Kong General Chamber of Commerce.

Tang, due to deliver the budget on Wednesday after 11 a.m. (0300 GMT), is expected to announce the economy grew by at least 7 percent last year, making it one of Asia's best performers.

With robust growth boosting tax revenues and income from land premiums, analysts expect he may fine-tune existing policies to deliver some reliefs.

Income and profits taxes were raised during an economic slump in 2002/03. Rather than rolling them back, Tang could keep standard salaries and profits tax rates at 16 and 17.5 percent, respectively, but adjust progressive income tax rates.

A single person on HK$135,000 a year who pays progressively higher tax for every HK$30,000 earned, for example, could see that limit raised to every HK$35,000, say accountants Deloitte.

That way, Tang will be offering relief to taxpayers without pushing more people out of the tax net.

"We suggest no change to the basic profits and salaries tax rates," said Yvonne Law, tax partner at Deloitte, adding that while the economy had recovered, it could not afford a lot of tax cuts. "We don't think a lot of companies will come to Hong Kong just because of a 1 percent drop in the tax rate."

BALANCING BUDGET

PricewaterhouseCoopers said the government could offer a one-off across-the-board tax rebate of between 5 and 10 percent to avoid tinkering again with tax rates, which could provide a short-term boost to consumer spending.

To broaden the tax base and ensure more stable income in the long term, Tang is also expected to announce plans for a public consultation on a goods and services tax (GST).

Hong Kong posted a HK$21.4 billion headline consolidated surplus in 2004/05, the first since 1999/2000. But excluding HK$26 billion in revenue from bond and note issues -- debt that has to be repaid -- the budget remained in deficit.

The territory relies heavily on income from land and more than 40 percent of wage earners pay no income tax.

The government has been committed to cutting spending to less than HK$200 billion a year and could achieve that level for the year ending March 2006, analysts said.

Tobacco tax was expected to be raised to discourage smoking while "green" taxes, such as a levy on the use of plastic bags and incentives to encourage waste recycling, could be introduced.

Hong Kong's strong economic performance over the past two years has been enhanced by its expanding role as a services hub for Greater China. Deloitte expects the financial secretary could abolish a 0.2 percent stamp duty on the transfer of shares to promote the territory's status as a regional financial centre.

Some also predicted Tang could help homeowners, stung by a series of interest rate rises in the past year, by extending home loan interest relief for two years.

(US$1 = HK$7.8)

From News.gov.hk:
Jobless rate falls to 5.2%, 52-month low (http://news.gov.hk/en/category/atschool/060217/html/060217en02007.htm)

Hong Kong Q4 2005 GDP growth seen at 7.2 pct yr/yr
By Susan Fenton

HONG KONG, Feb 17 (Reuters) - Hong Kong's economy probably grew by 7.2 percent in the fourth quarter of 2005 from a year earlier, slowing from the previous quarter as the trade sector cooled, a Reuters survey showed.

However, economists said domestic consumption was still strong because of solid employment growth and wage rises.

The median forecast of nine economists had annual growth slowing after an 8.2 percent rise in the third quarter from a year earlier.

"Employment growth improved in the last quarter of 2005 and we also saw a rise in some people's income, which will translate into improved purchasing power," said Henry Tsoi, senior economist at Hang Seng Bank.

"We expect a slowdown in growth in external demand this year but domestic demand will still be a driver of economic growth."

Financial Secretary Henry Tang will announce fourth-quarter gross domestic product data during his budget speech, which is due to begin after 11 a.m. (0300 GMT) on Wednesday, Feb. 22.

On a quarterly basis, the economy probably continued to expand but at a slower pace than in the third quarter when gross domestic product (GDP) jumped 2.7 percent, seasonally adjusted, from the second quarter.

Most economists did not provide a forecast for this measure, but they generally expected a 10th consecutive quarter of growth, which has been underpinned by exports, investment and consumption.

Tang is also due to announce full-year GDP data for 2005, which analysts forecast at 7-7.5 percent, and give an estimate for growth in 2006. A recent Reuters poll forecast the economy would expand by 5.2 percent this year.

The territory has become one of Asia's best performing economies in the past two years, benefiting from China's sizzling growth and enhancing its role as a Greater China services hub.

While the trade sector is expected to slow this year, consumer spending could accelerate as blue chip companies are set to raise wages by more than 5 percent in many cases and many economists expect interest rates will soon peak.

Percentage forecasts for growth in Hong Kong's gross domestic product in the fourth quarter of 2005:


year/year
Merrill Lynch 8.5
Hang Seng Bank 7.8
UBS 7.3
Citigroup 7.2
HSBC 7.2
DBS Bank 7.0
ING Financial Markets 7.0
Standard Chartered Bank 6.7
Nomura 6.0
-------------------------------------------
Median 7.2

February 17, 2006
December domestic exports up 25.1%
Census & Statistics Department

The volume of Hong Kong's re-exports of goods in December rose 6.7% over a year earlier, while domestic exports grew 25.1%. Taken together, the volume of total exports rose 7.9%. Concurrently, the volume of imports grew 10.4%.

The Census & Statistics Department said, comparing last year with 2004, the volume of Hong Kong's re-exports grew 11.6%, and that of domestic exports 7.6%. Taken together, the volume of total exports grew 11.4%. At the same time, imports rose 8.5% in volume.

Comparing the fourth quarter of 2005 with the preceding quarter, on a seasonally adjusted basis, the volume of total exports rose 2.2%. Within this total, the volume of re-exports grew 1.3%, while domestic exports surged 15.3%. In the same period, the volume of imports rose 2.6%.

Comparing December with the same month the previous year, the price of re-exports rose 0.1%, while those of domestic exports fell 0.5%. Taken together, the price of total exports rose 0.1%. The price of imports rose 1.4%.

Comparing 2005 with 2004, the price of re-exports rose 1.2%, and those of domestic exports 2.2%. Taken together, the price of total exports rose 1.3%, while the prices of imports rose 2.7%.

Middle class feeling pinched in rich Hong Kong

HONG KONG, Feb 21 (Reuters) - Hong Kong's economy might have grown by an estimated 7 percent last year and outshone many others in the region, but for insurance agent Ngai Wai-wang, that is immaterial.

Ever since the Asian economic crisis of 1997, his earnings have fallen sharply and he can only afford to eat out with his wife and two sons once a week. Exotic vacations are now just a memory in their photograph albums.

"We choose cheaper destinations in Asia now, like Thailand. My mortgage eats away half my salary, and my two sons, 12 and 14, are growing up and they need more money," said Ngai, 51.

Ngai takes home around HK$50,000 (US$6,400) a month and is a middle-income earner in Hong Kong. Unlike 40 percent of wage earners in this city who pay no income tax, he pays taxes but has not seen his wages rise appreciably since the late 1990s.

"I don't see any improvement in our lives. We have few benefits and we are taxed very heavily. The recovery is superficial and due to more Chinese tourists arriving. That's good for the retail sector. But no one else benefits," he said.

"If the economy was benefitting us, we would spend lavishly like before, but we count every penny now. The government should cut taxes. That way we consume more and that's good for society."

Hong Kong is set to announce a second straight budget surplus for the 2005/06 fiscal year on Wednesday, thanks to strong economic growth and higher asset prices.

NO RELIEF FOR THE POOR

But economists, unionists and social workers say Hong Kong's economic recovery has benefitted only the rich.

Hong Kong's overall jobless rate has dropped to a four-year low of 5.2 percent, but unemployment among low-skilled workers is on the rise as manufacturers move to cheaper offshore locations, such as the Chinese mainland.

At the same time, immigration of unskilled workers from the mainland is growing, keeping a lid on wages for the poor.

Even the middle class is not exempt from feeling the pinch, as unrelenting rises in interest rates over the past year have inflated mortgages.

Lee Fong goes to the market just before it shuts for the day so that she can get discounts on whatever is left. Living in a tiny rented room with her teenage daughter, the new immigrants from mainland China get by with help from a charity.

"Every few weeks, we get free rice, oil and other provisions. Otherwise we won't be able to survive," said Lee, who gets HK$4,000 a month for doing odd jobs at a jewellery store.

Lee is a constant reminder of a worsening income disparity in this former British colony, which returned to Chinese rule in 1997. For all its gleaming skyscrapers, world famous restaurants and swanky retail outlets, one in four children live in poverty.

Christine Fang of the Hong Kong Council of Social Service said social welfare and services, which were cut in recent years because of the economic downturn, should be reinstated.

"We have a section of society scrambling around to make ends meet. These people do not see an improved economy helping them ... If we have more money, we should improve services and let people share in the improving economy," Fang wrote last week in the South China Morning Post.

Unionist and legislator Lee Cheuk-yan said even middle-income earners are becoming victims of the wealth gap. Many small businesses have folded because landlords have demanded sharply higher rents with the recovering economy.

"The government should not reduce expenditure in social welfare but give more in the areas of health and education," legislator Lee said. "Health welfare is very important, such (cuts in) spending can kill the middle class."

From News.gov.hk:
January consumer prices up 2.6% (http://news.gov.hk/en/category/businessandfinance/060221/html/060221en03002.htm)

More info on this year's fiscal budget can refer here (http://www.budget.gov.hk/).

HIGHLIGHTS-Hong Kong's 2006/07 budget and Q4 GDP data

HONG KONG, Feb 22 (Reuters) - Hong Kong's economy grew 7.3 precent in 2005 and is forecast to rise 4 to 5 percent in 2006.

Following are the highlights from Financial Secretary Henry Tang's budget.

ECONOMIC DATA AND OUTPUT

--Financial Secretary Tang told legislators that the city's economy is expected to grow 4-5 percent 2006 on 2005 and to rise 6 percent a year from 2007-2010.

-- The government forecast inflation to rise 2.3 percent in 2006 on 2005.

-- Hong Kong's economy grew 7.3 percent in 2005, Tang said. That compared with analysts forecast of 7-7.5 percent.

BUDGET SURPLUS

-- The government forecast a consolidated surplus of HK$4.1 billion (US$525.6 million) and an operating surplus of of HK$5.8 billion in 2005/2006.

FISCAL DETAILS

-- Spending for 2006/07 is forecast at HK$214.3 billion, up from an estimated HK$200.9 billion in 2005/06.

The spending estimate for 2005/06 was lower than a previous government forecast for HK$214.7 billion but the government has yet to reach its target to get expenditure below HK$200 billion a year.

-- Land sales and fees are to amount to HK$30.5 billion in 2006/07, the government said, up from an estimated HK$28.7 billion in 2005/06.

BACKGROUND

-- Hong Kong's economy grew strongly after the SARS disease crisis abated in mid 2003, with quarterly expansion zooming to 3.4 percent in the second quarter of last year and 2.7 percent in the third. Economists expect growth to slow this year as demand from the United States for the territory's products eases.

-- The strong economic growth has boosted revenue, especially by giving the government the chance to resume land sales, which it suspended during the 2003 slump. The operating account -- which excludes non-recurring transactions such as land sales -- was in deficit from 1998/99 to 2004/05.

(US$=HK$7.8)

China's HK yuan debt mkt plan seen as test for yuan
By Edwin Chan and Alan Wheatley

HONG KONG/BEIJING, Feb 22 (Reuters) - China may allow the issue of yuan bonds in Hong Kong and permit cross-border trade to be settled in yuan, Hong Kong's financial secretary said on Wednesday, presaging another step towards a freer-floating currency.

Calling Hong Kong a "testing ground", Financial Secretary Henry Tang said the two measures under consideration would spur bilateral trade while developing the city's bond markets.

If the proposals were approved, Hong Kong would benefit by being the only place outside mainland China to host trading in yuan-denominated securities.

Economists said a market in such bonds may dampen speculative inflows into China betting on yuan appreciation. It might also shed more light on the market value of the yuan, also known as the renminbi (RMB), which can be converted for trade and foreign direct investment but only for limited capital transactions.

But they did not expect Beijing to allow such a market to expand rapidly in the short term.

Tang did not say when -- or if -- he expected the twin proposals to win approval.

"They are vitally important in reinforcing our position as an international financial centre, and will at the same time provide a testing ground for the move towards full RMB convertibility," Tang said during his annual budget speech.

"We need, however, to synchronise in tandem with the pace of financial reform on the mainland and move forward gradually."

Beijing dropped the yuan's long-standing peg against the dollar in July, and has long said it would eventually make the currency freely convertible.

PILOT SCHEME

Economists said Hong Kong was the logical choice for monitoring how the yuan would respond to market forces -- a stated intent of Beijing.

James Malcolm, a currency strategist with Deutsche Bank in Singapore, said it made sense to launch a pilot scheme in Hong Kong, where China can keep close track of it, but he described it as just an incremental step towards liberalisation.

"It's like an incubator for experiments. It'll start very very small," Malcolm said.

Dangling the prospect of partial internationalisation could help calm tempers in Washington, which is angry that Beijing has let the yuan rise just 0.8 percent since the revaluation, despite breakneck growth and a bulging balance of payments surplus.

The top U.S. Treasury official for international affairs is expected to press the case for swifter appreciation when he visits Beijing next Monday as part of an Asian tour.

"In the longer term, they plan to open the capital account," said Bank of East Asia economist Paul Tang. "It makes sense to do it on a small scale in Hong Kong."

The immediate impact of such a market would be more localised, providing an investment outlet for the nearly $3 billion worth of individual yuan deposits that have accumulated since Hong Kong's banks were allowed to take them in early 2004.

Yuan deposits in 38 Hong Kong banks hit 22.6 billion yuan ($2.8 billion) at the end of 2005; spending and cash withdrawals in 2005 using yuan-denominated bank cards reached HK$9.4 billion.

Economists said prospective issuers of yuan debt included Hong Kong-based or foreign firms that exported to China and thus raked in yuan-denominated revenue, and also investors that owned Chinese-based assets such as factories. ($1=8.0475 Yuan)

HK Jan export growth seen slowing amid holiday
By Susan Fenton

HONG KONG, Feb 24 (Reuters) - Hong Kong exports in January were expected to have risen 6 percent from a year earlier, slowing from December's annual pace as activity was interrupted by the Lunar New Year holiday, a Reuters survey shows.

Lunar New Year fell in January this year but in February last year and analysts said trade data for the first two months of 2006 would have to be combined to get a better sense of the trend.

The government is due to announce January trade data on Monday after 4.15 p.m. (0815 GMT).

"We expect export growth to moderate in coming months but not too much as trade flows from China will remain healthy and the U.S. economy is performing quite well," said Daniel Chan, senior investment strategist at DBS Bank.

Many economists forecast high single-digit growth in the value of exports this year, slowing from an 11.4 percent increase in 2005.

Imports probably rose 8 percent in January from a year earlier, slowing from 10.6 percent annual growth in December, the survey showed.

The survey of seven economists forecast a HK$7.1 billion trade deficit for January, shrinking from December's HK$16.9 billion deficit.

Exports have been surprisingly strong in recent months, helping Hong Kong's economy expand 0.6 percent in the fourth quarter of 2005 to mark the 10th straight quarter of growth.

Exports posted double-digit annual growth of between 11.5 and 17 percent between August and November but slowed in December when they were just 6.7 percent higher than a year earlier.

The sector has been boosted by an upturn in the global electronics cycle, surging demand in China for foreign goods and still robust U.S. consumer spending. A pick-up in Japan's economy and in some European countries has also helped, analysts said.

A booming air cargo sector is helping. In January, cargo volume at Hong Kong's international airport was 10.5 percent higher than a year earlier.

Forecasts for January trade by value (percentage change from a year earlier):



Exports Imports
Citigroup 9.3 10.0
Hang Seng Bank 8.0 10.3
UBS 6.4 9.0
Lehman Brothers 6.0 8.0
Bank of East Asia 4.0 3.0
DBS Bank 4.0 7.0
ING Financial Markets -2.5 1.0
---------------------------------------
Median 6.0 8.0

Is HSBC a Hong Kong bank?

Is HSBC a Hong Kong bank?

Strictly speaking, we can't say HSBC is a Hong Kong bank as its headquarter is located in London. But as far as I'm concerned, HSBC is a de-facto HK-based bank, as we can see, most of HSBC's business are conducted in HK. Other than that, I heard that HSBC's CEO also spend most of his time in HK headquarter.

Nowadays, HK business still accounts for 30% of HSBC's whole business, although HSBC is already globalized.

HSBC = Hongkong and Shanghai Banking Corporation
Roots in Hong Kong, but has since expanded into a global multinational. Hong Kong comprises less of the group's revenues now as it expands internationally, but most of the Board of Directors come from the Hong Kong flagship.

HK should broaden tax base, says ratings firm
Hong Kong Standard
Tuesday, February 28, 2006

Despite improvement in its financial strength, the Hong Kong government still needs to broaden its tax base to fix its revenue structure, credit rating agency Standard & Poor's said.

"In the medium term, establishing a sustainable revenue structure is still dependent on broadening the tax base," S&P credit analyst Ping Chew said. "Spending pressure remains high, particularly [related to] aging, health care and redeveloping the economy, including education."

Financial Secretary Henry Tang said in his budget speech last week that the government will launch a nine-month public consultation by mid-year on a goods and services tax. If such a tax were adopted, it would not be implemented before 2010.

Tang also proposed small salary tax cuts in view of the government's estimated HK$5.79 billion operating surplus for fiscal year 2005-06. For the coming year, Tang's figures show an operating surplus of HK$625 million.

"Political weakness, stemming from the government's unpopularity, could tempt the government to cut taxes and ease off on aggressive economic initiatives," Chew said.

S&P also said that, after growing 7percent in 2005, Hong Kong's economy is projected to slow as a weaker housing market and lower retail sales at the end of 2005 suggest a slow recovery in 2006.

It said tourism growth is less robust than expected, but should still benefit from China's burgeoning consumer base. Inflation should also continue to rise because of higher rents and imported inflation.

"Hong Kong's GDP growth will normalize after two years of accelerating," said Lilian Co, Asian equities director of Baring Asset Management (Asia). "The growth rate may be below 5percent this year, which will be healthier for long-term growth."

On the other hand, China - which has surpassed the UK as the world's fourth-largest economy - has some upside growth rate potential, which will support its credit quality, S&P said.

"China's growth prospect is still favorable for this year as the government has made progress in restructuring its economy, especially the banking sector," Chew said.

S&P has rated China A-minus with a positive outlook on the country's credit and AA-minus with a stable outlook on Hong Kong. "The [Chinese] government is likely to implement more `balancing,' including that between the coast and the hinterland, between exports and the domestic economy, and between high growth and social equity, as well as paying more attention to environmental impacts," Chew said.

Though the outlook for China's 2006 GDP growth is still uncertain, there are signs of continuing near double-digit growth for this year, said the ratings firm.

China's GDP growth reached 9.9 percent in 2005, compared with 10.1 percent in 2004.

Hong Kong business activity gathers pace in Feb-PMI

HONG KONG, March 1 (Reuters) - Business activity in Hong Kong picked up in February, creating more private sector jobs than at any time since April 2004, a purchasing managers' index showed on Wednesday.

New orders in the private sector continued to rise, although not as much as in January, and companies faced rising costs as robust demand for labour triggered the fastest wage inflation since the index began monitoring such data in November 1999.

The Brunswick Purchasing Managers' Index (PMI) rose to a seasonally adjusted 53.8 in February, its highest level since May last year and up slightly from 53.7 in January.

It was the 14th consecutive month that the index was above 50, indicating expansion in the private sector. A reading below 50 points to a contraction.

"These PMI findings give strong support to the anecdotal evidence that the Hong Kong economy has started 2006 on a very strong note," said Ray Bashford, a partner at Brunswick Hong Kong.

"The amount of new business which companies are reporting gives reason for confidence that the growth will continue through the first half of the year, at least."

Companies were able to pass some of their higher labour costs on by raising output prices.

New orders from China accelerated from January but lagged growth in overall orders, partly due to strong competition in China, the survey showed.

Companies continued to struggle to keep pace with growth in new business and backlogs of work rose for the second month, while suppliers' delivery times lengthened.

The PMI survey compares business conditions with a month earlier based on data from 300 private Hong Kong companies in manufacturing, services, retail and construction. The data is collected by NTC Research.

ANALYSIS-Hong Kong tax change boosts city as fund centre
By Jeffrey Hodgson

HONG KONG, March 2 (Reuters) - Hong Kong's decision to scrap profit tax on offshore funds has boosted its competitive edge against rival financial centres and could lure more money managers to the city.

The move should especially help Hong Kong in its long-term fight with Singapore to win a bigger chunk of the fast growing global hedge fund sector, industry watchers said on Thursday.

"It will lead to more managers setting up here ... there are a lot of large European and U.S. hedge fund managers that have been looking to set up operations in Asia over the last few years," said Rory Gallaher, a partner with law firm Deacons in Hong Kong.

"We do know that a number of them have gone to Singapore, simply because they did not want the uncertainty of the potential exposure to tax hanging over them."

Hong Kong lawmakers approved a bill on Wednesday that exempts non-resident "offshore fund entities" -- including individuals and companies -- from having to pay the territory's profit tax. The exemption is retroactive to the 1996/97 tax year.

To qualify, the mandate to manage the offshore money has to be given to an authorised Hong Kong fund manager.

Local leaders predicted the move would attract new offshore funds, boost market liquidity and fuel hiring in the city's key financial services industry.

They said the law was needed to bring the territory in line with international financial centres including London, New York and most importantly Singapore, which already provided a similar exemption.

"It certainly puts Hong Kong on par with the likes of Singapore in the region as a place for setting up fund operations," said Darren Bowdern, a principal with KPMG's financial services practice in Hong Kong.

"The perception has been that Singapore has been our major threat."

SMALLER MANAGERS TO BENEFIT

The immediate financial impact of the move was limited because, based on assurances by financial authorities that the law would change, offshore funds had not been paying the tax.

But the local fund management industry had fought hard for the measure, saying Hong Kong needed to clarify the matter once and for all.

"It is a competitively sensible and astute thing of the government to have done and (we) believe that it will be beneficial to the development of the fund management industry," said Elisabeth Scott, chairwoman of the Hong Kong Investment Funds Association.

Scott, who is also a managing director with Schroder Investment Management, said she thought the change had made starting up a new fund management firm in Hong Kong simpler and more attractive.

She said this should especially benefit smaller players, like hedge funds and boutique managers.

Chris Ingram, head of Asian tax for JF Asset Management, said Singapore has been very aggressive in marketing itself to fund managers and could point to the risk of Hong Kong's profit tax. He said the Hong Kong vote had removed that advantage.

"It codifies the practice and it removes all doubt. And the removal of that doubt is very useful for funds who are making daily and monthly valuations, with people coming in and out all the time. They just don't want to take those sorts of risks," he said.

"It protects Hong Kong's current position and it will help to attract new mandates."

Hong Kong's Trade in Services Statistics for 2004
Government Press Release
Friday, March 10, 2006

The Census and Statistics Department (C&SD) released today (March 10) trade in services statistics for 2004, with detailed breakdown by service item and also by destination/source.

Overall situation

The value of total exports of services rose by 18.5% to $429.6 billion in 2004 over 2003. The value of total imports of services grew by 19.2% to $242.5 billion over the same period. Taking exports and imports of services together, an invisible trade surplus at $187.1 billion, equivalent to 77.1% of the total value of imports of services, was recorded in 2004. This was larger than the corresponding surplus of $159.0 billion, equivalent to 78.2% of the total value of imports of services, in 2003.

Trade in services by major service group

Analysed by major service group, merchanting and other trade-related services was the largest group of exports of services, accounting for 34.1% of the total value in 2004. This was followed by transportation services (31.5%), travel (16.3%), financial services (8.3%), and insurance services (0.7%). Other services had a share of 9.1%.

Amongst exports of merchanting and other trade-related services, "merchanting" and "merchandising for offshore transactions", which are both regarded as services relating to "offshore trade", together took up a share of 90.2% of the total value (or 30.8% of the value of overall exports of services) in 2004. Owing to their significance, a separate press release was issued on "Hong Kong's Offshore Trade Statistics for 2004" today.

As to imports of services, travel accounted for 42.6% of the total value in 2004, followed by transportation services (27.9%), merchanting and other trade-related services (6.8%), financial services (3.7%), and insurance services (2.0%). Other services had a share of 17.0%.

Amongst the major service groups, merchanting and other trade-related services contributed most significantly to the overall invisible trade surplus, at $130.0 billion in 2004. This was followed by transportation services ($67.5 billion), and financial services ($26.4 billion). On the other hand, trade deficits were recorded for travel, insurance services, and other services, at $33.3 billion, $1.6 billion, and $2.0 billion respectively.

Trade in services by main destination/source

The mainland of China and the United States were the two largest destinations for exports of services, accounting for 27.4% and 20.6% respectively of the total value (excluding the value of financial intermediation services, which had no geographical breakdown) in 2004. These were followed by Taiwan (7.3%), Japan (7.2%), and the United Kingdom (6.2%).

The mainland of China and the United States were the largest sources of imports of services, accounting for 27.4% and 14.7% respectively of the total value (excluding the value of financial intermediation services, which had no geographical breakdown) in 2004. These were followed by Japan (8.7%), the United Kingdom (7.3%), and Australia (6.2%).

Trade in services by major service group and region

For exports of merchanting and other trade-related services, Asia was the most important destination, accounting for 46.6% of the total value in 2004, followed by North America (28.7%), Western Europe (19.6%), Central and South America (2.0%), and Australasia and Oceania (1.3%).

As to exports of transportation services, Asia was the most important destination, accounting for 53.8% of the total value in 2004, followed by North America (20.6%), Western Europe (18.2%), Australasia and Oceania (3.0%), and Central and South America (0.9%).

The same order of importance of destinations also applied to exports of travel services and other services in 2004. For exports of travel services, the respective shares were 80.2%, 8.2%, 6.7%, 3.0% and 0.5%. For exports of other services, they were 51.1%, 23.8%, 17.7%, 2.8% and 2.0%.

For exports of financial services, Western Europe was the most important destination, accounting for 32.7% of the total value (excluding the value of financial intermediation services, which had no geographical breakdown) in 2004. This was followed by North America (30.3%), Asia (29.9%), Central and South America (4.1%), and Australasia and Oceania (2.7%).

For exports of insurance services, Asia was the most important destination, accounting for 59.2% of the total value in 2004, followed by Western Europe (30.7%), North America (4.7%), Central and South America (4.4%), and Australasia and Oceania (1.1%).

For imports of transportation services, Asia was the largest source, accounting for 55.3% of the total value in 2004, followed by Western Europe (18.3%), North America (11.8%), Australasia and Oceania (6.8%), and Central and South America (1.9%).

The same order of importance of sources also applied to imports of financial services in 2004. The respective shares in total value (excluding the value of financial intermediation services, which had no geographical breakdown) were 42.1%, 27.3%, 25.2%, 3.1% and 0.8%.

For imports of travel services, Asia was the largest source, accounting for 59.8% of the total value in 2004, followed by North America (16.6%), Western Europe (11.6%), and Australasia and Oceania (9.9%).

The same order of importance of sources also applied to imports of other services in 2004. The respective shares in total value were 47.3%, 29.0%, 16.6%, and 3.7%.

As to imports of insurance services, North America was the largest source, accounting for 42.6% of the total value in 2004, followed by Asia (32.6%), Western Europe (22.6%), Central and South America (1.8%), and Australasia and Oceania (0.6%).

For imports of merchanting and other trade-related services, Asia was the largest source, accounting for 76.8% of the total value in 2004, followed by North America (12.4%), Western Europe (7.1%), Central and South America (2.5%), and Australasia and Oceania (0.2%).

Commentary

A Government Secretariat spokesman noted that Hong Kong's exports of services grew strongly in 2004, marked by broad-based surge in merchanting and other trade-related services, transportation, travel and financial services. The strong growth was boosted by the strong trade flows amidst the global economic upswing, the swift rebound in inbound tourism after SARS as well as the significant growth in financial market activities.

The spokesman noted further that Hong Kong continued to play the role of an important business, financial and service hub in the region, as evidenced by a predominant share of Asia in Hong Kong's exports of services in 2004. In particular, the mainland of China remained a major destination of Hong Kong's exports of services to Asia, accounting for over half of the total to the region. This indicated that Hong Kong continued to play a significant role as an eminent foothold and conduit for business between the mainland of China and the rest of the world.

More Information & Tables : http://www.info.gov.hk/gia/general/200603/10/P200603100142.htm

HK mid-sized firms out in front
14 March 2006
South China Morning Post

More than 82 per cent of mid-sized businesses in Hong Kong recorded growth at above the global average this year, a world-leading score.

According to a worldwide survey by accounting firm Grant Thornton, companies in Hong Kong and India have exhibited continuing rises.

In Hong Kong, mid-sized businesses have demonstrated sustainable above-average growth in the past three consecutive years.

Gary James, a partner at Grant Thornton, said that Hong Kong's economic background, coupled with an upturn in tourist arrivals and buoyant consumer spending, proved beneficial to a wide range of businesses.

These factors as well as strong export sales facilitated a very favourable business environment for mid-sized companies.

China was included in the survey for the first time and ranked in fourth place, with 61 per cent of mid-sized companies recording above-average growth.

Meanwhile, the survey found that counterparts in developed economies such as Australia, Britain, Japan, New Zealand and the United States were seeing fewer mid-sized companies with above-average growth. No further details were given for the decline in growth.

Despite having less growth in the mid-tier sector, the US topped the Super Growth Index.

This index measures those companies that show exceptionally strong growth and comprises about the top 20 per cent of firms on the index.

At 39 per cent, the US has the highest proportion of super-growth companies; while in Hong Kong, 34 per cent of companies achieved super-growth status.

The findings show that super-growth companies appear to have a competitive advantage in that they are far less constrained in accessing financing to aid expansion.

Meanwhile, mainland companies came in at 14th place in the super-growth rankings.

However, the Grant Thornton survey said that it would be hard for China to achieve greater super-growth status until more companies experienced rapid expansion both in terms of turnover and employment.

Is HSBC a Hong Kong bank?

As for me, even if it was mentioned that HSBC's global headquarters transferred to England, I still consider the HK headquarters as the source of the bank's history and reputation. In other words, everything started in that building before the formerly-named Hongkongbank pursued their major global expansion under their new HSBC brand name.

http://flore-leval.9online.fr/buildings/hsbc.jpg

http://lambcutlet.org/albums/Day_1/Hong_Kong_and_Shanghai_Banking_Corporations_old_headquarters.sized.jpg

And I heard that aside from exterior upgrades and improvements, they even do some major interior revamps as well. So this building does keep up with modern aesthetics despite it being a building/structure that has lasted for more than 20 years.

I do wanna visit the place when I visit Hongkong late this year (or sometime next year)

As for me, even if it was mentioned that HSBC's global headquarters transferred to England, I still consider the HK headquarters as the source of the bank's history and reputation. In other words, everything started in that building before the formerly-named Hongkongbank pursued their major global expansion under their new HSBC brand name.

http://flore-leval.9online.fr/buildings/hsbc.jpg

http://lambcutlet.org/albums/Day_1/Hong_Kong_and_Shanghai_Banking_Corporations_old_headquarters.sized.jpg

And I heard that aside from exterior upgrades and improvements, they even do some major interior revamps as well. So this building does keep up with modern aesthetics despite it being a building/structure that has lasted for more than 20 years.

I do wanna visit the place when I visit Hongkong late this year (or sometime next year)

HSBC moved to London because the bank, like the other who moved out of HK was uncertain of the territory's future after 1997.

But this is still the best looking building better than the one in London.

There is some confusion over what moved and what is the bank. HSBC Holdings is based in London. It's not a bank. It's merely a holding company that owns all the banks under the HSBC brand. The Hongkong and Shanghai Banking Corporation - the origins of HSBC's abbreviation, is the Hong Kong branch of the bank. That head office is still in Hong Kong.

From news.gov.hk:
February consumer prices up 1.6% (http://news.gov.hk/en/category/businessandfinance/060321/html/060321en03010.htm)

China's "luxury tax" to benefit Hong Kong watches
By Josiane Kremer

BASEL, Switzerland, March 30 (Reuters) - Hong Kong sees China's planned 20 percent sales tax on luxury watches as an opportunity, as Chinese consumers switch from buying expensive foreign timepieces to similar cheaper Hong Kong brands.

Rapid economic growth in the world's most populous nation has created a fast-swelling middle class with a taste for luxury goods, but the consumption tax would probably curtail sales of expensive watches.

"We see this as an opportunity for Hong Kong," said Raymond Yip, an executive of the Hong Kong Trade Development Council, at "Baselworld", the world's largest watch and jewellery fair.

As many as 333 Hong Kong exhibitors are showcasing their watches and jewels alongside their Swiss rivals at the fair, which takes place from March 30-April 6 in the Swiss border town of Basel.

Hong Kong's exports of watches and clocks were valued over $5.9 billion last year. The largest export items were wrist watches, accounting for two thirds of watch exports.

Hong Kong is known for its fashion, digital and sports watches in the medium price segment.

A trade agreement with the Chinese mainland already exempts Hong Kong from a 23 percent import tax, making its watches more competitive relative to other foreign timepieces, but that advantage will grow with any new "luxury tax".

Although Hong Kong watches with a price tag of more than $1,200 will also be subject to China's "luxury tax", Yip believes consumers will become more cost-conscious.

"(The luxury tax) makes watches more expensive, but fortunately, because we have this agreement, it will make Hong Kong watches even more attractive in the mainland," Yip said.

"Twenty percent is a lot of money, so people will start (buying) similar products made in Hong Kong," he said.

"People will start making some comparisons, and if the products are similar quality and even the brand name is similar, (they will switch)," he said.

Yip himself was wearing a Swiss watch during the interview, but said he wore a Hong Kong-made watch at home.

Hong Kong is also set to gain from increased tourism as wealthy Chinese consumers travel and buy their high-ticket items in Hong Kong to avoid China's luxury tax. Yip said 12.5 million Chinese tourists visited Hong Kong last year.

Analysts estimate China takes about 3 percent of total Swiss watch exports, with Swatch Group's Omega, Longines and Rado brands among the most popular.

The country's changes in taxes will be the biggest adjustment to consumption taxes in 12 years.

SAR's role shrinks as firms lift China focus
Mark Lee
Hong Kong Standard
Thursday, April 06, 2006

http://www.thestandard.com.hk/newsimage/20060406/HKB.jpghttp://www.thestandard.com.hk/newsimage/20060406/china-mobile.jpg

Last year was a banner year for corporate Hong Kong, but analysts note the city's economic importance to these companies is shrinking because they now generate an expanding proportion of their earnings externally.

Of the 33 constituent companies of the benchmark Hang Seng Index, 27 reported higher earnings last year than for 2004. For 19 of them - including market heavyweights HSBC and China Mobile (HK) - last year brought record high earnings.

But as Core Pacific-Yamaichi deputy research chief Kent Yau pointed out: "Companies such as HSBC now derive only a very small proportion of their profits from Hong Kong, while companies like China Mobile didn't do any business at all here."

More broadly, Standard Chartered economist Tai Hui said: "The results are not only a reflection of the Hong Kong economy, but also speak of a very robust global and regional business environment in the past year.

"They also show how Hong Kong is being increasingly integrated into mainland China."

Hong Kong's economy had a good year, growing 7.3 percent in 2005, driven by increases in consumer demand and exports.

But even these were boosted by the mainland's surging economy. Hong Kong - a main handling center for reexports of mainland goods - benefited from the continued growth in the country's exports, which increased 28 percent last year. And consumer demand was heightened by a record number of mainland tourists.

Which is why, for companies with locally based businesses, such
as Bank of East Asia and the property developers, the key to increased future earnings will be the success - or otherwise - of their mainland investments, Yau said.

Bank of East Asia, Hong Kong's fifth-largest listed bank, reported net profit from its mainland operations increased 74 percent to HK$290 million last year, just over one-tenth of its total net profit of HK$2.79 billion.

The bank aims to derive one-fifth of its earnings from the mainland by 2010 through increasing its branch network.

Li Ka-shing's Cheung Kong (Holdings) - Hong Kong's second largest developer by market capitalization - has invested 20.8 billion yuan (HK$20.11 billion) since 2004 to acquire mainland property, according to investment bank BNP Paribas, a trend that almost certainly will continue.

"In the next five to seven years, we estimate [Cheung Kong] will be spending more than 10 billion yuan to develop [mainland] projects," a BNP Paribas report said.

In addition to the benefits flowing from across the border, corporate earnings last year were also boosted by the adoption of new accounting rules, Yau said, which require companies to include gains and losses in the valuation of their investment properties in their profit and loss account.

This came just in time to take advantage of the local property turnaround after a six-year swoon. For example, Cheung Kong's net profit of HK$14 billion last year included a property revaluation gain of HK$1.78 billion.

Underlining the need for local firms to focus on the mainland and other overseas markets, Hang Seng Index components as a group performed weaker than Hong Kong-listed mainland stocks so far this year.

The benchmark index has risen 8percent this year, lagging the more than 20 percent growth in the Hang Seng China Enterprises Index of H shares over the same period.

And analysts think this divergence will continue.

"Hang Seng Index stocks are still seen as more pricey than H shares, even though H shares have gone up much faster recently," said Philip Securities director Louis Wong.

Investors are drawn to H shares because of the potential of higher earnings growth.

"The Hang Seng Index companies are currently averaging about 15 percent earnings growth, but mainland companies, especially commodity companies, are expected to post much stronger results," Wong said.

In every basket, there are always going to be a few rotten apple. Of the four companies in the Hang Seng Index reporting an earnings decline last year, Lenovo Group was affected by its acquisition of the personal computer business of IBM while Cathay Pacific Airways was hurt by a sharp spike in fuel prices last year.

Hong Kong reports 1.8 percent inflation in March
21 April 2006

HONG KONG (AP) - Inflation in Hong Kong rose 1.8 percent in March from a year earlier, edging up slightly compared to a 1.6 percent gain in February, the government said Friday.

The rise was mainly led by higher private housing rentals and increases in dining prices, the government said in a statement.

The first three months of the year together recorded a 2 percent rise in the Consumer Price Index from a year earlier, the statement said.

The government said the inflation rate was "benign" and predicted a moderate rise in the index.

"Looking ahead, consumer price inflation is likely to continue to edge up at a modest pace in the months ahead, as the economy maintains solid growth momentum and as higher oil prices would feed through to the retail price level," the statement said.

From news.gov.hk:
Total exports value up 14.7% in March (http://news.gov.hk/en/category/businessandfinance/060425/html/9dab611e-40e2-49b9-ab85-1bfecadbd92d.htm)

Government Economist KC Kwok's column on news.gov.hk:
HK's economy: Perceptions vs reality (http://news.gov.hk/en/category/ontherecord/060428/html/060428en11001.htm)

From News.gov.hk:
2005-06 sees $14b surplus (http://news.gov.hk/en/category/businessandfinance/060429/html/060429en03002.htm)

From news.gov.hk:
Tax revenue hits record high (http://news.gov.hk/en/category/businessandfinance/060502/html/060502en03004.htm)

The next problem would be to convince the public that despite record tax revenues, sales taxes need to be introduced to broaden the tax base.

From news.gov.hk:
Jobless rate hits 56-month low of 5.1% (http://news.gov.hk/en/category/atschool/060518/html/060518en02002.htm)

From news.gov.hk:
Jobless rate hits 56-month low of 5.1% (http://news.gov.hk/en/category/atschool/060518/html/060518en02002.htm)

That's good news man. It's hard to be unemployed especially in HK.

5% is historically a high rate for HK. Before the Asian flu in 1997 the rate hovered around 2-3%.

POLL-Hong Kong Q1 growth seen picking up to 1.2 pct q/q
By Susan Fenton

HONG KONG, May 22 (Reuters) - Hong Kong's economic growth was expected to have doubled in the first quarter to 1.2 percent compared with the pace set in the fourth quarter, amid strong consumption and solid exports, a Reuters poll shows.

Consumer confidence was stronger than expected in the first quarter as solid wage growth and a rally on the Hong Kong stock market offset concerns about further interest rate rises. Tourism picked up after a lull late last year.

"Basically, what we're seeing in Hong Kong is a rotation away from a trade dynamic towards a services dynamic," said Glenn Maguire, chief economist at Societe Generale.

"While the rest of Asia is linked to China and Japan by trade, Hong Kong is linked to China more by services - retail sales are holding up well and tourism is quite strong."

The government is due to release gross domestic product (GDP) data for the first quarter on Tuesday after 4.15 p.m. (0815 GMT).

First-quarter growth was expected to have risen a seasonally adjusted 1.2 percent, the median forecast of six respondents showed. That would be twice the 0.6 percent pace of the fourth quarter, which was the slowest growth in more than two years.

GDP in the first three months of 2006 rose 7 percent from a year earlier, the median forecast of 11 respondents showed. That would be the weakest growth in a year and a slowdown from 7.6 percent annual growth in the fourth quarter.

Hong Kong's trade is predominantly re-exports to and from booming China, a role that has helped the territory expand by more than 7 percent annually for the past two years.

This year though, economists forecast much slower growth of 5.3 percent, a recent Reuters poll showed.

The trade sector held up well in the first quarter with exports growing a seasonally adjusted 2.5 percent by volume from the fourth quarter of 2005. But economists see exports slowing later in the year.

"The U.S. housing market is slowing and that is going to affect U.S. consumer demand," said Tai Hui, an economist at Standard Chartered Bank.

Consumption is robust, although it could be undermined by a slowdown in the trade sector if overseas demand softens.

Foreign investment is at a record high as companies use Hong Kong to establish a base in Greater China. The territory also continues to attract fund flows on expectations that a further rise in the yuan will boost the earnings of many Chinese companies listed on the Hong Kong stock market.

Construction is bucking the trend. A dearth of new projects amid plentiful supply of new housing and the absence of big government projects has depressed the sector, economists say.

Percentage forecasts for growth in Hong Kong's GDP in the first quarter of 2006:



Percentage change on:
year ago previous qtr
Citigroup 7.6 1.2
DBS Bank 7.3 ~
ING Financial Markets 7.3 ~
Lehman Brothers 7.3 1.3
Hang Seng Bank 7.0 0.9
Standard Chartered Bank 7.0 ~
HSBC 6.7 ~
Societe Generale 6.7 1.1
CLSA 6.8 1.0
UBS 6.6 0.9
Nomura International 5.3 ~
_________________________________________________
Median 7.0 1.2

Hong Kong inflation rises in April

HONG KONG, May 22, 2006 (AFP) - Hong Kong inflation reached 1.9 percent in April, up from 1.6 percent in March, official figures showed Monday, due partly to increased prices for fresh vegetables.

A government spokesman said increased charges for package tours and in private housing rentals continued to feed through to consumer price indices.

However, prices of many other goods and services showed only mild increases or even declines, suggesting that local inflationary pressure is still well contained, he added.

Looking ahead, he predicts consumer price inflation to creep up amid the economic upturn.

"The recent renewed weakening of the US dollar may also increase price pressure from the external front in the period ahead," he said.

"Yet rapid labour productivity growth and the continuous expansion in production capacity should continue to provide an offset."

For the first four months, consumer prices rose 1.7 percent year-on-year.

Slowdown looms after economy leaps 8.2pc
Government, experts at odds on forecast after surprising first-quarter growth
24 May 2006
South China Morning Post

Slower economic growth is forecast for Hong Kong in coming months after the first-quarter's 8.2 per cent rise in gross domestic product exceeded even the rosiest estimates.

But economists and academics disagree with the government on the extent of the slowdown and its impact on full-year growth.

"The fact that we are keeping our full-year forecast at between 4 and 5 per cent means there will be some slowdown in the coming few quarters," government economist Kwok Kwok-chuen said yesterday, announcing the GDP figures.

"If you look at the longer-term development of the Hong Kong economy, 8.2 per cent is certainly pretty high above our trend growth rate. So we don't think 8.2 per cent is sustainable for the long term."

The higher-than-expected growth, following a budget surplus of about $14 billion, is likely to fuel growing calls for tax cuts. Mr Kwok declined to comment but noted: "Purely from an economic angle, I don't think we need to stimulate the economy through tax cuts."

The first-quarter result was primarily buoyed by robust exports and domestic demand, he said. It is a whole percentage point above the consensus estimate and tops the 7.5 per cent growth recorded in the fourth quarter of last year.

Given the strong start this year, Mr Kwok admitted that Hong Kong would have little difficulty achieving the official full-year projection. While he was confident the local economy was becoming more resilient to external shocks, he stressed that it was too early to revise the full-year forecast as uncertainties still clouded the horizon. Further interest rate increases, high oil prices, the impact of measures aimed at reining in the mainland economy as well as a bird flu outbreak could dampen growth.

But economists and academics believe any slowing of the economy will not be severe enough to limit full-year growth to 4 to 5 per cent.

City University associate professor of economics and finance Fred Kwan Yum-keung said he expected a figure of at least 6 per cent. The Hong Kong General Chamber of Commerce also revised its estimate up from 4.5 per cent to 5.5 per cent.

The chamber's chief economist, David O'Rear, pointed out that, like last year, healthy external trade, especially with the mainland and European Union, could yield even stronger growth in the second and third quarters. In 2005, real economic growth reached 6.8 per cent and 8.2 per cent in the second and third quarters, up from the first quarter's 6.2 per cent.

Diana Choyleva, a director of London-based economic think-tank Lombard Street Research, is less optimistic, warning that Hong Kong's exports would be on the receiving end of a US slowdown, given its role in Sino-US trade.

"Our forecast is for a significant US consumer-led economic slowdown {hellip} It will certainly be devastating for China. With both the US and China economies having a synchronised slowdown, it will be a double whammy for Hong Kong."

From news.gov.hk:
$9b gov't surplus recorded

A $9 billion surplus was recorded by the Government in April, the Financial Services & the Treasury Bureau says, seeing revenue of $29.7 billion and expenditure of $20.7 billion.

The surplus was mostly contributed by land premiums and salaries tax. About $12.7 billion in land premiums were received in the month, mainly from private treaty grants for railway projects.

The $9 billion addition has pushed fiscal reserves to $319.6 billion.

Gov't Press Release with eBay:
eBay: Hong Kong a strategic market for global trade (http://info.gov.hk/gia/general/200606/01/P200606010169.htm)

From news.gov.hk:
Q1 cargo throughput up 5% (http://news.gov.hk/en/category/businessandfinance/060609/html/060609en03001.htm)

From news.gov.hk:
Net financial assets hit $3.48 trillion (http://news.gov.hk/en/category/businessandfinance/060613/html/060613en03003.htm)

HK April domestic exports rise 32.6 pct on year

HONG KONG, June 22 (Reuters) - The volume of Hong Kong's domestic exports in April 2006 rose 32.6 percent from a year earlier, while re-exports increased by 10.6 percent, the Census and Statistics Department said on Thursday.

The total volume of the territory's exports, including re-exports through China, rose 11.7 percent while total imports climbed 11.9 percent from a year ago, the department said in a statement.

The volume of domestic exports for the first four months of 2006 increased by 39.8 percent from a year earlier while that of re-exports rose by 12.5 percent. Total exports increased by 13.9 percent and imports increased by 13.4 percent.

Prices of domestic exports meanwhile fell 4.7 percent in April 2006 from a year earlier and re-export prices increased by 0.7 percent. Total export prices were up 0.4 percent and import prices also increased by 1.0 percent, the data showed.

Prices of domestic exports for the first four months of 2006 were 3.3 percent lower, while those of re-exports increased by 0.1 percent. Total export prices were down by 0.1 percent and import prices increased by 1.0 percent.

The department said prices are based on unit values which do not take into account changes in the composition or quality of goods traded, except for some selected commodities for which specific price indices are available.

From news.gov.hk:
Q1 GDP up 8.2% (http://news.gov.hk/en/category/businessandfinance/060626/html/060626en03002.htm)

HK May exports fall 0.1 pct on year ago

HONG KONG, June 26 (Reuters) - Hong Kong exports in May fell 0.1 percent by value from a year earlier, the first annual decline since February 2005 and surprising economists who had forecast a 7.9 percent increase.

The decline indicates weakening global demand for goods from China although the government said on Monday it was too soon to say exports were slowing. Imports in May were also weak, growing just grew 2.5 percent by value from a year earlier, the government said on Monday, compared with forecasts for an 8.8 percent rise.

Both exports and imports are predominantly re-exports to and from China.

(Double click on [ID:nHKU000536] for a full table of data).

KEY POINTS: Unadjusted:

May Apr Mar
HK$bln pct* HK$bln pct* HK$bln pct*
Exports 193.2 -0.1 188.8 9.4 193.5 14.7
Imports 297.8 2.5 203.2 11.2 211.7 16.0
Trade balance -14.6 -14.5 -18.2
*Pct change on a year earlier.
Seasonally adjusted (percent change on three months earlier):
Mar-May Feb-Apr
Exports -1.1 1.9
Imports -1.8 2.0

COMMENTARY:

JOE LO, SENIOR ECONOMIST, CITIGROUP

"Hong Kong exports have weakened faster than we expected. This is the first annual decline in May for four years. It seems weakening demand from overseas, especially Europe, is the main cause.

"The U.S. economy is slowing so the outlook for Hong Kong exports is becoming less favourable. We still expect single-digit growth in exports in the second half of the year but this data shows there is a bigger risk on the downside than before. If the U.S. keeps tightening monetary policy, U.S. consumption will weaken."

ROB SUBBARAMAN, SENIOR ECONOMIST, LEHMAN BROTHERS

"It's surprisingly weak. It seems at odds with data from neighbouring countries: South Korea's exports rebounded in May, China's exports continue to grow by more than 20 percent and Taiwan's export orders were up.

"It does suggest caution going forward, particularly with the U.S. economy showing signs of slowing. One month doesn't make a trend but the June and July data will need close monitoring."

PAUL TANG, SENIOR ECONOMIST, BANK OF EAST ASIA

"This is a worry, it's a dramatic drop and it's not seasonal. It seems to be product sensitive -- exports of office machinery and appliances fell most but the reason is not clear.

"We'll have to wait for another month to confirm the trend but this is definitely an alarm call for the economy. Trade is still a very important driver for economic growth so if this trend continues we will have to revise our optimistic forecasts on the economy."

MARKET REACTION:

-- Trade data was released after the stock market closed. At 0826 GMT, the Hong Kong dollar was unchanged at 7.7684/85 per U.S. dollar before and after the exports data was released.

LINK:

-- To view the full details of trade data, see the Hong Kong government Web site at http://www.info.gov.hk/hkecon/kesi

BACKGROUND:

-- Exports had been expected to slow this year as global economic growth cools, including in the United States, Hong Kong's biggest export market after China. However, economists had forecast export growth would slow to high single-digits not decline.

-- Domestic exports have surged since late last year as textile manufacturers have relocated production to the territory from mainland China to avoid quotas on Chinese exports. However, domestic exports account for just over 6 percent of Hong Kong's total exports, which are predominantly re-exports to and from China's booming economy. (US$=HK$7.8)

Hong Kong, China to Expand Free Trade
Thursday June 29, 1:21 am ET

HONG KONG (AP) -- China has agreed to further open its economy to goods and services from Hong Kong under an expanded free trade agreement that aims to strengthen economic ties between the mainland and the territory, officials said Thursday.

The free trade pact -- called the Closer Economic Partnership Arrangement, or CEPA -- will waive import tariffs on a broader range of Hong Kong goods including electronics and spices, Hong Kong's leader Donald Tsang announced at a trade forum.

The pact will also grant the city's legal, tourism and construction industries greater access to the mainland market starting next year, he said.

Although Hong Kong returned to Chinese rule in 1997, the former British colony's products and companies are still treated as foreign under mainland Chinese law. CEPA is intended to address this disadvantage.

Tsang added that China was studying ways to let Hong Kong companies conduct more transactions in Chinese yuan, including allowing local firms to settle payments for imports from China with the Chinese currency.

The first CEPA deal, signed in 2003, gave zero-tariff status to products in 374 tariff codes. A follow-up agreement in August 2004 expanded that to goods in another 713 tariff codes, including pharmaceuticals, textiles, clothing, food and beverages.

Thursday's announcement came days ahead of the ninth anniversary of Hong Kong's handover to Chinese rule.

From news.gov.hk:
Chairman Jia revs up CEPA's engine (http://news.gov.hk/en/category/businessandfinance/060629/html/060629en03002.htm)

FS backs RMB services expansion (http://news.gov.hk/en/category/businessandfinance/060629/html/060629en03007.htm)

HK posts HK$1.6 bln surplus for April-May

HONG KONG, June 30 (Reuters) - Hong Kong posted a HK$1.6 billion (US$205 million) budget surplus for April-May, the first two months of the fiscal year, reversing an HK$8.4 billion deficit a year earlier, data released on Friday showed.

The government said the surplus was mainly due to income from fees for authorising changes in land use. On its operating account -- recurring expenditure versus recurring income -- the government said it had posted a HK$5.8 billion deficit for April-May.

The government forecasts a HK$5.6 billion consolidated fiscal surplus for the financial year ending March 2007. However, ratings agency Fitch Ratings said on Friday it expected the surplus to be considerably higher than that.

After suffering a series of budget deficits since the onset of the Asian financial crisis, the government's finances have revived in the past two years as economic recovery has boosted tax revenues and kick started government land sales.

For the year ended March 2006, the government posted a provisional HK$13.96 billion fiscal surplus.

In April-May 2006 government revenue totalled HK$39.2 billion while expenditure amounted to HK$37.6 billion, the government said on Friday.

For May alone the government posted a HK$7.4 billion deficit.

Fiscal reserves stood at HK$312.2 billion at the end of May, down from HK$319.6 billion at the end of April, the government said. (US$=HK$7.8)

HK business activity slows in June - PMI

HONG KONG, July 3 (Reuters) - Private business activity in Hong Kong slowed in June as the pace of new orders, notably from mainland China, eased, a purchasing managers' index showed on Monday.

Hong Kong is being affected by signs of easing global economic growth. However, the private sector did still mark an 18th straight month of expansion in June and companies actually stepped up hiring to cope with growth in business and backlogs of orders.

The Brunswick Purchasing Managers' Index (PMI) fell for a second consecutive month to a seasonally adjusted 53.3 in June from 53.9 in May. The index is now at its lowest level since December although it is still above 50, indicating activity in the private sector continues to expand.

A reading below 50 points to a contraction. "Despite a slowdown in the level of new orders, Hong Kong's economy recorded solid growth during June," said Ray Bashford, a partner at Brunswick Hong Kong, a public relations firm. "The fact that employment levels rose again is a clear indication that employers are continuing to invest to meet future demand."

The survey results were consistent with economists' forecasts for slower but still healthy overall economic growth in the second half of the year and offset weak trade data last week.

Exports unexpectedly declined in May from a year earlier, the data showed, but George Leung, chief economist at HSBC, said he expected the trade sector to have bounced back in June.

"May exports were affected by a base effect last year when a U.S.-China trade conflict caused a rush of exports orders to be pushed through," Leung said. "In general, we expect exports will slow in the second half of the year from the first half but there will not be a sharp slowdown."

HSBC expects the economy to expand by 6.4 percent this year and estimates 8 percent growth in the volume of exports over 2005.

The June PMI showed employment was at its strongest since March but wage inflation was slower than in previous months. Average salaries have now risen for 30 successive months, the survey showed.

Companies continued to be hit by rising raw material prices and higher prices of goods from Europe and Japan but they managed to partly offset that by charging higher prices for their products. Their pricing power was not as strong as in May but was better than earlier in the year, according to the survey.

The PMI survey compares business conditions with a month earlier based on data from 300 private Hong Kong companies in manufacturing, services, retail and construction. The data is collected by NTC Research.

From news.gov.hk:
May retail sales value up 5.3% (http://news.gov.hk/en/category/businessandfinance/060703/html/060703en03002.htm)

HK seen slowing on global downshift
Hong Kong Standard
Friday, July 07, 2006

Hong Kong's economy will slow down in the second half of the year as the global economy shifts to a low gear in the face of monetary tightening, according to an economic research team's forecast.

The APEC Study Center of the University of Hong Kong said Thursday in its latest macroeconomic forecast that third-quarter gross domestic product will "moderate to 5.9 percent compared with the same period last year" while real GDP growth in the second quarter will be "6.7 percent on a year-on-year basis."

Director of the center, Richard Wong Yue-chim, said: "Reflecting the projected slowdown in the global economy, brought on by tighter monetary conditions, Hong Kong's real GDP is expected to grow by 7.5 percent in the first half of this year, and slow down to 5.6 percent in the second half.

"The full-year growth estimate is around 6.5 percent, dropping from the 7.3 percent annual growth recorded last year."

The center projects domestic exports to rise by 26 percent and 11.1 percent in the second and third quarters, respectively. Meanwhile, retail sales volume is forecast to grow by 7.7 percent in the second quarter and 9.9 percent in the third.

Alan Siu Kai-fat, the center's executive director, also forecasts that US interest rates may rise once again by year's end, but added that Hong Kong's financial institutions may not follow suit.

Unemployment is forecast to drop to 4.9 percent in the second quarter and further, to 4.7 percent, in the third quarter. According to the latest government figures, Hong Kong's seasonally adjusted unemployment rate between March and May hit a 57-month low of 4.9 percent.

The APEC center expects inflation of 1.9 percent in the second quarter and 1.7 percent in the third, mainly driven by rising rentals.

Siu said Hong Kong manufacturers in the Pearl River Delta are now suffering from an unfavorable business environment due to rising wages and raw material costs.

LCQ12: Promoting the development of creative industries
Wednesday, July 5, 2006
Government Press Release

Following is a question by the Hon Chan Yuen-han and a written reply by the Secretary for Commerce, Industry and Technology, Mr Joseph W P Wong, in the Legislative Council today (July 5):

Question:

About promoting the development of creative industries, will the Government inform this Council:

(a) of the respective numbers of applications received and approved under the DesignSmart Initiative last year, and the amount granted;

(b) of the subsidy schemes other than the DesignSmart Initiative which are available for application by persons engaged in creative industries (such as artists and inventors), so that they can launch their creative products in the market; and

(c) as the cultural department of Shenzhen has recently proposed to set up a "Shenzhen-Hong Kong Entertainment Economic Zone" to attract Hong Kong companies engaged in creative and cultural industries to the Mainland, whether the authorities have evaluated the impact of such proposal on Hong Kong's creative industries?

Reply:

Madam President,

My response to Hon Chan's questions is as follows:

(a) In 2005, 14 applications for funding under the DesignSmart Initiative (the Initiative) were received. In the same year, 15 projects, including applications that were submitted in 2004 and examined in 2005, were approved, involving a total funding of HK$ 22 million.

(b) Apart from the Initiative, there are other schemes available for application by persons engaged in creative industries. Please refer to Annex for details.

(c) In November 2002, Guangdong, Hong Kong and Macao jointly set up a collaboration framework to enhance cultural collaboration in the Greater Pearl River Delta (GPRD) Region (the collaboration framework). The Guangdong Provincial Department of Culture (together with the Municipal Bureaux of Culture in Guangzhou, Shenzhen, Zhuhai, Foshan, Dongguan and Zhongshan), the Home Affairs Bureau of the Hong Kong SAR Government and the Cultural Institute of the Macao SAR Government take turns to hold meetings and have set up six working groups to implement and follow up collaboration proposals in various arts and creative areas. The purpose of the collaboration framework is to help enhance the cultural literary of the GPRD and thereby boost cultural and economic developments of the region through complementary development, resources sharing, efficiency enhancement, cost reduction, brand name creation, talents grooming, information exchange, and arts and cultural promotion, etc. At the seventh meeting held in February 2006, a Working Group on Research for the Development of Cultural and Creative Industries was set up to discuss relevant researches and explore the scope of further collaboration. We will continue to enhance collaboration between Shenzhen and Hong Kong in the cultural and creative industries under the existing collaboration framework.

In April 2006, the Shenzhen Municipal Government proposed co-operation between the cultural and entertainment industries of Shenzhen and Hong Kong by the development of a "Shenzhen-Hong Kong Entertainment Economic Zone" with a view to achieving complementary development and a win-win environment. The Home Affairs Bureau will explore ways for collaborating with Shenzhen Municipal Government in this aspect under the existing collaboration framework.

CEPA pumps impetus into HK's economy
3 July 2006
China Daily

Hong Kong Chief Executive Donald Tsang said on June 29 that the signing of Chinese mainland-Hong Kong Closer Economic Partnership Arrangement (CEPA) undoubtedly pumped impetus into Hong Kong's economy.

Addressing the opening of the Forum on Economic and Trade Cooperation and Development between the Chinese mainland, Hong Kong and Macao, Tsang said, the forum provides the participants with an opportunity to review the achievements of the CEPA and look at future opportunities.

He said one of the key areas of Hong Kong economic development is to create a win-win situation through strengthening economic and trade cooperation with the Mainland and complementing each other's strengths.

Since the implementation of the CEPA from the beginning of 2004, Hong Kong has exported products with a total value of 4.8 billion HK dollars (615 million US dollars) to the mainland tariff free, he said.

Under the CEPA, Hong Kong service providers are granted preferential treatment in 27 sectors when setting up operations in the mainland. In some sectors, like legal and banking services, the preferential treatment goes beyond China's WTO commitments.

The chief executive said the Individual Visit Scheme has been implemented in 44 mainland cities and more than 13 million mainland visitors have come to Hong Kong under the Scheme.

Application procedures for mainland enterprises to invest in Hong Kong have been streamlined. So far, about 380 mainland enterprises have obtained approval to set up operations in Hong Kong, with investment totaling over 2.2 billion US dollars.

He added that mutual recognition agreements or arrangements for the exemption of professional examinations have been signed for 10 professions.

Tsang said HK's economy has now fully recovered and regained its strong momentum. The unemployment rate has dropped to 4.9 percent, its lowest level in four years. It is estimated that in its first two years of implementation, the CEPA has created 29,000 jobs, and generated 5.4 billion HK dollars (692 million US dollars) in services receipts and 5.5 billion HK dollars (705 million US dollars) in capital investment for Hong Kong.

Economic outlook rosier, says HKU
7 July 2006
South China Morning Post

Healthy domestic consumption will drive much of Hong Kong's economic growth, which is forecast to slow to 5.6 per cent in the second half but post a "still fairly impressive" 6.5 per cent for the full year, according to the University of Hong Kong.

The outlook is slightly rosier than the university's earlier estimate of 5 per cent to 6 per cent growth. It reflected "the projected slowdown in the global economy brought on by tighter monetary conditions", Richard Wong Yue-chim, director of the university's Apec Study Centre, said.

The official forecast remains unchanged at between 4 per cent and 5 per cent. The government said this might be revised after second-quarter data is compiled in August.

The university has already raised its estimate for the second quarter to 6.7 per cent from 5.5 per cent to account for the stronger than expected 8.2 per cent growth in the first three months of this year. Growth is forecast to ease to 5.9 per cent in the third quarter.

Alan Siu Kai-fat, executive director of the centre, said the economic growth rate was broad-based, with strong contributions from external trade and domestic demand despite a weaker global environment. Specifically, he pointed to a continued gradual improvement in the jobless rate to 4.7 per cent in the third quarter, with inflation ending the year at about 2 per cent. He said recent rent increases and an average wage rise of 3 per cent were largely responsible for inflation.

The encouraging economic outlook is also reflected in comments by Peter Gordon, MasterCard International's vice-president of commercial payment solutions in Asia-Pacific, on corporate credit card use by small and medium-sized enterprises (SMEs).

He pointed to the growing potential in servicing the more than 282,000 registered SMEs in Hong Kong, which employ about one-fifth of the population, through the issuance of corporate credit cards to handle company purchases and expenses.

Hang Seng Bank offers a corporate card specifically targeting SMEs, while Wing Lung Bank launched its card last month.

Mr Gordon thinks more banks will cater to SMEs with these cards. Since 2000, the number of banks in Asia-Pacific using MasterCard for SMEs has risen from 18 to 68.

Moody's ups ratings on SAR, China
Mark Lee
Hong Kong Standard
Saturday, July 08, 2006

Credit-rating company Moody's raised the credit outlooks on both the mainland and Hong Kong to positive from stable, paving the way for possible ratings upgrades as the two economies continue to power ahead on rising foreign direct investments and external trade.

The mainland's "strong external position provides insulation from external shocks and allows the authorities time to introduce market-oriented reforms," Moody's said Friday.

The credit outlooks for state-owned energy giant China National Offshore Oil Corp, parent of Hong Kong-listed CNOOC, was raised to positive from stable, as were the outlooks for eight mainland lenders, including Bank of China and Construction Bank .

"Even though the mainland government's liabilities are not large, the latest action by Moody's is likely to lead to savings in the cost of borrowings for mainland companies," said HSBC senior economist George Leung.

Moody's adjusted the credit outlooks for several SAR companies, including Hongkong and Shanghai Banking Corp, Hang Seng Bank and MTR Corp, to positive from stable.

China's growing trade surplus and foreign direct investments bolstered its foreign-currency reserves to US$875 billion at the end of March - the world's largest - and they are likely to exceed US$1 trillion this year, according to Moody's.

The trade surplus grew to a record US$13 billion in May as the country's manufacturers continued to gain market share from their foreign competitors. The mainland attracted US$60 billion in foreign direct investments last year, the second-highest in the world.

Moody's said the mainland's ability to service its US$33 billion of external debt has also been enhanced by the reduction of bad debts in the banking system after the central government injected an estimated US$400 billion to shore up domestic lenders such as China Construction Bank and the Bank of China prior to their share listings.

The mainland government must demonstrate further progress in reforming its financial system, including opening the domestic banking market to foreign lenders later this year in line with its commitments to the World Trade Organization, Moody's said, before the rating company will upgrade the country's foreign-currency bonds rating to A1 from the current A2.

Moody's upgraded its rating for the mainland to A2, the sixth-highest grade, from A3 in October 2003, after raising the country's credit outlook to positive from stable 11 months earlier.

"The significance of the latest action is more symbolic than practical, and is a recognition of the mainland's growing financial strength," said Bank of East Asia chief economist Paul Tang. "The latest action won't entail massive savings in the costs of financing for the mainland government, which doesn't have large foreign debts, and does not have much need to issue new debt."

Standard & Poor's raised its outlook on mainland government bonds to positive from stable last July.

Moody's also raised its credit outlook for the Aa3 rating on Hong Kong government's local currency bonds to positive from stable Friday, and said it is planning to upgrade its A1 rating on the SAR government's foreign currency bonds, noting the city's "fiscal position continued to strengthen."

Hong Kong reported a budget surplus of HK$14 billion in the year ended March as growing exports and consumer demand drove the economy to 7.3 percent growth last year.

In the first three months this year, the economy grew at an annual rate of 8.2 percent.

"We are committed to consolidating Hong Kong's public finances further with continued fiscal discipline," Financial Secretary Henry Tang Yin- yen said in a statement.

"We will also be shortly launching a public consultation on the introduction of a goods and services tax in Hong Kong."

S&P, which has an AA- rating for Hong Kong, in April raised its outlook to positive from stable.

Investors show strong support for Hong Kong
Tuesday, July 11, 2006
Government Press Release

The Chief Executive, Mr Donald Tsang has thanked new foreign, Mainland and Taiwan investors for their substantial contribution to the Hong Kong economy.

Mr Tsang today (July 11) hosted a reception attended by over 200 guests representing some 150 overseas, Mainland and Taiwan companies that had set up operations or increased their overall investment in Hong Kong from September, 2005, to June, 2006. Consuls-General, heads of international chambers of commerce in Hong Kong and Hong Kong’s Investment Promotion Ambassadors also joined the event.

Mr Tsang said that despite the challenges the community was facing, Hong Kong remained an attractive location for companies from all over the world to come to do business.

Addressing one of the challenges - air pollution, the Chief Executive said: "We are aware of the problem and are taking active steps to deal with it."

Noting that the greater share of Hong Kong's air pollution came from South China, Mr Tsang appealed to Hong Kong business people as well as Hong Kong-based international business people, to do their part by ensuring that their manufacturing operations in the Pearl River Delta were as environmentally friendly as possible.

Mr Tsang also spoke about the second challenge - the danger of so-called "marginalisation" - but noted that "everything in the character of Hong Kong people reassures me that our community will remain alert both to dangers and to opportunities. And the Government behaves similarly.""

The Secretary for Commerce, Industry and Technology, Mr Joseph WP Wong, and the Director-General of Investment Promotion at Invest Hong Kong, Mr Mike Rowse, greeted the business executives at the reception.

"Invest Hong Kong would like to thank our clients for choosing to invest in Hong Kong," Mr Rowse said. "Their decision to set up here shows their confidence in the long-term development of the business environment and economy of Hong Kong. Their presence at today's event is a strong statement of Hong Kong's position as the best place to do business in Asia."

Mr Rowse said that 2005 was a successful year for investment promotion for Hong Kong. Invest Hong Kong assisted 232 foreign, Mainland and Taiwan companies to set up or expand operations in Hong Kong last year. Hong Kong also recorded an all-time high number of nearly 3,800 regional operations run by foreign, Mainland and Taiwan companies.

He also noted that inward investments continued to come to Hong Kong. As at the end of June, Invest Hong Kong had assisted 156 companies to invest or expand in Hong Kong, achieving more than half its annual target of 240 and representing an 8.3% increase from the same period last year.

These projects will create more than 4,285 jobs for Hong Kong. The investors reported that their investments led to the immediate creation of more than 1,699 jobs, and would create at least 2,586 additional jobs in the next two years. Initial investment by these companies investment topped $6.82 billion.

"In the past few months, we welcomed the arrival of companies involved in a variety of sectors, such as law firms, financial services companies, high-tech and telecom companies. All of these companies bring to Hong Kong their own unique technologies, industry knowledge and international experience, which further enhances our standards and positions in those sectors."

"At the same time, we have seen investment from restaurants and retail operations, which bring more choices of goods and services for the people of Hong Kong. As they set up and further expand, these companies bring economic benefits for Hong Kong by renting retail and office space, hiring commercial services for their daily operations and offering employment and training opportunities for our people at different skills levels," Mr Rowse said.

CEPA continued to have a positive impact on attracting investors to Hong Kong. Mr Rowse said that about a quarter (23%) of the companies the department had assisted so far this year indicated that CEPA played an important role in their decision to invest here. He expected that with the implementation of the new liberalisation measures CEPA's appeal to current and potential investors would be strengthened, as more qualified Hong Kong-based companies would enjoy greater access to the Mainland.

He said the flow of Mainland investments in Hong Kong remained strong. Mainland companies made up 13.5% of the department's completed projects in the first six months, and now constituted around 20% of the current live caseload.

The traditional source markets of investment projects in Europe, Asia-Pacific, and North America, and continue to be key contributors to our economy. They represented 35%, 26% and 22%, respectively, of the total number of projects completed in the first six months.

"Invest Hong Kong is experiencing a substantial year-on-year increase in investment projects so far this year -- and we are working with many more overseas, Mainland and Taiwan companies to establish and build their operations in Hong Kong," Mr Rowse said. "These investments not only bring in capital and create job opportunities, but also provide new ideas and specialist skills that enrich a variety of business sectors in Hong Kong."

Latest figures show that Hong Kong remains the preferred destination for foreign direct investment (FDI) in Asia. During the first quarter this year, the FDI inflows to Hong Kong reached $102.6 billion (US$13.16 billion). The total FDI inflow in the whole year of 2005 was $279.24 billion (US$35.9 billion).

Mr Rowse also extended sincere gratitude to the international business chambers and consulates for their continued support in promoting Hong Kong as the ideal business location.

Senior representatives of three companies, accompanied by Mr Rowse, met the media to share their views on the overall investment environment in Hong Kong. They were Chief Representative of Jun He Law Offices, Mr Liu Lin Fei; Member of the Executive Board & Chief Executive, Asia Division of Swiss Reinsurance Company, Mr Martyn Parker; and President Asia Pacific & Managing Director of Wavecom Asia Pacific Limited, Mr Didier Dutronc.

The executives discussed their companies' recent investment in Hong Kong. In summary:

Jun He Law Offices
------------------

Jun He Law Offices, one of the largest and most recognised Mainland law firms, opened its Hong Kong branch office in June. This was a strategic move to further expand its regional presence, aiming at gaining better access to the global arena through its Hong Kong platform.

According to the firm, China's entry into the WTO and increasing economic relations between the Mainland and Hong Kong -- especially business opportunities arising from China's fast developing economy -- have significantly increased demand for PRC-related legal services. Jun He plans to take advantage of Hong Kong's role as the window to international finance and trade to develop these business opportunities.

Swiss Re (Swiss Insurance Training Centre)
-----------------------------------------

Swiss Re, a leading global reinsurer, opened the Swiss Insurance Training Centre (SITC) at Cyberport in May. The Centre is the company's first international campus outside of Switzerland and provides state-of-the-art courses for insurance and reinsurance professionals from throughout the region.

The establishment of SITC will enhance Hong Kong's standard of professional services and strengthen the city's attractiveness to industry players and talented professionals. Swiss Re is committed to long-term development in Hong Kong, the home of its Asia-Pacific regional headquarters.

Wavecom
-------

Wavecom, a leading French wireless technology provider, has selected Hong Kong for its Asia Pacific R&D centre. Recognising the need to develop its R&D capabilities in Asia to stay close to the end users, the company expanded its regional headquarters in Hong Kong by adding a new R&D arm and moved to the Hong Kong Science Park.

The company chose to expand its presence in Hong Kong for several reasons, including the availability of high quality and loyal employees, intellectual property protection and the city's excellent location and connectivity with the region and beyond.

From news.gov.hk:
Fund management business assets up 25% (http://news.gov.hk/en/category/businessandfinance/060719/html/060719en03009.htm)

HK June CPI rises 2.2 pct yr/yr

HONG KONG, July 21 (Reuters) - Hong Kong's composite consumer price index (CPI) in June rose 2.2 percent from a year earlier, in line with expectations and driven by housing rents, food prices and utility charges.

It was the highest inflation rate since September 1998.

From news.gov.hk:
$14b surplus for 2005-06 financial year (http://news.gov.hk/en/category/businessandfinance/060721/html/060721en03001.htm)

Government welcomes Fitch's decision to upgrade HK's rating outlook
Tuesday, July 25, 2006
Government Press Release

The Government today (July 25) welcomed Fitch's decision to upgrade its long-term foreign currency rating outlook on Hong Kong to "Positive" from "Stable".

At the same time, Fitch also affirmed Hong Kong's long-term foreign currency rating at "AA-" and long-term local currency rating at "AA+" with a stable outlook.

In its press statement announcing the rating decision, Fitch attributed the upgrade in outlook to Hong Kong's strong external financial position, continued improvements in public finances, the Government's commitment to addressing structural fiscal issues and reduced exposure to China risks. Fitch acknowledged that Hong Kong's current account surplus, at 11.4% of GDP in 2005, and Hong Kong's international reserves, at 3.8 months of currency external payments, are far better results than that of the "AA" median.

Welcoming the news, the Financial Secretary, Mr Henry Tang, said the upgrade reflected international recognition of Hong Kong's improved public finances and growth prospects. He added that the Government would continue to exercise fiscal discipline and to explore ways to broaden the tax base.

"We note the concerns expressed by Fitch for the potential risks related to the fact that Hong Kong is part of China. We hope that the solid track record in the strict adherence to the 'one country, two systems' principle will convince international credit rating agencies to accord us a higher rating that is in line with our economic fundamentals," Mr Tang added.

Fitch last affirmed its foreign currency sovereign rating on Hong Kong at "AA-" in May 2005. It last raised Hong Kong's rating outlook to "Stable" from "Negative" in May 2004.

Business expectations for the third quarter of 2006
Thursday, July 27, 2006
Government Press Release

The Census and Statistics Department (C&SD) released today (July 27) results of the Quarterly Business Tendency Survey for the third quarter (Q3) of 2006.

Business Situation

For all surveyed sectors taken together, significantly more respondents expect their business situation to be better, as compared to those expecting it to be worse, in Q3 2006 over the second quarter (Q2) 2006.

Analysed by sector, significantly more respondents in the construction; import and export trade; restaurants and hotels; communications; real estate; business services; and banks, financing and insurance sectors expect their business situation to be better, as compared to those expecting it to be worse, in Q3 2006 over Q2 2006.

Volume of Business/Output

Respondents in all the sectors covered expect an increase in their volume of business/output in Q3 2006 over Q2 2006.

Analysed by sector, significantly more respondents in the construction; wholesale and retail; import and export trade; transport and related services; communications; real estate; and banks, financing and insurance sectors expect their volume of business/output to increase, as against those expecting it to decrease, in Q3 2006 over Q2 2006.

Employment

On employment, respondents in all sectors expect it to increase in Q3 2006 over Q2 2006.

Analysed by sector, significantly more respondents in the construction; wholesale and retail; restaurants and hotels; transport and related services; real estate; and banks, financing and insurance sectors expect their number of persons engaged to increase, as compared to those expecting it to decrease, in Q3 2006 over Q2 2006.

Selling Price/Service Charge

Regarding selling price/service charge, respondents in all except the manufacturing; wholesale and retail; and import and export trade sectors expect it to increase in Q3 2006 over Q2 2006.

Analysed by sector, more respondents in the construction; restaurants and hotels; transport and related services; real estate; business services; and banks, financing and insurance sectors expect their selling price/service charge to increase, as against those expecting it to decline, in Q3 2006 over Q2 2006.

Further Information

The survey covers ten major sectors in Hong Kong, including the manufacturing; construction; wholesale and retail; import and export trade; restaurants and hotels; transport and related services; communications; real estate; business services; and banks, financing and insurance sectors.

The survey gathers views on short-term business performance from the senior management of about 530 prominent establishments in various sectors in Hong Kong with a view to providing a quick reference, with minimum time lag, for predicting the short-term future economic performance of the local economy. Views collected refer only to those of the respondents on their own establishments rather than those on the respective sectors they are engaged in; and are limited to the expected direction of quarter-to-quarter change (i.e. "up", "same" or "down") but not the magnitude of change. In collecting views on the quarter-to-quarter changes, if the variable in question may be subject to seasonal variations, respondents are asked to provide the expected changes after excluding the normal seasonal variations.

It has to be noted that in this type of survey on expectations, the views are affected by the events in the community occurring around the time of enumeration. The enumeration period for this survey round was from June 12, 2006 to July 6, 2006.

Survey results are generally presented as "net balance", i.e. the difference between the percentage of respondents choosing "up" over that choosing "down". The percentage distribution among various response categories (e.g. "up", "same" and "down") reflects how varied business expectations are. The "net balance", with its appropriate sign, indicates the direction of expected change in the variable concerned. A positive sign indicates a likely upward trend while a negative sign, a likely downward trend. However, the magnitude of the "net balance" reflects only the prevalence of optimism or pessimism, but not the magnitude of expected change, since such magnitude is not collected in the survey.

Table 1 shows the net balances on views on expectations in respect of different variables.

A spokesman for the C&SD cautioned that, in a survey of this nature, the results should be interpreted with care, as it is difficult to establish precisely the extent to which respondents' perception of the future accords with the underlying trends.

The survey results are published in greater detail in the "Report on Quarterly Business Tendency Survey, Q3 2006". Users can download this publication free of charge at the "Statistical Bookstore, Hong Kong" (www.statisticalbookstore.gov.hk) of the C&SD.

Print version of this publication is available for sale at HK$22 per issue. Purchase can be done in person at the Publications Unit of the C&SD (19/F Wanchai Tower, 12 Harbour Road, Wan Chai; Tel: 2582 3025) or through mail order by returning a completed order form which can be downloaded from the C&SD's website (www.censtatd.gov.hk/products_and_services/other_services/provision_of_stat/mail_ordering_of_publications/index.jsp). Print version of this publication is also available for sale online at the Statistical Bookstore and the Government Bookstore of the Information Services Department (www.isd.gov.hk/eng/bookorder.htm). Print versions if purchased online are offered a discount, at 85% of their original prices.

Enquiries about the survey results may be directed to the Business Expectation Statistics Section of the C&SD (Tel: 2805 6112).

Table 1 : http://gia.info.gov.hk/general/200607/27/P200607270146_0146_17221.pdf

S&P lifts HK, China ratings
Hong Kong Standard
Katherine Ng and Bloomberg
Friday, July 28, 2006

Standard & Poor's Ratings Services has raised both China and Hong Kong's long-term sovereign credit rating one notch, to reflect the mainland government's efforts to improve bank finances and curb an overheating economy.

S&P Thursday raised China's long- term foreign and local currency rating to A from A-, and Hong Kong's to AA from AA-. S&P's outlook for both economies is stable. This is the highest rating the agency has ever assigned to Hong Kong.

Another rating agency, Moody's Investors Services, on July 7 upgraded China's and Hong Kong's outlook from stable to positive, saying they were still under review and making no decision on upgrading Hong Kong's rating.

Hong Kong's Financial Secretary Henry Tang Ying-yen welcomed S&P's revision. "The upgrade confirms that Hong Kong's improved fiscal position and sound economic fundamentals deserve a much higher rating. It is also recognition of the continued strength of China's economic performance and the overall strengthening of its creditworthiness," he said.

S&P cited China's "persistent efforts to strengthen the banking sector" and the economy's "excellent growth prospects." China has spent US$60 billion (HK$468 billion) bailing out three of its four biggest state banks since 2003, and successfully listed two of them in Hong Kong in the past year. Higher ratings may enhance confidence that the government can slow economic growth that reached 11.3 percent in the second quarter to a sustainable pace.

"Overall, it's a big endorsement" of the government's economic policies, said Liu Yang, at Atlantis Investment Management in Hong Kong. "It will give comfort to investors who are purchasing Chinese assets. It also will drive interest in the banking system."

Since April, the central government has raised interest rates and twice ordered banks to set aside more deposits as reserves in an effort to slow investment in factories and real estate that it says is growing too quickly.

"The authorities have reacted early in this current economic cycle, tightening monetary policy and attempting to limit unproductive investments," S&P said in a statement.

"It is a good thing that the [mainland] government did not use rate hikes to curb the overheating economy. The increase of [banks'] reserve requirement ratio is a more direct way to control lending," said Kim Eng Tan, assistant director, sovereign and international public finance rating, at S&P.

"While current measures are only the first steps, S&P expects ongoing efforts to moderate growth to more sustainable levels."

China's foreign exchange reserves, the world's largest, jumped by a third from a year earlier to US$941 billion at the end of June, driven by record exports and foreign direct investment.

"The government has not relented in its restructuring of the financial sector," Thursday's statement said. S&P said it lowered its estimate of nonperforming assets in the financial system to 21-25 percent of total loans as of the end of 2005.

The ratings company also raised Hong Kong's long-term credit rating to AA from AA-, citing improved credit fundamentals of "ultimate sovereign" China. "The higher credit ratings on China reduce the likelihood of potential negative developments in China spilling over to Hong Kong and adversely affecting Hong Kong's credit standing," S&P said.

The upgrade may encourage overseas funds to put more money into the city, increasing demand for the currency. The Hong Kong dollar also advanced after China's yuan rose to the highest since the central bank scrapped a peg to the dollar a year ago.

"The upgrade is good news for Hong Kong and an excuse to buy the Hong Kong dollar," said Craig Chan, a strategist at Royal Bank of Scotland in Hong Kong. "There's also a lot of speculation the yuan is going to appreciate and that's putting pressure on the Hong Kong dollar to gain too."

"The higher credit ratings on China reduce the likelihood of potential negative developments in China spilling over to Hong Kong and adversely affecting Hong Kong's credit standing," the ratings company said.

From news.gov.hk:
Q2 GDP up 5.2% (http://news.gov.hk/en/category/businessandfinance/060822/html/060822en03003.htm)

Sounds like good news for Hong Kong again.

HK leads financial hub race for Asia
Hong Kong Standard
Friday, September 01, 2006

Hong Kong is the most competitive financial center in Asia Pacific, ahead of Japan and Australia, a survey has found.

The city ranked high for its transparent business regulations and low tax base, among other advantages, according to a study by the Securities and Futures Commission.

"Hong Kong is clearly ahead of other Asian markets in most factors," said the SFC study, which extracted and compared the scores of 12 regional economies, including the mainland, Hong Kong, Taiwan, Japan, Australia and Singapore, in two recent global competitiveness surveys run by the Geneva-based World Economic Forum and the International Institute of Management Development, based in Lausanne.

Hong Kong slipped seven places to 28th in the WEF's latest Global Competitiveness Report, released last September, but retained second place in the IMD's latest World Competitiveness Scorecard, released in June.

The SFC said the SAR scored higher than other economies in financial- services-related areas in the surveys.

"Hong Kong may be the most competitive market regionally for equities, but it needs further development of the debt market to be an all-round financial center," said Standard Chartered economist Frances Cheung.

"However, the same can be said of most other Asian financial centers, with the exception of Japan and Australia."

A record HK$195 billion was raised in initial public offerings last year on the Hong Kong stock exchange, making it the second largest IPO market in the world behind the New York Stock Exchange. This was largely as a result of several blockbuster share sales by giant mainland companies, including China Construction Bank (0939) and China Shenhua Energy (1088).

The trend is continuing this year, with the IPO by Bank of China in June raising a record HK$90 billion.

"There needs to be a further balancing in Hong Kong in favor of other funding channels such as bonds," said John Bailey, director of corporate and infrastructure ratings at Standard and Poor's. The size of the market for corporate and government bonds in Hong Kong stands at less than US$100 billion (HK$780 million) at present, compared with more than US$7 trillion in Japan.

"The Hong Kong government doesn't have much need to raise debt, which makes it difficult for the bond market to be kick-started," said Cheung from Standard Chartered.

The relatively lop-sided nature of Hong Kong's financial markets does not detract from their ability to attract international investors, the SFC said.

Foreign funds now account for about 34 percent of total stock market transactions in Hong Kong, the SFC said, compared with 30 percent for local retail investors, and 27 percent for domestic institutional investors.

"Hong Kong is one of the more transparent markets for investors, and one of the easiest to work in," said Bailey. "Also, it provides international investors the best opportunities to participate in the growth of the mainland economy."

The SFC said Hong Kong also scored higher than the other 11 economies in its ability to produce and attract qualified financial professionals.

There are more than 3,000 certified financial analysts in Hong Kong, compared with just 200 in 1995, the SFC said. The number of certified public accountants has also more than doubled to 25,000, from 11,500 in 1995, the SFC said.

From news.gov.hk:
HK leads Asia in talent, economic freedom (http://news.gov.hk/en/category/businessandfinance/060904/features/html/060904en03004.htm)

From news.gov.hk:
HK ranks 5th on business-friendly scale (http://news.gov.hk/en/category/businessandfinance/060906/html/060906en03006.htm)

From news.gov.hk:
Greater use of HK's financial system urged (http://news.gov.hk/en/category/businessandfinance/060914/html/060914en03007.htm)

The latest Viewpoint: One country, two financial systems--Making greater use of Hong Kong’s financial system would be in both Hong Kong's and the Mainland's interest. (http://info.gov.hk/hkma/eng/viewpt/20060914e.htm)


Also from news.gov.hk:
Q2 construction value up 0.5% (http://news.gov.hk/en/category/businessandfinance/060914/html/060914en03002.htm)

Q2 industrial production index up 5.3% (http://news.gov.hk/en/category/businessandfinance/060914/html/060914en03006.htm)

Exchange Fund foreign assets up $14.9b (http://news.gov.hk/en/category/businessandfinance/060914/html/060914en03004.htm)

HK July domestic exports rise 20.8 pct on year

HONG KONG, Sept 22 (Reuters) - The volume of Hong Kong's domestic exports in July 2006 rose by 20.8 percent from a year earlier, while re-exports increased by 11.0 percent, the Census and Statistics Department said on Friday.

The total volume of the territory's exports, including re-exports through China, rose 11.6 percent while total imports climbed 9.5 percent from a year ago, the department said in a statement.

The volume of domestic exports for the first seven months of 2006 increased by 30.2 percent from a year earlier while that of re-exports rose by 9.3 percent. Total exports increased by 10.4 percent and imports increased by 10.0 percent.

Prices of domestic exports meanwhile fell 2.2 percent in July 2006 from a year earlier and re-export prices increased by 1.3 percent. Total export prices were up 1.1 percent and import prices also increased by 2.6 percent, the data showed.



Prices of domestic exports for the first seven months of 2006 were 3.2 percent lower, while those of re-exports increased by 0.5 percent. Total export prices were up by 0.3 percent and import prices increased by 1.6 percent.

The department said prices are based on unit values which do not take into account changes in the composition or quality of goods traded, except for some selected commodities for which specific price indices are available.

Government welcomes Moody's decision to upgrade Hong Kong's rating
Wednesday, September 27, 2006
Government Press Release

The Government welcomed Moody's decision today (September 27) to upgrade Hong Kong's long-term foreign currency rating to "Aa3" from "A1", with "Positive" outlook. The Government also welcomed Moody's upgrade of Hong Kong's foreign-currency bank deposit ceiling from "A1" to "Aa3", with "Positive" outlook.

In its press statement announcing the rating decision, Moody's attributed the upgrade to Hong Kong's strong financial position and large positive international investment position, showing that Hong Kong now had a degree of resilience to any potential shocks emanating from the Mainland. In addition, Moody's noted that the large foreign assets held by Hong Kong residents could help Hong Kong weather potential economic or financial shocks. Moody's also stated that the upgrade was prompted by its belief that the foreign currency bond rating should be in line with local currency bond rating.

Welcoming the news, the Financial Secretary, Mr Henry Tang, said the upgrade reflected international recognition of Hong Kong's improved public finances and growth prospects.

"Following Moody's upgrade, Hong Kong has now achieved AA-category ratings by all major international credit rating agencies. The latest ratings are also the highest that have ever been assigned to Hong Kong. Moody's upgrade is also a major breakthrough as it has allowed Hong Kong's rating to rise above that of the Mainland by more than one notch," Mr Tang said.

"Hong Kong's foreign-currency sovereign rating has been constrained by the Mainland risk factor. In the past year, we have worked intensively on the credit rating agencies to assure them that Hong Kong is very resilient to Mainland risks. We are glad to see that the efforts are paying off. We will continue to maintain close dialogue with the credit rating agencies in order to achieve higher ratings that reflect our strong fundamentals," Mr Tang added.

Until three years ago, Moody's had capped the foreign-currency sovereign rating of Hong Kong at that of the Mainland. In October 2003, Moody's allowed Hong Kong's foreign-currency rating to pierce through the Mainland's sovereign rating to achieve "A1" and had constrained Hong Kong's rating gap to one notch above that of the Mainland since then. The latest rating action widened the gap to two notches.

Milton Friedman attacks Hong Kong on policy change

HONG KONG, Oct 6 (Reuters) - Nobel prize winning economist Milton Friedman criticised Hong Kong on Friday for abandoning a laissez-faire approach to government, saying the territory will no longer be such a shining symbol of economic freedom.

Chief Executive Donald Tsang said last month his administration had not based its economic policy on "positive non-interventionism" - a laissez-faire approach that had been seen as central to Hong Kong's rapid economic development over the past 50 years.

"Mr Tsang insists that he only wants the government to act, when there are obvious imperfections in the operation of the market mechanism," Friedman wrote in an article in the Far Eastern Economic Review.

"That ignores the reality that if there are any 'obvious imperfections', the market will eliminate them long before Mr Tsang gets around to it."

Friedman said the territory's laissez-faire policy had contributed to China's economic boom, adding China's fate would depend on whether it continued to move in Hong Kong's direction faster than Hong Kong moved in China's.

Tsang released a statement on Friday saying that the philosophy behind the government's principle of prudent financial management had remained unchanged over the past 30 years. However, the term "positive non-interventionism" was ambiguous, he said.

""Big market, small government" is a more accurate description of the government's long-established financial approach," Tsang said in the statement.

Hong Kong is consistently rated one of the world's freest economies although some commentators have said that previous governments have not always adopted a laissez-faire attitude.

Middle class calls for action on poverty
Wendy Leung
Hong Kong Standard
Monday, October 09, 2006

Hong Kong's middle class would like to see Chief Executive Donald Tsang Yam-kuen announce initiatives to reduce poverty in his policy address Wednesday, according to a survey the results of which were announced Sunday.

The survey, by Middle Class Force, interviewed 520 managers and executives, whose salaries ranged from HK$25,000 to HK$120,000 a month, between late September and early October what they expect from Tsang.

Group chairman Andrew Fung Wai- kwong said 56 percent of the respondents had expressed concern that nearly one million of Hong Kong's seven million population were living in poverty, arguing this would affect social stability.

"We would like to see the government provide more education such as on-the-job training to low-income and unskilled workers so as to raise their competitiveness," Fung said.

Another hope expressed by 55 percent of the middle class, and one which Fung said Tsang could easily address, was for the government to drop the goods and services tax proposal.

This regressive tax will only hurt the poor, Fung said.

It will also be a huge waste to collect a tax which the government says is not intended to raise revenue and which will be returned to the public in other ways.

More than half the respondents urged Tsang to commit his government to the election of a chief executive and the full Legislative Council by universal suffrage as soon as possible, according to Fung.

He said a popularly elected government would be more inclined to fight for the interests of the public and would have a stronger hand in dealing with such sensitive issues as air quality and the reduction of air pollutants by power companies.

The only other subject of interest to the middle class was education with 45.8 percent saying Tsang should reduce the burden on post-secondary students by providing more financial assistance.

A slightly smaller number, 44.4 percent, said he should set aside a fund to upgrade the community's knowledge of information technology.

Apleichau Environment and Planning Concern Group chairman William Ngai Wai-wang said the government should implement small-class teaching, reduce interest rates for non-means test student loans and provide tax allowance to parents of tertiary school students, particularly those taking associate degree courses.

"Hong Kong is a knowledge-based economy, and consequently the education of our next generation assumes great importance," Ngai said.

Asked to comment on Tsang's performance in fulfilling the promises he made in his first policy address last year, Fung said: "I cannot see anything that he has done for the middle class over the past year."

Nobel laureate urges Hong Kong to keep laissez-faire policy: report

HONG KONG, Oct 23, 2006 (AFP) - This year's winner of the Nobel prize for economics has urged Hong Kong not to abandon its laissez-faire economic policy, stoking concerns over rising government intervention in the market.

In an interview with Hong Kong media published Monday, American economist Edmund Phelps argued that a lean, hands-off government was best suited to encouraging a dynamic economy and said he hoped Hong Kong would remain "a shining example of the consequences of economic dynamism.

"It would be a pity if the tiger changed its stripes and became a model of corporatism and reckless interventionism," said Phelps, 73, during a phone interview from his New York City home with the Standard and sister publication Sing Tao Daily.

His comments came after American economist and fellow Nobel laureate Milton Friedman lambasted Hong Kong leader Donald Tsang for declaring last month that the age of "positive non-intervention" had ended.

Friedman characterised the statement as "the death of the policy on which the territory's prosperity was built".

With a proposed new tax and a minimum wage policy on the cards, his comments reflected growing concern that the southern Chinese territory is moving away from the blueprint that many believe brought it great wealth in the past 30 years.

Phelps hit out at the government's recently announced strategy of tackling low wages in the territory by "encouraging" companies to pay their workers according to market rates.

He argued that the government should subsidise companies that employ low-wage workers in order to keep up demand for their labour.

Phelps, a professor at Columbia University, earned the Nobel Prize for his academic work in the 1960s, which helped debunk the then-orthodox view that low unemployment would result in high inflation.

HSBC likely to acquire Taiwan's Far Eastern

JeffreyTam

UK-based banking giant HSBC Holdings (0005) is rumored to be acquiring Taiwan-based Far Eastern International Bank, prompting the target lender's share price to climb 6.8 percent Tuesday on expectations of a takeover bid.
Far Eastern shares closed Tuesday at NT$16.45 (HK$3.85) while HSBC's stock price fell by 0.2 percent to HK$146.90.

Michael Smith, chief executive of HSBC's Asian banking unit, the Hongkong and Shanghai Banking Corp, is currently in Taiwan for the launch of its online and telephone banking service, fueling market speculation the HSBC Group may be considering buying Far Eastern. An HSBC spokesperson declined comment.

"There have been a lot of talks in Taiwan, and I think it [HSBC's takeover] is quite possible," said Kevin Chan, research analyst at Nomura Securities.

Should HSBC make the acquisition, its branch network in Taiwan would be beefed up to about 47 outlets from the current eight. The Taiwanese bank is part of family-controlled conglomerate Far Eastern Group, with about 39 branches and NT$306 billion in total assets as at December 2005.

Rumors about HSBC's interest in Far Eastern have lingered on since early April. The Taiwanese lender subsequently filed a statement to the Taiwan stock exchange, saying it would "not rule out any likelihood of external growth with the purpose of creating the most benefits for our shareholders."

Far Eastern posted first-quarter pretax income of NT$366 million, down from NT$1.01 billion the previous year, as Taiwan's banking industry faltered on mounting nonperforming loans.

A Taiwanese newspaper reported October 12 that HSBC also has an interest, in partnership with Netherlands-based ABN AMRO Bank, in acquiring Ta Chong Bank.

Snowballing bad consumer credit loans and the fragmented banking industry have led to a binge of mergers and acquisitions in Taiwan, luring foreign companies to jump in.

Following London-based Standard Chartered Bank's (2888) recent takeover of Taiwan's Hsinchu International Bank, analysts have speculated that US- based Citigroup will inject NT$6 billion into Taiwan's Bank of Overseas Chinese to gain a 25 percent stake.

Fed rate flat amid housing slowdown

Thursday, October 26, 2006

The Federal Reserve kept interest rates unchanged early Thursday (Hong Kong time) for a third consecutive meeting, hoping that a slowing economy will dampen a worrisome rise in inflation.
The Fed left its federal funds rate at 5.25 percent. It has been at that level since late June when the central bank raised rates for a 17th consecutive time in a two-year effort to combat inflation.

The decision to keep the funds rate unchanged means the prime lending rate in the United States, the benchmark for millions of consumer and business loans, will remain at 8.25 percent. Financial markets had widely expected no change in rates, with investors believing the Fed would want to avoid jolting markets just two weeks before the November congressional elections.

Fed chairman Ben Bernanke has held rates steady for three straight meetings. Many economists believe Bernanke and his colleagues will leave rates unchanged for perhaps as long as a year as they watch to see whether the economy follows the Fed's hoped-for scenario of slowing enough to cause inflation to retreat from current levels. The decision by the Federal Open Market Committee, composed of Fed board members and Fed regional bank presidents, was supported by a 10-1 vote.

Confirming the economic slowdown, meanwhile, sales of existing homes in the United States fell for a sixth straight month in September and the median sales price dropped on an annual basis by the largest amount on record, further documenting a lukewarm housing market.

The National Association of Realtors reported Wednesday that sales of previously owned homes fell by 1.9 percent in September to a seasonally adjusted sales pace of 6.18 million units, the slowest sales rate since January 2004.

The median price of a single-family home fell to US$219,800 (HK$1.71 million) last month, a drop of 2.5 percent from the price in September 2005. That was the biggest year-over- year price decline in records going back nearly four decades.

IMF predicts Hong Kong economy to expand 5pc
8 November 2006
South China Morning Post

Hong Kong's economy is expected to grow 5 per cent next year after a robust increase in the range of 5.5 to 6 per cent this year, according to the International Monetary Fund (IMF).

The IMF also expected that the budget surplus this year would be higher than the government's original forecast of HK$5.6 billion.

The comments were part of the concluding statements published yesterday following the visit by an IMF mission last month.

The mission said it expected economic growth of 5.5 to 6 per cent this year, and around 5 per cent next year. Near-term risks to this outlook included a sharper slowdown in global demand and a rise in protectionist sentiments towards the mainland, the mission said.

With last year's budget surplus reaching HK$14 billion, or 1 per cent of gross domestic product, the mission believed the budget this year would continue to take advantage of the strong economy.

"The current economic outlook and spending trends suggest this year's output could be above 0.5 per cent of GDP," the mission said.

In his budget in February, Financial Secretary Henry Tang Ying-yen estimated that the budget surplus in 2006-07 would be HK$5.6 billion, about 0.4 per cent of GDP.

On the question of a minimum wage law, the IMF said such legislation, if properly designed, would not unduly affect employment. But given the city's institutional constraints on monetary and fiscal policies, the burden of economic adjustment would be borne by changes in nominal wages and other prices, it said.

"The minimum-wage legislation would have to be designed in such a way as to maintain the overall flexibility of the economy and its competitiveness," it said.

The IMF also expressed support for discussions on broadening the tax base and for a fair-competition law.

Mr Tang welcomed the mission's positive assessment on the city's robust market infrastructure.

Q3 GDP up 6.8%


Hong Kong's economy gathered strong momentum in the third quarter, with GDP expanding briskly by 6.8% in real terms, up on a 5.5% rise in the second quarter, Acting Government Economist Helen Chan says.



This signified the 12th consecutive quarter of distinctly above-trend growth since the current upturn began in mid-2003.





Forecast growth


Mrs Chan said, in the light of an exceptionally strong GDP outturn of 6.8% growth for the year's first three quarters, and even after allowing for some possible moderation in external trade in the fourth quarter, the forecast GDP growth for 2006 as a whole has been revised up from 4-5% to 6.5% in the current update.



She said external trade regained vigorous in the third quarter after some moderation in the second.



Merchandise exports saw faster growth of 8.9% in real terms in the third quarter over a year earlier, thanks to thriving trade flows in the Mainland and the renewed weakening of the US dollar in recent months.



Exports of services likewise grew strongly, by 8.6% in real terms, along with vibrant offshore trade and buoyant financial market activities.



Optimistic outlook

Mrs Chan said the outlook for the remainder of 2006 is for a further expansion in economic activity at a solid pace.



Externally, despite the economic slow-down in the US, the economic situation elsewhere is still very favourable. The vibrant Mainland economy and its surging trade flows, in particular, will continue to provide the main impetus to Hong Kong's trade growth.



Economic recovery in the euro area and Japan remains on track. The recent easing in oil prices and the pause in interest rate hikes in the US will also help to reduce some downside risks to the global economy.



Against this background, Hong Kong's external trade looks set for further growth in the fourth quarter, particularly with the additional boost from a weak US dollar, she said.



Consumer spending

Mrs Chan said local consumer spending rose solidly, amidst improving employment income, expanding job opportunities and a buoyant stock market.



A more stable property market, together with the pause in interest rate hikes, also helped. Private consumption expenditure attained solid growth of 4.4% in real terms in the third quarter over a year earlier, further on growth of 4.5% and 5.1% in the first two quarters.



On a seasonally adjusted quarter-to-quarter comparison, private consumption expenditure grew 0.5% in real terms in the third quarter, following 1.2% growth in the second quarter.



Overall investment spending accelerated markedly to double-digit growth at 12.7% in real terms in the third quarter over a year earlier, marking the fastest growth since the fourth quarter of 2000.



Business confidence

Machinery and equipment investment, which surged by 22.4%, was the key driver of overall investment growth, reflecting strong business confidence.



The prevailing business confidence is likewise strong, which should provide the favourable ground for a further surge in machinery and equipment investment.



Construction activity, though likely to remain weak in the near term, might also show some relative improvement if private sector activity can continue to stabilise.



Inflation moderate

CPI inflation has remained moderate so far this year and is likely to remain so through to year's-end given the recent easing in oil prices and notable growth in labour productivity, Mrs Chan said.



With the actual outturn of the Composite CPI in the first 10 months of 2006 in line with expectations, the forecast rate of increase in the Composite CPI for 2006 as a whole is maintained at 2%. The forecast rate of change in the GDP deflator for 2006 as a whole is likewise kept unchanged at 0%.



With robust economic expansion transpiring into broad-based job creation, the labour market continued to show extensive improvements recently.



Some 311,000 additional jobs have been created since the trough in 2003, bringing the seasonally adjusted unemployment rate down to a 64-month low of 4.5% in the three months ending October. The number of long-term unemployed has fallen by 55%.

Hope HK will continue to grow, in re-inventing its economy & position. HK should expand its position to an even bigger metropolis, than the existing: "Foot at HK, Eyesight in the mainland" position.

===================

6.8pc GDP growth beats expectations

GitaDhungana

Wednesday, November 22, 2006


Hong Kong's economy expanded more than expected in the third quarter as soaring stock prices and an improved job market boosted private consumption while export growth regained momentum.
Government figures released Tuesday show gross domestic product rose 6.8 percent in the third quarter from the same period last year, up from a 5.5 percent increase in the previous quarter.

"This was the 12th consecutive quarter of distinctly above-trend growth since the current upturn began in mid- 2003," acting government economist Helen Chan said.

Private consumption increased by 4.4 percent from last year.

Strong domestic demand on the back of an improving labor market and a buoyant stock market continued to play an important role in the economic upturn, Chan said.

"A more stable property market, together with the pause in interest hikes, also helped," she added.

Hong Kong's jobless rate for August-October fell to 4.5 percent, the lowest level since June 2001, with a record 3.5 million people employed.

Retail sales in September increased by 7.5 percent from September 2005 following a five-month high of 8 percent recorded in August.

The third-quarter expansion beat the 5.4 percent median estimate of 19 economists surveyed by Bloomberg.

"Growth momentum was somewhat higher than we expected, basically due to strong growth recorded in exports, and strong private consumption," said Daniel Chan, senior economist at DBS.

Exports in the third quarter picked up after some moderation in the second quarter.

Merchandise exports grew faster in the third quarter than a year earlier, thanks to thriving trade flows in the mainland and a renewed weakening of the US dollar in recent months, Helen Chan said.

Total exports in the third quarter increased by 8.9 percent, compared with 6.4 percent in the second quarter. Meanwhile, export of services rose 8.6 percent amid vibrant offshore trade and buoyant financial market activities.

For the nine months ended September 30, the total gross domestic product rose 6.8 percent.

The stronger-than-expected expansion in the third quarter led the government to raise its full-year growth forecast to 6.5 percent from a previous 4 percent to 5 percent.

"We expect the growth momentum to slow down in the fourth quarter due to a possible slowdown in exports," said Daniel Chan.

He forecast GDP to grow more than 6 percent in the fourth quarter and 6.5 percent for the whole year.

"Private consumption will still be the driving factor for growth as exports are expected to slow down on the back of the US slowdown," he said.

The US economy grew at a 1.6 percent annual rate in the third quarter, the slowest pace in more than three years, while expansion in China also eased in the third quarter, to 10.4 percent.

Meanwhile, the Hong Kong consumer price index in October rose 2 percent from a year earlier, as overall price levels were decreased by a 10 percent cut in the domestic gas price with the introduction of natural gas in the Town Gas supply from October 1.

For the whole third quarter, the composite consumer price index edged up slightly higher to 2.3 percent, from 2 percent in the second quarter.

That's good news for the region. HK though is still remains as the gateway to mainland China and is still the one of the main investors

Hong Kong is the single largest outside investor in China.

Analysts raise GDP full-year forecast

Gita Dhungana

Thursday, November 23, 2006


Following Tuesday's announcement of better-than-expected third-quarter economic results, analysts have raised their growth forecast for the full year.
Most are optimistic about the city's economic prospects in the near term, but expect a slowdown next year, dragged by a slowing United States economy.

"The-stronger-than-expected real GDP growth for 3Q this year should boost market confidence in Hong Kong's future growth prospects," Citigroup said Wednesday.

It raised its 2006 growth forecast to 6.7 percent, up from 6 percent.

Government figures showed Hong Kong's gross domestic product grew 6.8 percent in the third quarter, as business investment expenditures surged while exports and domestic consumption remained robust.

The city is brimming with consumer confidence, driven by an improving job market and soaring stock prices.

Economists maintain a positive outlook for the fourth quarter, but view a slowing US economy as a threat.

"On the external side, in addition to the slowdown in the US economy, some moderate slowdown in mainland exports is expected, due to government policies, to reduce export growth that will hurt Hong Kong's exports," said Paul Tang, chief economist at Bank of East Asia. He predicted full-year 2006 GDP growth of 6.5 percent, followed by a slowdown next year.

But some economists say the US downturn will not adversely affect Hong Kong's exports, as the slump is concentrated in the housing industry.

" But in the second half of 2007, both US and Chinese economies are expected to moderate, which will hurt Hong Kong's growth momentum," said JPMorgan economist Qian Wang who forecasts 5 percent GDP growth for next year.

Ten economists surveyed by Reuters expect the SAR's economy to rise 6.6 percent this year, followed by 5percent in 2007.

"We are optimistic on Hong Kong's economic prospects over the medium term, believing that the economy is well-positioned to leverage on opportunities from China's multi- decade development," said Morgan Stanley.

"But with gigantic asset markets relative to the size of the economy, Hong Kong has to get accustomed to more volatile business cycles."

HK export growth to slow to 6 pct in 2007 -TDC

HONG KONG, Dec 11 (Reuters) - Hong Kong exports will grow 6 percent by value in 2007, slowing from an estimated 8 percent this year, amid cooling U.S. demand and electronics sales and a drop in domestic exports, a trade body forecast on Monday.

The quasi-government Hong Kong Trade Development Council (TDC) said rising intra-Asian trade would cushion the export slowdown.

A new TDC Export Index, measuring exporter confidence on a quarterly basis, shows that exporters are far less confident about their business outlook than earlier in the year.

In the fourth quarter, the index gave a reading of 49.3, down from 56.1 in the third quarter and 59.8 in the second quarter.

The index survey covers 500 companies across six industries. A reading below 50 indicates that proportionately fewer respondents expect their export business to grow in the near term.

Weakening export growth will put pressure on the Hong Kong economy. However, 6 percent export growth next year is in line with economists' forecasts in a recent Reuters poll for 5 percent economic growth in 2007, cooling from an estimated 6.6 percent expansion this year.

The TDC said there were signs that the global electronics cycle has peaked, and that would hurt Hong Kong because electronics products account for nearly half of the territory's total exports.

More than 90 percent of Hong Kong exports, and the bulk of its imports, are re-exports to and from China.

Domestic exports are small but are likely to grow by 2 percent this year following the relocation of some clothing manufacturing to the territory last year to avoid the reimposition of quotas on Chinese clothing and textile exports, the TDC said.

However, Edmund Leung, the TDC's chief economist, said there were signs that Chinese quotas were not as tight as expected, giving room for more direct shipments from the mainland next year. As result, Hong Kong's domestic exports will drop 10 percent in 2007, the TDC forecast.

Import growth is also expected to slow next year. The TDC forecasts 8 percent growth in the value of Hong Kong imports next year, compared with an estimated 10.5 percent increase this year. Import growth would be stronger than export growth because of solid domestic demand which would boost retained imports.

The TDC export index was based on responses from 500 companies in the clothing, electronics, toys, timepieces, fine jewellery and machinery industries. Those sectors account for about 70 percent of Hong Kong exports.

Gov't Press Release:
Hong Kong's Gross National Product (GNP) and External Factor Income Flows (EFIF) for the Third Quarter of 2006 (http://info.gov.hk/gia/general/200612/18/P200612180146.htm)

英報︰
港集資額超倫敦主板 (明報) 12月 19日 星期二 05:05AM

【明報專訊】英國《泰晤士報》引述永安會計所委託進行的一項調查表示︰「今年在香港上市公司的集資額達395億美元（3081億港元），佔全球總集資額的17%，遠超過倫敦(相關新聞 - 網站)交易所的340億美元（2652億港元）。」有分析員認為，香港的集資額躍升全球首位，顯示海外投資者對亞洲股隻的需求愈來愈大。

港佔全球總額17%

不過，若包括倫敦交易旗下的AIM市場，倫敦交易所全年集資額高達400億美元，仍然較香港395億美元集資額略高。

The Times
December 18, 2006

Hong Kong overtakes LSE in value of flotations
Liz Chong

The London Stock Exchange has been leapfrogged by Hong Kong as the preferred international location for initial public offerings.

Companies listing in Hong Kong this year have raised a record $39.5 billion (£20 billion), more than 17 per cent of the total capital raised worldwide.

*
The Hong Kong stock exchange has gained from a push by China’s Government for stock market flotations that it believes will help to develop the country’s corporate culture and capital markets. Hong Kong owes its strong performance this year to two blockbuster IPOs — the $22 billion debut by Industrial & Commercial Bank of China and the Bank of China’s $9.7 billion deal.

Hong Kong’s stock exchange will see the debut tomorrow of a $1.69 billion offering by China Coal Energy, a coal miner that is one of eight companies due to hit the market before the end of the year.

Analysts say that the increased flow of deals through Hong Kong reflects the growing appetite of foreign investors who are comfortable with buying Asian stock.

Chinese companies have raised more than $46 billion this year from stock markets worldwide.

However, the London Stock Exchange came a close second to Hong Kong with $34 billion worth of deals as it stole a march on its US rivals, according to a survey by Ernst & Young, using data compliled by Dealogic.

The London markets, including the Alternative Investment Market, raised more than $40 billion, the survey said.

Five of the largest 20 global IPOs this year took place in London. These included Standard Life, which raised $4.4 billion this July, and Debenhams, which netted $1.9 billion in May.

More than half that sum was raised by 71 companies based outside the UK as foreign businesses flocked to London. The amount raised by overseas companies in London has soared by 69 per cent over the past year to $22 billion, Ernst & Young said.

The bulk of the money flowed into Rosneft, the Russian state-run oil company which this summer raised more than $10 billion.

The number of foreign companies raising money in the United States slipped from 28, raising $8 billion, in 2004 to 26, raising $6 billion, this year, the Big Four accounting firm said.

Companies say that they find the UK’s regulatory environment welcoming, because they are intimidated by the threat of shareholder litigation in the United States and by the cost of complying with America’s Sarbanes-Oxley legislation on corporate governance.

^^ This is quite amazing news...

HKex has been leading the IPO world for the past few years thanks to mainland companies. However, in terms of capitalisation and breadth of securities offered, HK still trails London and New York.

港股市值超德國 全球居第七
2006-12-20

【大公網訊】港府主管官員20日說，到十一月底，港股市值已突破港幣十二兆（約新台幣四十九兆二千億），超越德國股市，全球排行第七。

據中央社香港二十日電，港股經過19日下跌超過二百點後，20日反彈近三百點，恆生指數最高達一萬九千二百七十三點，收市報一萬九千二百四十點，升二百七十五點，成交額為港幣五百三十五億。

據統計，以總市值排名，香港交易所位居全球第七，在亞洲僅次於東京。港股市值大增主要是中國多家超重量級銀行股票來港上市。

港府財經事務及庫務局局長馬時亨在一項電台訪問表示，港股近來走勢強勁，市值增至超過十二兆元，已超越德國交易所，全球排名第七。香港的新股集資額今年全球排名第二，僅次於倫敦。

他說，香港年生產總值約一兆四千億元，港股市值超過十二兆，這是值得港人驕傲的成果。

馬時亨表示，繼中國工商銀行後，相信企業在中國 A股及香港H股上市將成為趨勢，透過中港兩地監管機構的合作，未來將有更多企業同時在兩地上市。

他並表示，截至去年底止，香港資產管理總額達五千八百億美元，年增率百分之二十五，預期今年仍將以兩位數成長，期望未來可繼續透過股市、債市、期貨及保險市場作多線發展，以鞏固國際金融中心地位。

不過，馬時亨指出，香港債券二手市場並不活躍，這可能與經濟體系相對較小有關，但他認為未來香港債市仍可發展，主因是香港限制較少，加上法制健全，可吸引更多海內外公司來香港發行債券。

Market cap at record high

WinniePang

Thursday, December 21, 2006

Hong Kong-listed mainland companies, boosted by their A shares traded in the mainland, sent the market capitalization of the Hong Kong exchange soaring to an all-time high Wednesday, after Thailand's government lifted the capital controls on equity investment in the country late Tuesday, clearing the uncertainties overhanging the regional markets.

The Hang Seng Index climbed 275.57 points, or 1.45 percent, to close at 19,240.12.

Total market capitalization hit a record HK$12.7297 trillion. Wednesday's turnover was HK$53.54 billion, compared to Tuesday's HK$54.45 billion.

"Investors speculated on those Hong Kong-listed mainland stocks, which have A shares listed in the mainland bourses, following the lead of Datang International Power Generation (0991), whose [H shares] surged, fueled by the jump of its A shares," said Kitty Chan Pui-man, a director at CASH Asset Management.

Datang's Hong Kong stock - first listed in March 1997 - closed Wednesday at a record HK$7.92, up 9.544 percent, or 69 HK cents, spurred by the company's A-share debut on the Shanghai stock exchange, where the stock shot up 71 percent from its offer price.

The Hang Seng China Enterprises Index outperformed the blue-chips index, gaining 290.77 points or 3.18 percent to close at 9,430.28, a record high. The leader was China Life (2628), whose shares surged 8.16 percent, or HK$1.80, closing at HK$23.85.

"The rebound of the Thai stock market provided support for the Hong Kong stocks," said Castor Pang Wai- sun, a strategist at Sun Hung Kai Financial. He expects the HSI may test the 19,400 level in the near term.

The Thai benchmark index jumped more than 10 percent Wednesday after falling nearly 15 percent the previous day, improving the sentiment in the region. Benchmark indexes in Indonesia, Malaysia, South Korea and Japan all rose more than 1percent.

Financial Secretary Henry Tang Ying-yen told the Legislative Council that Hong Kong should remain vigilant after Tuesday's crisis was sparked by the Thai government trying to take steps to curb the speculation of its currency.

The Thai baht led the rebound of other Asian currencies Wednesday as restrictions on the foreign inflows were removed.

The baht climbed to 35.71 per US dollar at late Bangkok trading after falling as low as 36.08 Tuesday. Other Asian currencies also rebounded, with the Malaysian ringgit rising 0.9 percent to 3.5450 and South Korean won 0.6 percent to 925.80 per US dollar.

Financial Services and Treasury Secretary Frederick Ma Si-hang said as Hong Kong's market cap topped HK$12 trillion at the end of November, it is ranked seventh in the world, surpassing Germany.

Hong Kong proposes expansion of economic links with China

HONG KONG, Jan 15, 2007 (AFP) - Hong Kong unveiled on Monday a series of economic proposals as part of a wider move aiming to strengthen its status as a financial centre and to assist China's rapid economic development.

A team of four groups published recommendations in a report advising the government on how to benefit from China's 11th Five-Year Plan, which concerns the mainland economic development for 2006-2010.

"These recommendations are not solely about how Hong Kong can continue to strive for the best and keep our momentum in economic development amidst fierce global competition," Hong Kong leader Donald Tsang told reporters.

"More importantly, the targets and initiatives contained in the action agenda state clearly how our professional services in finance, logistics and trade can respond to and support the country's rapid development," he said.

The team, which has taken four months to draw up the report, has mapped out an action agenda setting out 207 specific measures, Tsang said, some of which have been discussed with state leaders during his duty visit to Beijing last month.

The report comes days after China approved mainland lenders to sell yuan-denominated bonds in Hong Kong, seen as a key step for the Chinese currency to move towards the ultimate goal of full yuan convertibility and integration of China's economy with the outside world.

On Monday, the team said Hong Kong should be further developed as "China's international financial centre of global significance" and should serve as a testing ground for the Chinese currency to become fully convertible.

It proposed an integration of the China and Hong Kong stock markets and to further relax rules on Chinese enterprises raising funds through listings in Hong Kong.

The government should also encourage mainland corporations to make better use of Hong Kong's market and financial intermediaries for activities including fund raising, treasury, and international asset management.

It said the city's capability should also be enhanced to handle yuan-denominated financial transactions.

"We believe that the mainland institutions should work closely with the Hong Kong counterparts to make maximum use of Hong Kong for overseas financial activities," David Li, who was in charge of making recommendations on financial services, said in a media briefing.

"The window of opportunity will not last forever. If we do not act now, inertia will set in and business will gravitate to established financial centres overseas," he said.

Li, Bank of East Asia chairman, said Hong Kong is still far behind other financial centres as a trading centre for bonds and commodity futures but believed the city has the infrastructure to catch up.

Li said Hong Kong could facilitate two-way cross boundary fund flows with China which will help address the increasing concern of external imbalances in the economy.

The report also said assistance could be provided for Hong Kong-owned factories in southern China's Guangdong province to meet environmental standards and enforce measures to reduce air pollution, which has been a major concern in the territory.

Tsang added the recommendations would be studied in depth, and policies and implementation plans would be drawn up as soon as possible.

He added some initiatives, which would be submitted to the Chinese government for approval, would commence in the first half of this year.

Capital `free walk' tops action agenda

http://www.thestandard.com.hk/newsimage/20070116/donald.jpg

JeffreyTam

Tuesday, January 16, 2007


The future well-being of Hong Kong will be determined largely by how well it can maintain and reinforce its status as a "globally significant" international financial-services center to the mainland, a focus group said Monday in the SAR's action agenda on China's 11th Five-Year Plan.
One of the newest concepts introduced by the financial-services focus group, chaired by Bank of East Asia (0023) chairman David Li Kwok-po, is the "free walk" scheme for capital in the mainland.

The scheme helps mainland investors remit self-owned foreign exchange out of China and make investments overseas on their own through Hong Kong without having to go through the QDII (qualified domestic institutional investor) scheme.

"These recommendations are not solely about how Hong Kong can continue to strive for the best and keep our momentum in economic development amidst fierce global competition," Chief Executive Donald Tsang Yam- kuen told reporters Monday.

"More importantly, the targets and initiatives contained in the action agenda state clearly how our professional services in finance, logistics and trade can respond to and support the country's rapid development," he said.

A team of four groups published recommendations in a report advising the government on how Hong Kong can benefit from China's latest five-year plan, which focuses on the mainland economic development for 2006-2010.

The team, which has taken four months to draw up the report, has mapped out an action agenda setting out 207 specific measures, Tsang said, some of which were discussed with state leaders during his duty visit to Beijing last month.

The report comes days after China gave approval to mainland lenders to sell yuan-denominated bonds in Hong Kong. This move is seen as a key step for the Chinese currency to move towards full yuan convertibility and integration of China's economy with the outside world.

Economists also see this as a move to boost yuan-denominated deposits in the city, which currently total about 23 billion yuan (HK$23 billion). "More yuan-denominated deposits are needed to better complement China's policy of allowing mainland firms to issue debt- securities in Hong Kong," one economist said.

Making Hong Kong an initial public offering center is also what BEA's Li wants for the city in light of more enterprises from the mainland and overseas coming to list in the territory. The 10 largest IPOs launched in Hong Kong since 1993 were all by mainland enterprises.

"We recommend strengthening high-level government liaison between the mainland and Hong Kong, and enhancing communication among Hong Kong Exchanges & Clearing (0388), the Shanghai Stock Exchange and the Shenzhen Stock Exchange," the action agenda says.

"Our exchange is relatively small and is still far behind other centers in bonds and futures," Li said.

The development of a yuan-denominated futures and commodity futures market is also of great concern to the financial sector.

The report suggested the city should leverage on the Closer Economic Partnership Arrangement and QDII platforms to add the proposed yuan and commodities futures and options to the eligible investment vehicle list.

"We believe that mainland institutions should work closely with Hong Kong counterparts to make maximum use of Hong Kong for overseas financial activities," Li said. "The window of opportunity will not last forever. If we do not act now, inertia will set in and business will gravitate to established financial centers overseas."

Tsang says it again: city is on a 20-year high

(SCMP) 01月 12日 星期五 00:03AM

The chief executive defended his claim that Hong Kong's economy is the best it has been in almost 20 years in a war of words yesterday with lawmakers who argued that the city's wealth gap is widening.

Speaking in a question-and-answer session in the Legislative Council, Donald Tsang Yam-kuen admitted some low-income households had failed to benefit from the stronger economy, but insisted such problems could not be solved overnight.

He said the most important thing was to create jobs through a stronger economy. What followed would be greater competitiveness and higher wages.

"Actually, this is what we are witnessing now - at least wage levels have stopped going down; that's a fact." Mr Tsang, who backed up his claim with statistics, repeated what he told the central government on his duty trip to Beijing last month, that Hong Kong's economic situation was "the best it has been in almost 20 years".

In the third quarter last year, people earning HK$15,000 or more accounted for more than one-third of the workforce, compared with only a quarter during the same period 10 years ago.

The proportion of workers earning less than HK$9,000 had also shrunk, dropping from 42 per cent in 1996 to 36 per cent last year.

The lowest income group, which earns below $5,000, represented just 5 per cent of the working population.

"The figures are cold but it did show at a macro level that our economy has improved," he said. "I am most happy to see the unemployment rate falling to a new low of 4.4 per cent, at a speed even faster than my own popularity rate."

But legislator Fernando Cheung Chiu-hung of the welfare sector challenged him with another set of "cold figures" - that the government lacked policies in helping the poor to share in the boom.

Citing a Bauhinia Foundation study released on Tuesday, Mr Cheung said the number of households with monthly incomes below HK$8,000 rose by 76.5 per cent to more than 500,000 in the 10 years since 1996. Their proportion of the total number of households also rose from 13 per cent to 22 per cent, he said.

Unionist legislator Lau Chin-shek said the wealth gap was widening in much the same way as bad traffic gridlock, where there was only one free traffic lane, which was taken up by the rich.

Saying the problem could take generations to resolve, Mr Tsang said he would strive to turn Hong Kong into a global economic power through maintaining the city's edge as a logistics hub and its role as a business information centre.

"I believe the upcoming couple of years will be defining years for the development of Hong Kong ... there is no room for a second-class city."

In the 11th five-year action plan to be disclosed on Monday, Mr Tsang will elaborate more on the airspace congestion issue, which Beijing has promised to treat as a high priority issue.

Other topics discussed included the expansion of yuan business in Hong Kong, and the promotion of Hong Kong as a convention and exhibition centre for mainland and overseas companies.


Mr Tsang said if Hong Kong worked hard, it had every opportunity to become a world-class financial centre like New York and london.

Asked if he had raised the case of jailed journalist Ching Cheong on his duty visit to Beijing, he said he brought up the issue every time he met state leaders, but stressed that open debate on Ching being released on medical parole would not be conducive to his case as he had already been tried and convicted.

Steady growth seen despite weakened HK dollar
Hong Kong Standard
Wednesday, January 17, 2007

Hong Kong's economy will continue to grow steadily in 2007 amid a strengthening Chinese economy despite recent weakness in the local currency, economists said Tuesday.

The Hong Kong dollar broke the 7.800 resistance level Tuesday, down to 7.8003 against the US dollar, the lowest since August 2002.

According to Citigroup research report, the Hong Kong dollar's recent weakness is due to a net outflow of funds caused by repatriation of initial public offering proceeds, stock market corrections and interest rate arbitrage.

John Greenwood, chief economist at AMVESCAP, said Tuesday the yuan would continue to appreciate in 2007. But he believes the convergence of the yuan and the Hong Kong dollar is "nothing more than an arithmetic coincidence."

He said the benefits brought by the booming Chinese economy will offset the cost of yuan appreciation. "Assuming Hong Kong does not have a high rate of inflation, then it will become more competitive, enticing China to buy more goods and services and send more tourists here," he said.

Greenwood said demand would exist for the Hong Kong dollar from the mainland until the yuan becomes fully convertible.

John Calverley, chief economist and strategist at American Express Bank, said there will be a 4 percent appreciation in the yuan this year. He also predicted an increase in Hong Kong interest rates as he thinks they must move closer to US interest rates.

Calverley said Hong Kong's gross domestic product growth will slow down slightly from 6.5 percent last year to between 5 percent and 5.5 percent this year, amid a projected slowdown in both US and China economies.

But Hong Kong's was still a good GDP growth rate, he said.

Greenwood predicted GDP growth of 4 percent, which he said is satisfactory. He is bullish about both the Hong Kong and China markets amid stable growth in the global economy.

Calverley is optimistic about Hong Kong stock market growth, due to falling unemployment, strong growth in China's economy and the weaker US dollar. But he is not bullish about China's stock market as he believes the government will launch measures to prevent overheating. "The market has gone up a lot already," he said. "I suspect the government doesn't want to see the market going up too fast."

HK exports up overall; domestic sector weak
Year's goods shipments rise 9.4 per cent to HK$2.47 trillion; just 5pc made in city
26 January 2007
South China Morning Post

Hong Kong's total goods exports last year grew 9.4 per cent in value over 2005, but the pace of growth dipped to 13.7 per cent year on year in December, from November's 14.2 per cent, the government said yesterday.

Re-exports, which grew 10 per cent, accounted for the vast majority of the total of HK$2.47 trillion last year. The value of domestic exports fell 1.1 per cent from 2005.

Domestic exports accounted for 5.45 per cent of all goods exports, down from 6.04 per cent in 2005, when exports were HK$2.25 trillion. Export growth for the year was down from the 11.4 per cent seen in 2005.

Imports rose 14.5 per cent year on year, to HK$235.5 billion, in December. Full-year imports rose 11.6 per cent. The trade deficit leapt to HK$138.8 billion, from HK$79.3 billion in 2005, the Census and Statistics Department said.

Export growth fluctuated wildly, peaking with a Lunar New Year-distorted 20.5 per cent in February. Exports declined marginally in May.

"Looking ahead, the generally resilient global economy, the vibrant mainland economy and the fall in oil prices should render support for external demand. The weakness of the US dollar is also another favourable factor to Hong Kong's exports," a government spokesman said.

Standard Chartered Bank economist Tai Hui said he expected the growth momentum to continue in the current quarter, although double-digit increases might be more difficult to achieve. The bank is forecasting total exports to rise by about 7 per cent in the quarter, half the pace of growth of a year ago, and by 5.9 per cent this year.

Exports last month were HK$214.7 billion, fuelled by strong re-exports to the mainland. The 13.7 per cent increase beat the consensus estimate of 12.1 per cent.

Re-exports - products made elsewhere but shipped through the city - rose 18 per cent to HK$206.2 billion year on year in December, making up for the almost 40 per cent drop in domestic exports, to HK$8.5 billion. Growth was particularly strong for re-exports to the Netherlands, up 38.5 per cent; to the UK, up 36.8 per cent; to the mainland, up 20.3 per cent; and to the US, up 15.3 per cent.

Re-exports of clothing surged almost 50 per cent, to HK$5.4 billion, and those of office machines rose more than a third, to HK$7.6 billion.

The continued drop in domestic exports last month was largely accounted for by clothing, exports of which shrank by more than half, to HK$3.7 billion, and office machines, down by 58.9 per cent, to HK$1.1 billion. Electrical appliance exports fell 44.7 per cent, to HK$645 million. Domestic exports to European markets, the US and Japan fell by over 10 per cent.

Meanwhile, a quarterly survey found more respondents expect their business to improve rather than worsen this quarter compared with the last quarter of 2006. The communications, real estate, business services and financial sectors were the most optimistic.

Senior managers of 560 big firms in 10 sectors were interviewed between December 11 and January 11 for the department's latest quarterly business trends survey.

Comparing the percentage of respondents expecting their situation to be better to those expecting it to worsen, the financial sector is the most upbeat about business volume and hiring. The restaurant and hotel sector is the most positive about prices and charges.

Yam pins HK forex hopes on mainland

(SCMP) 02月 06日 星期二 00:03AM

Hong Kong's foreign exchange turnover could be increased if the mainland makes more use of the city for its foreign reserve management, according to Hong Kong Monetary Authority chief executive Joseph Yam Chi-kwong.

"We have talked with the People's Bank of China and the State Administration of Foreign Exchange, hoping they could make more use of Hong Kong's financial markets," he told the Legislative Council's financial affairs panel yesterday.

Lawmaker Sin Chung-kai questioned why Hong Kong's foreign exchange turnover lagged behind Singapore even though the government toiled to enhance the city's position as an international financial centre.

Mr Yam said the city's foreign exchange transactions were rising despite being lower than other financial centres. "It could be that our currency is relatively stable and so there's less speculative trading."

Hong Kong was ranked seventh in the global foreign exchange and derivatives markets in 2004, behind countries such as Britain, the United States, Japan and Singapore, according to a triennial survey by the Bank for International Settlements.

Some dealers said Singapore offered more incentives to attract banks such as Standard Chartered to move their foreign exchange business from Hong Kong to Singapore.

However, a Standard Chartered official said it was not the case, adding the arrangement was to align its currency groupings to improve efficiencies and services.



Mr Yam said Hong Kong was still competitive given its sophisticated infrastructure.

He said Hong Kong could benefit if the mainland, which has more than US$1 trillion in foreign reserves, made more use of the city's financial markets, not only its foreign exchange market.

Mr Yam said the central government's response was supportive.



Asked whether the Exchange Fund would invest in red chips and H shares, he said as the proportion of these stocks was growing in the Hong Kong stock market, he believed the fund's external managers would take appropriate actions.

Brokers said it was inevitable for the fund to invest in red chips and H shares because they accounted for a big portion of the market.

The market capitalisation of such stocks was HK$6.71 trillion at the end of last year, accounting for 50 per cent of the total, against 39 per cent in 2005. The daily turnover of these firms accounted for 60 per cent of the average daily turnover last year, up from 46 per cent.

There is a lot of speculation activity in forex markets, and since the HKD is pegged to the USD, the rate will remain stable and ward off speculators.

Hong Kong's forex market is quite competitive in the region. Here are some facts :

The Triennial Central Bank Survey of forex and derivatives market activity was last conducted in 2004 by the Swiss-based Bank for International Settlements :
http://www.bis.org/publ/rpfx05t.pdf

Page 8
"The geographical distribution of foreign exchange trading did not change noticeably over the last three years. The United Kingdom continued to be the most active trading centre, accounting for 31% of total turnover, followed by the United States (19%), Japan (8%), Singapore (5%), Germany (5%), Hong Kong SAR (4%), Australia (3%) and Switzerland (3%).

Page 15
Currency Distribution of Reported Forex Market Turnover (% Shares of Avg. Daily Turnover, April 2004)
USD - 88.7
EUR - 37.2
CHF - 6.1 (Swiss franc)
HKD - 1.9
SGD - 1.0

The Hong Kong Dollar is almost twice as much heavily traded worldwide than the Singapore Dollar.

Page 18
Geographic Distribution of Reported Forex Market Turnover (Daily averages in April 2004 in billions of USD and %)
Japan - 199 billion, 8.3%
Singapore - 125 billion, 5.2%
Hong Kong SAR - 102 billion, 4.2%
United States - 461 billion, 19.2%
United Kingdom - 753 billion, 31.3%

Hong Kong's forex market turnover was 1% less than Singapore on a global scale. There is significant forex market activity in HK. With the mainland trying out yuan convertibility in HK, the prospects of growing this market is far greater in HK.

HK$9,999 just for dinner as city regains feel-good factor Hospitality sector sees the benefits of a resurgent economy
21 February 2007
South China Morning Post

A Hong Kong couple splurged HK$9,999 on a nine-course, candle-lit dinner atop the 42-storey Langham Place Hotel in Mong Kok on Valentine's Day.

Advanced booking for a dinner at the Nobu, a 150-seat Japanese restaurant that offers fine dining at the InterContinental Hotel in Tsim Sha Tsui typically takes four to six weeks.

Local residents celebrating their wedding anniversaries compete with overseas celebrities, royalty and heads of state for the pleasure of staying in the hotel's luxurious presidential suite - the city's most expensive at HK$87,000 a night.

These are just some signs of the buoyancy of Hong Kong's economy and its hospitality sector.

Economists and hoteliers believe the splurges reflect a "feel good" factor and wealth effect as the city's stock market posts fresh records and its residents see the lowest unemployment rate in 10 years and enjoy pay rises.

Increased corporate travelling to and from the mainland through Hong Kong and a growing number of leisure travellers in the city are also fuelling the local hospitality business.

"Spenders have increasingly loosened their belts since Christmas," said Citigroup senior economist Joe Lo. "The city is prospering again and the mood is very vibrant."

Mr Lo expects the government to announce a growth rate of slightly above 6 per cent when it reveals its full-year economic growth forecast next month.

A barometer of economic booms and busts, Hong Kong hotels are bracing for yet another banner year on the back of sustainable economic growth and after possibly their best year ever last year.

Langham Hotels International, the hospitality subsidiary of property investor Great Eagle Holdings, recorded brisk trade in food catering and accommodation at its three hotels - the four-star Eaton Hotel on Nathan Road and the five-star Langham hotels in Mong Kok and Tsim Sha Tsui, sales and marketing vice-president Brett Butcher said.

Sales at Langham restaurants had risen 25 per cent so far this year with about 65 per cent of diners local people, he said. Revenue on a same-room basis had also grown 25 per cent year to date, helped by a 20 per cent rise in room rates, he said.

"The figures tell you how robust the market is," Mr Butcher said. "Our Tsim Sha Tsui hotel last year had its best year since it opened in 1991 and the signs point to a banner year this year."

The 495-room Langham Hotel in Tsim Sha Tsui charges US$200 for a guest room a night or 10 per cent higher than the average of the 665-room Langham Place Hotel which opened in 2005.

Stronger demand also helped the InterContinental on the Tsim Sha Tsui waterfront lift its average room rate 18 per cent this year, marketing director Trevor Owen said.

"The leisure market is strong. We've got many tour groups from the US, [Britain] and Japan," he said. "There is 20 per cent growth in mainland visitors [at the InterContinental] so far this year, though the base of comparison is small."

Mr Butcher said the majority of Langham guests came from non-mainland markets such as Europe, the United States and Australia, dismissing the myth that mainland visitors were inundating local hotels.

"Most mainland visitors come to Hong Kong for day trips and shopping," he said. "And many hotels don't get much trade from them."

Some hoteliers found many mainland guests preferred spending on shopping and dining to accommodation. This is supported by anecdotal evidence in three three-star hotels of Far East Consortium International, a hotel operator and property developer.

Far East chief financial officer Bill Mok Kwai-pui said the 700 rooms at the group's hotels in Kowloon were 96 per cent to 99 per cent filled for the most of last year, with the number of guests equally split among the mainland, Europe and the United States.

Across Victoria Harbour, Far East's two four-star hotels - the 142-room Cosmopolitan in Wan Chai and the 162-room Lan Kwai Fong boutique hotel in Central - were 90 per cent to 94 per cent occupied on the average. They charged an average of HK$700 to HK$800 a room night that went as high as HK$1,200 at some busy times.

"The market is unbelievably strong," he said. "We have many long-haul travellers as guests, not just mainland visitors."

Given the growing number of exhibitions held in Hong Kong and mainlanders visiting the city, the buoyancy of the tourism and hospitality sector would be sustained for the rest of this year, Mr Mok said. He expected "double-digit" growth in gross operating profits of the group's hotels this year.

Still, behind the buoyancy hide risks of a possible downturn.

"The stock market perhaps is consolidating but it is one of many factors affecting the economy," Mr Butcher said. "I don't see the stock market falling severely."

Warning as Hong Kong exports growth slows to 9.2 percent

HONG KONG, Feb 27, 2007 (AFP) - Growth in Hong Kong's exports slowed in January to 9.2 percent year-on-year, down from 13.7 percent in December, the government said Tuesday, sparking analysts' warnings that worse was to come.

Exports grew to 207.4 billion Hong Kong dollars (26.6 billion US dollars) in January, with re-exports of China-produced goods up 12.5 percent at 199.0 billion dollars and domestic exports down 35.8 percent at 8.4 billion dollars.

Imports during the month rose 14.1 percent year-on-year to 211.8 billion dollars, after a year-on-year increase of 14.5 percent in December, it said.

A visible trade deficit of 4.4 billion dollars was recorded in January.

By segment, electrical machinery, apparatus and appliances registered the largest increase of 10.9 percent in exports, followed by office machines and automatic data processing machines with 8.7 percent.

A government spokesman said the difference in timing of the Chinese New Year holiday, which fell in January last year but in February this year, would impact trade figures for the first two months of the year.

But Bank of East Asia (BEA) economist Paul Tang warned the figures could fall further.

"This is a possible cause for alarm considering the low base of comparison for the month due to distortions created by the Chinese New Year," Tang said.

"This is not conclusive, but the low figure could mean the start of the slowing of exports for Hong Kong," he added.

Gross Domestic Product for the 4th quarter 2006 and the whole year of 2006

GDP by expenditure component for the fourth quarter of 2006 and the whole year of 2006

In the fourth quarter of 2006, the Gross Domestic Product (GDP) increased by 7.0% in real terms over a year earlier, compared with the 6.7% increase in the third quarter. For 2006 as a whole, GDP recorded a growth of 6.8% in real terms over 2005.

On a seasonally adjusted quarter-to-quarter comparison basis, GDP recorded an increase of 1.3% in real terms in the fourth quarter of 2006.

Analysed by major GDP component, private consumption expenditure (PCE) grew by 5.8% in real terms in the fourth quarter of 2006 over a year earlier, at a faster pace than the 4.4% growth in the third quarter. For 2006 as a whole, PCE increased by 5.1% over 2005.

Government consumption expenditure (GCE) in national accounts terms increased by 2.4% in real terms in the fourth quarter of 2006 over a year earlier, compared with the 1.1% decline in the third quarter. For 2006 as a whole, GCE recorded a small growth of 0.3% in real terms.

Gross domestic fixed capital formation (GDFCF) increased by 9.5% in real terms in the fourth quarter of 2006, slightly moderating from the 10.3% increase in the third quarter. For 2006 as a whole, GDFCF registered an increase of 7.9% in real terms over 2005.

Within the total GDFCF, expenditure on machinery, equipment and computer software increased by 14.9% in real terms in the fourth quarter of 2006 over a year earlier, after a strong growth of 20.4% in the third quarter.

Expenditure on building and construction dropped by 2.6% in real terms in the fourth quarter of 2006 as compared with a year earlier, moderating markedly from the 10.1% decline in the third quarter.

Over the same period, expenditure on building and construction of the private sector and public sector decreased by 0.5% and 7.2% in real terms respectively.

Total exports (comprising re-exports and domestic exports) recorded a double-digit growth of 11.7% in real terms in the fourth quarter of 2006 over a year earlier. Imports of goods grew by 11.4% in real terms in the fourth quarter. For 2006 as a whole, total exports and imports of goods recorded an increase of 10.2% and 10.0% in real terms respectively.

Exports of services increased by 7.5% in real terms in the fourth quarter of 2006 over a year earlier. Imports of services rose by 6.3% in real terms in the fourth quarter. For 2006 as a whole, exports and imports of services grew by 8.7% and 6.3% in real terms respectively.

The implicit price deflator (IPD) of GDP, as an overall measure of inflation in the economy, recorded a year-on-year decline of 0.5% in the fourth quarter of 2006, at a similar pace of the 0.4% decline in the third quarter. For 2006 as a whole, the IPD of GDP dropped by 0.4%.

In the light of latest information available, the GDP real growth rate for 2005 was revised upwards from 7.3% to 7.5%.


GDP by economic activity for the third quarter of 2006

The preliminary figures of GDP by economic activity at constant prices for the third quarter of 2006, which were released in end-December 2006, were revised as more data became available.

The revised figures showed that net output in all the service activities taken together rose by 8.1% in real terms in the third quarter of 2006 over a year earlier, compared with a growth of 7.6% in the second quarter.

Analysed by constituent sector and on a year-on-year comparison, net output in wholesale, retail and import and export trades, restaurants and hotels sector increased by 10.4% in real terms in the third quarter of 2006 over a year earlier, faster than the 7.1% increase in the second quarter. The growth was mainly attributable to the continued vibrant external trade and the brisk expansion of offshore trade. Also contributed was the solid growth in local consumer demand.

Net output in transport, storage and communications increased by 8.6% in real terms in the third quarter of 2006 over a year earlier, after a 6.8% rise in the second quarter. The improved performance of external trade underpinned the growth in transport and storage services. Net output in communications service also grew further, upon the continued expansion in the traffic volume of international telephone services.

Net output in financing, insurance, real estate and business services rose by 11.7% in real terms in the third quarter of 2006 over a year earlier, after a 15.2% increase in the second quarter. The growth impetus came mainly from the continued growth in the financial services, on the back of a significant increase in commission and service income.

Net output in community, social and personal services increased by 2.5% in real terms in the third quarter of 2006 over a year earlier, after a 1.5% rise in the second quarter.

Net output in local manufacturing sector decreased by 0.6% in real terms in the third quarter of 2006 as compared with a year earlier, after a 5.3% rise in the second quarter.

Net output in construction sector decreased by 10.9% in real terms in the third quarter of 2006 over a year earlier, following a decrease of 4.6% in the second quarter. The decline was mainly attributable to the sharp fall in the public sector output.

As to electricity, gas and water sector, net output rose by 4.5% in real terms in the third quarter of 2006 over a year earlier, after a rise of 2.2% in the second quarter.


GDP by economic activity at current prices for 2005

The GDP by economic activity statistics at current prices which are compiled mainly based on data collected from the annual economic surveys are useful for analysis of the contribution of different economic activities to the total GDP.

The revised figures of GDP by economic activity at current prices for 2005 showed that wholesale, retail and import and export trades, restaurants and hotels accounted for the largest share (28.8%) of the GDP, followed by financing, insurance, real estate and business services (21.9%), and community, social and personal services (19.2%).

Hong Kong Q1 GDP growth seen up 6.4 pct y/y

HONG KONG, May 15 (Reuters) - Hong Kong's economy probably grew by 6.4 percent in the first quarter from a year earlier, decelerating slightly from the previous quarter as business investment slowed, but driven by strong consumption, a Reuters survey shows.

"It's still a strong number," said Tai Hui, an economist at Standard Chartered Bank.

"Consumption and export growth is consistent with booming China trade. Obviously the risk going forward is whether we see a slowdown in the U.S. economy." In the fourth quarter economic activity grew by 7 percent from a year earlier, its fastest pace since the first quarter of 2006, although on a seasonally adjusted quarterly basis economic growth eased.

The territory is riding on China's surging economy, which grew by more than 11 percent in the first quarter and is boosting demand for financial and other services in Hong Kong and supporting the territory's exports, which are mostly re-exports to and from China.

A handful of economists who looked at seasonally adjusted growth in the first three months of this year forecast that gross domestic product rose 1 percent from the previous quarter, easing from a 1.3 percent expansion in the fourth quarter.

While investment probably dipped early this year, economists saw that as temporary as many companies had expanded last year. The business outlook remained sound and investment was likely to improve in coming months, they said.

Upbeat consumers were the driving force behind the economy's first-quarter growth, buoyed by wage growth, healthy bonuses and an increasingly tight job market.

The unemployment rate fell to 4.3 percent, its lowest level in eight years, and companies in sectors such as finance had to raise salaries by 10 percent and more to attract new staff amid a labour shortage, economists said.

Hong Kong's economy has grown by an average 7.6 percent annually in the past three years. A Reuters poll forecasts much slower growth of 5.3 percent this year, mainly due to weaker export growth, but that would still make it one of Asia's best performers after China and India.

Consumer spending is expected to remain strong for the rest of this year amid further wage growth, low interest rates and a wealth effect from a strong stock market, which hit record highs this week.

While the economy is cushioned by China, it is threatened by signs of weakening consumer confidence in the United States -- Hong Kong's biggest export market after China, economists say.

Hong Kong exports in the first quarter held up surprisingly well, rising 1.4 percent by volume on a seasonally adjusted basis from the previous quarter and helped by solid demand from Europe and other Asian countries.

But economists expect weakening U.S. consumer demand will curtail export growth in the second half of the year.

Percentage forecasts for growth in Hong Kong's GDP in the first quarter of 2007 from a year earlier and from the previous quarter, seasonally adjusted:


Yr/Yr Qtr/Qtr
Bank of East Asia 7.2 n/a
Standard Chartered Bk 6.5 n/a
Deutsche Bank 6.4 n/a
Hang Seng Bank 6.4 n/a
Lehman Brothers 6.4 1.0
ING Financial Mkts 6.3 1.2
DBS Bank 6.2 n/a
JP Morgan 6.0 1.0
Citigroup 5.5 0.6
HSBC 5.2 n/a
-------------------------------------------------
Median 6.4 1.0

HK's economic growth slows sharply in first quarter

HONG KONG, May 18 (Reuters) - Hong Kong's economy grew just 0.5 percent seasonally adjusted in the first quarter, its weakest performance since economic recovery began nearly four years ago as investment in construction and industry slowed.

Consumer spending was robust, however, underpinned by a tight job market that has pushed up wages.

Economists had expected growth to slow, but only to 1 percent from 1.3 percent in the fourth quarter of 2006.

"The economy looks like it started this year a bit weaker than expected and there are some external clouds on the horizon," said Rob Subbaraman, senior economist at Lehman Brothers.

"The cloud around China, regarding how much more monetary policy tightening is needed, and the risk of that causing a correction in asset markets, or the economy slowing down, is a risk."

From a year earlier, gross domestic product rose 5.6 percent, government data showed on Friday. That was well below a forecast from economists of a 6.4 percent increase and down from 7 percent in the fourth quarter.

"The view for us for Hong Kong, though, is that growth is going to hold up pretty well this year. We're forecasting 5.5 percent," Subbaraman said.

On Friday the government maintained its growth forecast of 4.5-5.5 percent for 2007 and kept its annual inflation forecast at 1.5 percent for the year.

That economic growth forecast is much lower than the average annual growth of 7.6 percent seen in the past three years.

Slower first-quarter growth contrasted with an acceleration in the Chinese economy, which grew 11 percent from a year earlier during the period. However, the territory continues to benefit from China's boom, particularly in financial services.

Helen Chan, a government economist, said domestic demand had emerged as a driver of growth, helping offset slowing exports.

"The major worry is that U.S. economic growth slows more than expected," Chan said. That would hurt export growth and could cause volatility in financial markets, she said.

A slump in the United States would hit Hong Kong badly if it depressed trade with China.

INVESTMENT DROPS

A 5.4 percent drop in spending on building and construction from a year earlier dragged down growth in the first quarter.

On top of that, investment in machinery, equipment and computer software rose just 6.8 percent compared with a rise of 14.9 percent in the fourth quarter of 2006. In the first quarter of 2006 it had grown by 22.4 percent.

Joe Lo, an economist at Citigroup, said it was not surprising that business investment slowed after surging at double-digit rates last year.

"It's reasonable that there's some slowdown but I expect it will pick up because consumption is robust," Lo said. "My view of the economy is unchanged. I still forecast 6 percent growth this year."

Private consumption expenditure rose 2.2 percent from the fourth quarter, when it had grown by 1.7 percent. It rose 5.6 percent from a year earlier, easing slightly from 5.8 percent in the fourth quarter.

Consumer confidence has been helped by tame inflation, at a little over 2 percent on an annual basis, a booming stock market and a drop in unemployment to its lowest level in eight years.

Exports in the first quarter were surprisingly solid, even though January-March growth in the United States -- Hong Kong's biggest export market after China -- was the weakest in four years. Chan said shipments to China, Japan and Europe held up.

Exports of goods rose a seasonally adjusted 1.4 percent by volume from the preceding quarter.

POLL-Economists raise HK 2007 growth forecast to 6 pct

HONG KONG, Aug 21 (Reuters) - Economists have raised their economic growth forecasts for Hong Kong this year to a median 6 percent after a strong second quarter, a Reuters poll shows, with domestic demand expected to offset any slowdown in trade.

A poll prior to Friday's second-quarter gross domestic product (GDP) data had forecast 5.5 percent growth this year.

"As we saw in the second quarter, Hong Kong's strong growth is coinciding with strong growth in China, and we see that correlation continuing," said Prakash Sakpal, an economist with ING Financial Markets in Singapore.

Economic growth in the second half would be driven by domestic demand as consumer spending was being boosted by rising wages and a tight labour market, he said.

While a 6 percent expansion this year would be well below average growth of 7.7 percent over the past three years, the economy appears to be firing on all cylinders, jumping 2 percent seasonally adjusted in the second quarter.

That was its fastest growth since the third quarter of last year, backed by strong consumer spending, solid exports and a rebound in investment. Exports increased by a seasonally adjusted 2 percent from the first quarter and private consumption, which excludes spending by tourists, rose 2.8 percent.

Compared with a year earlier, second-quarter GDP rose 6.9 percent, and the government lifted its full-year growth forecast to 5-6 percent from 4.5-5.5 percent.

China is heading for a fifth straight year of double-digit economic growth, but an uncertain external environment poses a risk to Hong Kong's small, open economy.

The United States is the territory's biggest export market after China and U.S. consumer demand is weakening. The outlook for exports will be influenced by whether turmoil in financial markets caused by rising credit problems filters into the real economy, analysts said.

For now, economists expect a moderate slowdown in exports in the second half and say domestic demand in Hong Kong will be strong enough to offset that.

"Investment should also still be good," said George Leung, chief economist at HSBC. "Hong Kong has been a little bit underinvested in the past few years but as the economy continues to grow, it will need more investment."

Investment rebounded in the second quarter and spending on building and construction increased 5.3 percent from a year earlier, reversing a 2.6 percent decline in the first quarter.

Percentage forecasts for growth in Hong Kong's GDP in 2007 from a year earlier:

2007
Latest Previous
Lehman Brothers 6.5 6.0
HK General Chamber of Commerce 6.3 5.0
Hang Seng Bank 6.1 5.6
Bank of East Asia 6.0 6.0
Goldman Sachs 6.0 6.0
ING Financial Mkts 6.0 5.5
JP Morgan 5.8 5.3
Nomura 5.7 5.5
CLSA 5.5 4.8
Standard Chartered Bank 5.5 5.5
HSBC 5.3 5.3
------------------------------------------------------
Median 6.0 5.5

hkskyline, did you used to have a thread that shows the IPO news at hk? I am wondering if the hk stock exchange has a list of the companies that have been list at HK....just want to see the growth of the stock exchange in value.

hkskyline, did you used to have a thread that shows the IPO news at hk? I am wondering if the hk stock exchange has a list of the companies that have been list at HK....just want to see the growth of the stock exchange in value.

I will make a massive update to this thread next week. I haven't touched it for a while :
http://www.skyscrapercity.com/showthread.php?t=389967

I'm not sure if the exchange keeps track of the new listings on a list of some sort. It may be on the HKEx website.

Hong Kong inflation steady at 1.6 percent

HONG KONG, Oct 22, 2007 (AFP) - Inflation in Hong Kong held steady at 1.6 percent as smaller increases in the cost of tour packages and a government subsidy on rent offset higher food prices, the government said Monday.

A government spokesman said Hong Kong's inflation was on a rising trend because of Hong Kong's growing economy. Without tax concessions such as the rent subsidy, inflation would have been 2.7 percent in September, he added.

The rise in inflation compared to the previous September was mainly due to the faster rise in food prices.

"The year-on-year increase in food prices further enlarged from 4.6 percent in August to 6 percent in September," the spokesman said.

"On the other hand, the implementation of the pre-primary education voucher scheme and the smaller increase in prices of package tours partly offset the impact of the higher food prices."

In recent months, mainland inflation has been rising on the back of the increasing price of food, in particular the country's meat staple of pork, which has become a major concern to the Chinese government.

Hong Kong govt maintains 6 pct 2007 GDP growth forecast

HONG KONG, Dec 3 (Reuters) - The Hong Kong government maintained its forecast for 6 percent economic growth this year, but the territory must keep boosting productivity to hold inflation in check, the government said on Monday.

The government announced earlier this month stronger-than-expected second-quarter economic growth of 6.2 percent from a year earlier. However, K.C. Kwok, the government's chief economist, told legislators on Monday that a downturn in U.S. economic growth could hurt Hong Kong's exports.

The United States is Hong Kong's biggest export market after mainland China, and U.S. demand for Hong Kong goods has been falling on an annual basis in recent months.

Strong domestic demand in the territory, supported by rising wages and falling unemployment, has become the driver of economic growth but is also adding to inflationary pressure, Kwok said.

On a quarterly, seasonally adjusted basis private consumption expenditure jumped 4.5 percent in the third quarter from the previous quarter. However, weaker investment spending meant the economy grew 1.7 percent from the previous three months, slowing from a 1.9 percent expansion in the second quarter. The government this month lifted its 2007 inflation forecast to 2 percent from 1.5 percent, but Kwok told legislators during a briefing on the economy that it could be higher.

Waivers on housing rates pushed inflation below 2 percent in the second and third quarters, but annual inflation in the fourth quarter would top 3 percent as those waivers were no longer effective, Kwok said. In October prices were 3.2 percent higher than a year earlier.

Economists see inflation rising further in 2008 to 3-4 percent as a result of rising food prices and housing rents and because Hong Kong's currency peg to a weak U.S. dollar is pushing up the prices of imported goods.

Hong Kong exports to grow 7 pct in 2008 -TDC

HONG KONG, Dec 6 (Reuters) - Hong Kong's exports will grow by a modest 7 percent in 2008, totalling US$371 billion, as sales to the United States continue to weaken, the quasi-government Hong Kong Trade Development Council forecasts.

That would mark a second straight year of single-digit growth and will take some steam out of a buoyant economy, which is forecast to grow 6 percent this year but by 5.3 percent in 2008, according to a Reuters poll.

Exports grew 9.5 percent by value in the first 10 months of this year from a year earlier but the TDC sees slower growth in the final two months, resulting in an 8-9 percent increase for the full year, with shipments totalling US$344 billion.

Exports to the United States -- Hong Kong's biggest market after mainland China -- have been weaker in recent months than they were last year as a deteriorating housing market has dampened U.S. consumer spending.

Exports to Japan have also dipped but have been offset by strong growth in shipments to Europe, the Middle East and the rest of Asia, which should continue next year, the TDC said.

More than 90 percent of Hong Kong's exports are re-exports to and from China's booming economy as Hong Kong manufacturers have mostly shifted production to mainland China.

They are being hit by rising costs. The Chinese yuan <CNY=CFXS> has appreciated by up to 10 percent against the U.S. dollar since mid-2005, raising manufacturers' production costs by 2 to 4.5 percent, the TDC said. The yuan is expected to appreciate another 7-8 percent next year.

Labour costs in southern China have surged 25 percent in the past two years, according to the TDC, and manufacturers have also had to cope with cuts in export tax rebates.

HK exporters urged to target emerging markets in Asia, Middle East amid US slump
6 December 2007

HONG KONG (AP) - Hong Kong manufacturers should look to emerging markets in Asia, oil-producing countries and mainland China for their exports to offset slowing demand from U.S. consumers, a leading economist said Thursday.

Due to the slowdown in the global economy, especially the U.S., Hong Kong exports were expected to grow at a much slower rate in 2008, Hong Kong Trade Development Council chief economist Edward Leong said.

The TDC expects Hong Kong exports to grow 9 percent in 2007 on the previous year, but Leong said that would slow to about 7 percent in 2008.

"The United States market will be less promising in 2008," he told reporters in an online broadcast. "A stronger euro and the EU economy may help buffer against the slowdown in the U.S. to some extent," he said.

Hong Kong exports to the EU grew by 5.7 percent in the first 10 months of 2007, compared to a contraction in the U.S. and Japan, he said.

Leong also urged Hong Kong exporters to target fast-developing markets in Asia and oil-producing countries in the Middle East, which he said would be less affected by the U.S. slowdown and could provide "promising opportunities." Over the last 10 months, Hong Kong's exports to the Middle East have shot up 20 percent to $4.2 billion, according to figures from the TDC.

Mainland China is also key for Hong Kong's sustained growth, Leong said, but added that rising production costs would play on manufacturers who have factories in southern China -- the country's manufacturing belt.

"Without the Chinese mainland as our market, I would expect exports to grow much slower," Leong said. The Chinese mainland will be a great help to our export performance in the next year."

However, the appreciation of the Chinese currency, which has gained about 10 percent against the U.S. dollar since 2005, has translated into a 2-4.5 percent rise in production costs for Hong Kong companies manufacturing in China.

Rising labor costs in China and increasing pressure on manufacturers to ensure their factories comply with local and international environmental and ethical standards were also increasing production costs, he said.

Electronics, particularly digital entertainment and related products, would continue to be the main driver of exports, followed by jewelry for the European market, he said. Toy exports would be clouded by several recalls over unsafe products, he said.

Food, rents push HK inflation to 9-year high
Hong Kong Standard
Friday, December 21, 2007

http://www.globalphotos.org/hongkong/20070421/IMG_2053.jpg

Hong Kong's inflation accelerated to a nine-year high last month boosted by increases in food prices and private housing rents.

Figures released by the Census and Statistics Department showed that consumer prices rose 3.4 percent in November from the same month a year ago, jumping from a 3.2 percent gain in October.

November's inflation figure was in line with market expectations, as economists expected inflation to remain high on the back of strong domestic demand and higher food prices in China - from where the city imports most of its food.

Inflation in China rose to an 11-year high of 6.9 percent last month.

Citi economist Joe Lo said despite higher inflation in the city, price rises were not too rapid to raise fears of runaway inflation.

"A moderate rise in inflation is not a bad thing for Hong Kong, as it lowers real interest rates that would boost domestic demand," Lo wrote in a research note yesterday.

"This is what Hong Kong needs when there are higher downside economic risks in major export markets."

Economists said inflation will maintain an upward trend next year.

Raymond So Wai-man, a finance professor at the Chinese University of Hong Kong, predicted that inflation next year will average 4 percent. A government spokesman said the "sustained economic expansion, the high food and oil prices, the weakening of the US dollar and the appreciation of yuan would continue to exert pressures on prices."

He added: "Lately, the pickup in private housing rentals also deserves attention. Yet the sustained increase in labor productivity should help mitigate these price pressures to some extent."

The consumer price index in the first 11 months rose by 1.9 percent from the same period a year earlier. The government targets this year's full-year inflation to reach 2 percent.

Hong Kong's inflation rises to 3.8 percent on pork prices

HONG KONG, Jan 22, 2008 (AFP) - Hong Kong's inflation rate rose to 3.8 percent year-on-year in December, up from a rate of 3.4 percent recorded in November, official figures showed Tuesday.

A government spokesman said the higher year-on-year increase in the composite consumer price index (CPI) during the month was due mainly to a rise in pork prices.

The price of the staple meat has rocketed in recent months, as Hong Kong struggles to get enough supply from the mainland, which is also witnessing unprecedented demand.

According to the figures, pork rose 42.9 percent year-on-year.

Other factors that contributed to higher inflation were higher costs of package tours and increased prices of meals bought away from home.

For 2007 as a whole, the composite consumer price was on average 2.0 percent higher than in the preceding 12-month period.

The spokesman added: "Looking ahead, the global food inflation, elevated oil prices, weakening of the US dollar and appreciation of the yuan would continue to pose upside risks to inflation.

"The recent upward trend in private housing rentals also deserved monitoring. Yet the sustained labour productivity growth should still provide some cushioning effect to the upward price pressures."

HK says economy to slow after over 6 pct 2007 growth

HONG KONG, Jan 28 (Reuters) - Hong Kong's economy grew by just over 6 percent in 2007 but will slow this year, although the government said it remains "cautiously optimistic" on the outlook, despite an uncertain global economic environment.

"Economic growth last year was just above 6 percent, around 6.1 or 6.2 percent, less than 6.5 percent," a spokesman for Financial Secretary John Tsang told Reuters on Monday.

"We are cautiously optimistic but we don't expect the growth rate to be as high this year as in the past few years," he said by telephone.

A 6.1 to 6.2 percent expansion in gross domestic product last year means the economy grew by around 6.4 percent in the fourth quarter from a year earlier, close to the 6.2 percent rate of growth in the third quarter, economists said.

They said private consumption expenditure was the main driver of fourth-quarter growth, as interest rates were falling and wages continued to rise, and was likely to remain so this year.

Economists interviewed by Reuters expect economic expansion to slow to between 5 and 5.5 percent in 2008 because export growth is set to ease. However, their forecasts are based on the view that a potential U.S. recession would be short.

"Recent turmoil in financial markets clearly shows higher risk of a downturn in the United States affecting the global economy. Hong Kong's two main sectors: trade and finance will get hit," said Joe Lo, senior economist at Citigroup.

He lowered his 2008 economic growth forecast for the territory this month to 5.3 percent from 6.2 percent.

FISCAL STIMULUS

Hong Kong's economic growth has surged in the past four years, averaging 7 percent annually.

It is helped by China's economy, which is creating demand for services in the territory, and is expected to grow by 10 percent this year. Locally, falling interest rates and a tight labour market should continue to spur consumer spending, economists say.

Hong Kong tracks U.S. interest rate cycles because of its currency peg to the U.S. dollar. Banks have cut rates five times since September and are expected to cut them again this week if the U.S. reduces rates, as markets expect.

Exports, however, are likely to slow in coming months. Economists say consumption could falter if a sharp slowdown in the trade sector results in job losses and have urged Tsang in his annual budget on Feb. 27 to step up fiscal stimulus.

The government is expected to post a record budget surplus for fiscal 2007/08 of at least HK$80 billion-HK$100 billion (US$10.3 billion-US$12.8 billion) as a strong economy has boosted tax revenues and land sales. Tsang has pledged to announce one-off tax concessions and relief measures in the budget.

He will also cut standard salaries and profits tax rates by 1 percentage point to 15 and 16.5 percent, respectively, and allocate US$32 billion for infrastructure projects.

Lo at Citigroup said he hoped Tsang would also cut marginal tax rates, increase tax allowances and give a bigger one-off tax rebate than last year when it gave a waiver on half of income tax subject to a ceiling of HK$15,000 per person.

"Cutting the standard tax rate will not benefit most taxpayers. They need to cut marginal tax rates and raise allowances as well," Lo said.

The government is due to announce details of fourth-quarter and full-year 2007 gross domestic product on Feb. 27, coinciding with the budget when it will also announce a forecast for economic growth in 2008.

IMF sees HK growth slowing to 4.6pc
Hong Kong Standard
Wednesday, February 06, 2008

The International Monetary Fund has predicted Hong Kong economic growth will moderate to 4.6 percent this year from an estimated 6 percent in 2007 amid weakening demand in the United States and Europe.

"Looking ahead, growth is expected to slow to below 5 percent in 2008, largely due to a moderation in global demand," the IMF said in a report. "The biggest risk to this outlook is a more-than-expected deterioration in external demand, especially in the United States and Europe, and potentially further financial turbulence, both internationally as well as domestically." The fund expects strong domestic demand, rising rents and continued yuan appreciation to push Hong Kong's inflation up to 3.7 percent this year from an estimated 2.2 percent in 2007.

Hang Seng Bank (0011) warned that the mainland's export growth will decelerate to about 20 percent in 2008, from 25.7 percent in 2007, as the United States remains in danger of falling into recession and global growth continues to be slow. Authorities will continue to tighten monetary control to keep inflation from rising further, senior economist Bill Leung wrote in the bank's monthly report on the mainland economy.

In a UBS paper released yesterday, economist Jonathan Anderson said the Chinese economy is in the midst of both unusual and temporary shocks.

"Things may look rather shaky for the Chinese economy going into the second quarter of 2008," Anderson said.

However, most if not all of these issues will fade toward the middle of the year, according to Anderson.

He said there were many positive elements in the mainland economy that left the investment bank "very bullish for Chinese growth."

"The pace of overall expansion will moderate this year, but even a US recession still leaves China at or near double-digit GDP growth rates," Anderson said.

Hong Kong set to persevere
Hong Kong Standard
Thursday, February 14, 2008

While Hong Kong - along with other Asian economies - may not be able to avoid the impact of a US economic slowdown, Aberdeen International Fund believes the city will remain fundamentally sound.

"The West is having a crisis, and Asia is doing quite [well] from an economic and financial perspective," said Nicolas Yeo, the head of China and Hong Kong equities at the fund house.

"But it is hard for Asian economies to completely be decoupled from the West as Asia relies heavily on exports there. Domestic consumption is strong but not enough to offset a potential slowdown on export to the West. It will be quite a challenging year for Asia."

Yeo said Asia would remain a promising place to invest in for at least the next five years. But unlike the West, inflation is Asia's Achilles' heel. "Rising oil and commodities will be a challenge in Asia, especially in China."

Yeo considers Chinese stocks to be expensive. "We welcome consolidation. Investors should be careful."

The fund house is overweight on Asian currencies. "We believe Asian currencies will outperform most other G7 countries," said Donald Amstad, head of fixed income at Aberdeen Asset Management Asia.

Outside Edge: A tax-free toast to Hong Kong

By Robin Kwong

Published: February 29 2008 19:26 | Last updated: February 29 2008 19:26

With an economy growing at more than 6 per cent annually, what does Hong Kong have to fear?

Plenty, if you ask the economic and political elite in “Asia’s World City”. There is the ageing population, bad air quality and the increasing threat of being marginalised in China’s growth story. Other regional competitors, such as Singapore, are also vying for the title of being Asia’s premier financial centre.

If you do not ask the economic and political elite, others worry about the issues of growing income inequality and not having democracy for at least the next 10 years.

But should Hong Kong fall behind, it would not be for the government’s lack of effort. Years ago, it tried incubating high-tech industries with affordable land at a place called Cyberport. Typically, however, that ended up being just another real-estate project embroiled in accusations of sweetheart deals for the developer.

Then it brought Disneyland to the city and built a cable-car route to promote tourism, only to have malfunctions shut down the ride for half a year – while the whole thing was upstaged by glitzy new casinos in nearby Macao. Other recent proposals include being a hub for carbon trading, gold futures, arbitration services or education. Another idea, to be a creative industries hub, failed to achieve the roaring success promised.

This week, though, the bureaucrats unveiled a truly elegant plan to stay ahead of the competition: tax-free booze for everyone. The idea is to capture a slice of the world’s burgeoning fine-wine trade and establish Hong Kong as an international centre for it, alongside London and New York.

The move to abolish taxes on wine and beer, uncorked by John Tsang, financial secretary, in his budget speech, sent the city’s wine-loving tycoons into waves of bacchanalian ecstasy.

It also marked the speediest plunge off the wagon of any alcohol tax regime in the world. At the beginning of last year, Hong Kong was charging a punitive 80 per cent on the price of imported wines. Today, it is rare, if not unique, in leaving wine untaxed.

Protests from health advocates have been drowned out because of HK$4bn (£259m) in likely economic benefits and lots of new jobs. “Our starting point in [abolishing] the wine tax is to create employment,” Mr Tsang said after his budget speech, which also included billions in fiscal giveaways – largely to the middle class.

So perhaps the ambition was more local than global after all. Although Hong Kong’s administration does not have to face democracy for another decade, Mr Tsang has hit on the perfect populist budget. He was duly rewarded with a 12 per cent rise in approval ratings, making him even more popular than his boss, Donald Tsang, the chief executive.

What are the chances that John Tsang did not pop open a celebratory bottle afterwards?

The writer is the FT’s Hong Kong reporter. He, too, opened a post-budget celebratory bottle

Copyright The Financial Times Limited 2008

Goods exports up 7.6%




Merchandise exports expanded further in March, with the total goods exports value up 7.6% on a year earlier, to $222.5 billion, the Census & Statistics Department says. The value of total goods imports also surged 6.6%, to $250.7 billion.



The merchandise exports expansion was supported mainly by the robust growth in many emerging markets as well as the notable expansion of the EU market. The US market unexpectedly rebounded to show a distinct growth in March over a year earlier, while total exports to the Mainland rose only marginally in value terms. Yet for the first quarter as a whole, total exports to the Mainland still recorded double-digit growth.



Looking ahead, the external trading environment continues to be overshadowed by uncertainties arising from the weakness in the US economy and the unfolding global financial turbulence. The tightening measures in the Mainland are another area to watch.



Visible trade deficit

The month saw the re-export value went up 7.9% to $215 billion and the domestic export value dipped 1% to $7.5 billion. A visible trade deficit of $28.1 billion, equivalent to 11.2% of the value of goods imports, was recorded.



For this year's first quarter the total goods export value rose 10.5% over the same period last year, with re-exports up 10.9% and domestic exports up 0.3%. The value of goods imports surged 11.6%. A visible trade deficit of $51.5 billion, equivalent to 7.4% of the goods import value, was recorded.



Comparing the first quarter with the preceding one on a seasonally adjusted basis, the total goods export value rose 2%, with re-exports up 2.1% and domestic exports down 0.6%.



March saw strong increases in the values of total exports to some major destinations, including India (up 83.7%), Singapore (28.5%) and Germany (25.9%). The value of total exports to Japan fell 10.2%.



Rises were registered in the import values from most major suppliers, in particular India (up 33.2%) and Thailand (20.8%).



India the key destination

For the first quarter, year-on-year increases were registered in the total export values to most major destinations, in particular India, up 112.2%. Rises were registered in the import values from all major suppliers, in particular India (up 50.6%) and Thailand (27.8%).



In terms of commodities, increases were registered in the total export values of many principal commodity divisions in March, with non-metallic mineral manufactures up 60.2%. Rises were also registered in the import values of most principal commodity divisions, in particular non-metallic mineral manufactures (up 24.6%).



For the first quarter, distinct year-on-year rises increases were registered in the total export values of most principal commodity divisions, with non-metallic mineral manufactures up 54%. The import values of most principal commodity divisions also saw distinct year-on-year rises, in particular non-metallic mineral manufactures (up 32.3%).

Businesses see better prospects in Q2




The outlook for business in the second quarter is brighter than in the first, particularly for the manufacturing, import and export trade, transport and related services and business-services sectors.



The Census & Statistics Department released its Quarterly Business Tendency Survey findings today, which found 34% of respondents forecast a better outlook while only 8% expected it to be worse.



Respondents also expect a rise in their volume of business/output, particularly in the manufacturing, import and export trade, transport and related services, communications, business services, and banks, financing and insurance sectors.



On employment, those in the wholesale and retail, restaurants and hotel, real estate, and banks, financing and insurance sectors expect a Q2 rise.



Except the banks, financing and insurance sector, respondents in other sectors expect selling prices and service charges to increase, particularly in the manufacturing, wholesale and retail, and restaurants and hotels sectors.

香港首季GDP升7.1%



香港首季本地生產總值上升7.1%，已連續18季錄得顯著高於趨勢的增長，通脹平均升4.6%。



第一季的整體消費物價通脹平均升幅達到4.6%。剔除今年寬減差餉 和去年公營房屋租金豁免等措施的一次性影響後，第一季的基本消費物價通脹為4.9%。消費物價在首季進一步上升，主要是由於全球食品通脹，以致本地食品價格飆升。持續高於趨勢的經濟增長亦令需求方面的通脹壓力增加。

由於美國 經濟仍然疲弱，加上全球金融繼續動盪，外圍環境在第一季更形不利，然而香港的對外貿易依然表現堅挺。受內地及其他新興經濟體系的強勁表現和歐盟 巿場的進一步擴張所帶動，商品出口在第一季進一步顯著上揚，錄得8.3%的實質增長。受惠於金融服務持續激增，以及離岸貿易和訪港旅遊業顯著擴張，服務輸出在第一季亦維持強勁升幅，實質增長10.8%。

在第一季消費者及投資者的信心仍然高企，內部需求因而繼續發揮支持整體經濟增長的重要作用。消費開支進一步顯著實質增長7.9%，反映勞工巿場情況穩健及收入不斷上升。整體投資開支保持堅挺，在第一季實質增長8.9%，其中建造業活動有所回升。然而，隨全球經濟前景變得較為失色，本地股票巿場在季度內進一步下調，而樓巿亦不及早前熾熱。

勞工市場情況在第一季保持穩健。經季節性調整的失業率維持在3.4% 的水平，而就業不足率則降至1.9%，為十年低位。收入和工資持續上升。

展望外圍環境仍將不明朗及具挑戰性。由於美國樓市調整的影響已擴散至其他經濟層面，會令美國經濟持續疲弱，而全球金融市場亦可能繼續動盪。其他主要先進經濟體系的經濟活動亦已呈現放緩象。然而，新興及發展中的經濟體系的增長動力預計仍然相當勁。但受到先進經濟體系需求疲弱的影響，這些市場的增長動力將無可避免地稍為緩和。雖然如此，這些經濟體系的增長應能繼續紓緩未來數季發達國家經濟放緩對香港的影響。

Q1 GDP up 7.1%

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The economy continued to grow in the first quarter with GDP rising 7.1%, despite the growing adversities in the external environment, Government Economist KC Kwok says. This marked the 18th consecutive quarter that GDP growth exceeded the average trend growth.

Mr Kwok said given the uncertainties prevailing in the external environment and dimmer global economic prospects, the GDP forecast at 4%-5% as announced in the Budget is kept unchanged.


With the strong GDP growth in the first quarter, and barring any abrupt external shocks, it is likely GDP growth in 2008 should be close to the upper end of the forecast range.

Export expansion

Total goods exports grew 8.3% in real terms in the first quarter, supported by the vibrant performance of the Mainland and other emerging economies and the expansion of the EU market.



Services exports also rose 10.8% in real terms on the back of a continued surge in financial services, as well as notable growth in offshore trade and inbound tourism.



Domestic demand played a key role in driving the economy forward. Private consumption spending rose 7.9%, underpinned by the firm labour-market conditions and rising incomes. Overall investment grew 8.9% with a rebound in building and construction activity.



However, amid dimmer global economic prospects, the local stock market experienced further consolidation in the first quarter and the housing market turned less hectic.



Labour market conditions continued to be firm in the first quarter. The seasonally adjusted unemployment rate stood at 3.4%, and the underemployment rate fell to a 10-year low of 1.9%. Labour earnings and wages were on the rise.



Consumer price inflation picked up, mostly due to the surge in food prices amid the global food inflation. Headline CPI inflation averaged 4.6% in the first quarter. After netting out the one-off effects of the rates concession this year and the public housing rental waiver last year, underlying CPI inflation was 4.9%.



Global uncertainties

Mr Kwok said the external environment will remain uncertain and challenging. "The US economy will continue to be weak with the effects of the housing market downturn spreading into the wider economy, while global financial markets are likely to remain unsettled. Economic activities in other major advanced economies have also showed signs of deceleration."



The growth momentum in the emerging and developing economies, including the Mainland economy, is expected to remain vibrant, while there should be some mild moderation in growth due to the weaker demand from the advanced economies.



This should provide some cushioning effect on the impact on Hong Kong from the developed world's economic slowdown in the coming quarters.



Domestic demand is expected to grow and remain a key driver in economic growth. The firm labour market conditions and rising incomes should continue to fuel private consumption.



As business confidence holds up well and interest rates remain low, there should also be growth in investment spending in the rest of the year.



Inflation forecast

Mr Kwok said the inflation outlook is also uncertain and will hinge on the movements in food prices in the international markets in the rest of the year, which can be expected to be volatile.



Apart from global food prices, the elevated international oil prices, the exchange-rate movements as well as the strength of the local economy are likely to continue to exert inflationary pressure. Nevertheless, the sustained increase in labour productivity will provide some offsetting effect.



Due to the high degree of uncertainties in the external environment, the forecast rate of increase in the underlying CPI for 2008 is maintained at 4.5%. The corresponding forecast headline inflation rate is also unchanged at 3.4%.



"The risks to these forecasts are on the upside. The Government will review the inflation forecast as more incoming data become available," the economist said.



Optimistic outlook

Mr Kwok said although there are some global uncertainties that may affect Hong Kong's economy, he is cautiously optimistic about the Hong Kong's future economic development because of the strong domestic demand and the rapid growth of the Mainland and other emerging economies.



When asked whether Hong Kong will continue to record strong economic growth in the coming months, Mr Kwok said the economy cannot continue to grow at such a rapid rate for a prolonged period because it would create tremendous inflationary pressure. It is healthy to have a gradual slow-down in the economic growth rate, he added.



On the recent Sichuan earthquake, he said it is necessary to pay attention to the actual loss incurred in the disaster and how the reconstruction work will proceed. However, he said the quake would unlikely to have a significant impact on the Mainland's and Hong Kong's economy because China is a big country and Sichuan is an agricultural province.

Eirgh .. there goes inflation. Don't see my salary going up anywhere near that GDP figure any time soon!

Weaker growth to come but HK seen `resilient'
Hong Kong Standard
Monday, May 19, 2008

Economists' views differ on Hong Kong's growth outlook this year after better-than-expected first-quarter expansion of 7.1 percent.

"Hong Kong is linked to the mainland via a services dynamic," said Societe Generale's Asia Pacific chief economist Glenn Maguire. "The case for a significant deterioration in Hong Kong's growth performance is a tenuous one. It will prove to be fairly resilient."

Maguire expects Hong Kong economic growth this year to be about 6 percent.

On Friday, the government announced that gross domestic product for the first quarter hit 7.1 percent - higher than market expectations of 6.1 percent and last quarter's revised 6.9 percent increase.

Government economist Kwok Kwok-chuen, however, said the GDP forecast this year remained at 4 to 5 percent because of "uncertainties prevailing in the external environment."

Citi economist Joe Lo concurred: "Looking ahead, we think both domestic demand and exports would weaken. If the recent increase in unemployment continues, private consumption could lose momentum in the second half. Also, as the US downturn hits more economies around the world, Hong Kong is unlikely to be able to maintain exports."

Lo expects Hong Kong GDP growth in the second half of this year to slide to 3 to 4 percent. "In the coming year, it is unlikely Hong Kong would sustain a strong performance like in this year's first quarter," said Lo.

Bank of East Asia (0023) chief economist Paul Tang Sai-on and ING economist Prakash Sakpal agreed that Hong Kong exports will slow in the second quarter.

But Sakpal said the slowdown would be mild and would not hurt Hong Kong's economy.

"We might see some slowdown [in external demand], but so far economies in the region such as Taiwan and Korea have sustained strong export growth into the second quarter. So hopefully we should see that in Hong Kong as well," said Sakpal.

失業率3.3% 返回十年低位


(星島) 05月 19日 星期一 05:19PM

香港最新失業率降至3.3％，就業不足率也降至1.8％，均是超過10年以來的最低位。總就業人數升至354萬人，總勞動人口也增至366萬人。短期的就業展望，端視全球經濟增長放緩對本港經濟的影響，特

別是私人機構新增職位的速度，能否於暑假吸納畢業生及離校生。勞工及福利局 局長張建宗表示，勞工市場持續強勁，但鑑於本港外圍經濟環境不明朗，以及本地勞工市場的人力資源錯配問題，當局絕不會鬆懈。張建宗指出，在知識型經濟的發展下，繼續致力提升本地工人的技術及質素。政府統計處 公布，截至4月底止季度的失業率，回落0.1個百分點，至3.3％，返回超過10年以來的最低位；就業不足率也降0.1個百分點，至1.8％，同樣是超過10年以來的最低位。失業率下跌，主要見於娛樂及康樂服務、飲食及酒店和清潔服務業。就業不足率回落則主要見於娛樂及康樂服務、清潔服務和地基及上蓋工程建造業。季內總就業人數增加4,500人，至約354萬人。

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Jobless rate hits 10-year low
May 19, 2008

The jobless rate fell to 3.3% in February-April from 3.4% in January-March, its lowest level in a decade, the Census & Statistics Department says. The underemployment rate fell to 1.8% from 1.9%, also the lowest level in more than 10 years.

Falls in the jobless rate were mainly seen in the amusement and recreational services, restaurants and hotels, and sanitary services sectors. For the underemployment rate, decreases were mainly seen in the amusement and recreational services, sanitary services and, foundation and superstructure construction sectors.

While the labour market remained buoyant with a modest expansion, the rise was more than offset by a larger increase in the labour force, bringing the number of jobless people up moderately.

Total employment rose 4,500 to 3.54 million and the labour force grew 6,500 to 3.66 million. Jobless people rose 1,900 to 120,900 while underemployed people dipped 4,700 to 65,800.

The near-term employment outlook will hinge on how the moderation in global economic growth affects the economy, particularly the pace of job creation in the private sector, especially during the summer months, for absorbing the new batch of fresh graduates and school leavers.

Secretary for Labour & Welfare Matthew Cheung said the labour market stayed robust, with 64,976 jobs received in April, up a hefty 54.3% over the same period last year.

He cautioned there is no room for complacency given the uncertainties in Hong Kong's external economic environment and the local skills mismatch problem. The Government will maintain efforts to boost worker skill in the face of a knowledge-based economy.

HK 2008 growth prospects pick up after Q1 data

HONG KONG, May 20 (Reuters) - Surprisingly strong first-quarter economic growth in Hong Kong has prompted analysts to raise 2008 forecasts, but consumption has probably peaked for now and exports are set to slow down, a Reuters poll shows.

The median economic growth forecast suggests 2008 growth would be 4.9 percent, up from a median forecast of 4.6 percent before the latest growth data was released last Friday.

Those figures showed growth in the first quarter picked up to a seasonally adjusted 1.8 percent from 1.5 percent in the fourth quarter of 2007 as exports proved surprisingly resilient in the face of weakening U.S. demand and as investment picked up.

Compared with the same year-earlier quarter, GDP rose 7.1 percent in the first three months of the year, well above forecasts for a 6.1 percent expansion.

While exports were supported by strong demand from Europe and Asia, economists said those regions would start to feel greater impact from weakening U.S. demand later this year.

"The outlook is more cautious as the external environment remains patchy," said Irina Fan, senior economist at Hang Seng Bank. "Despite the recent run of not-so-negative U.S. data, we believe the worst is yet to come."

The United States is Hong Kong's biggest export market after mainland China. It is also the final destination for many goods exported within Asia.

A tight labour market and wage growth should continue to support consumer spending, but it could be less robust than late last year as inflation curbs purchasing power and falling interest rates, which have cut consumers' mortgage costs, could now have reached the bottom of their cycle.

Private consumption expenditure in the first quarter, which excludes spending by tourists, dipped 0.1 percent seasonally adjusted from the fourth quarter.

Percentage forecasts for growth in Hong Kong's GDP in 2008 from a year earlier:

2008
Latest Previous
Daiwa Research Institute 6.6 6.6
Merrill Lynch 6.0 6.0
Goldman Sachs 5.2 5.2
CLSA 5.0 4.2
Hang Seng Bank 5.0 5.0
HSBC 5.0 5.0
Citigroup 4.8 4.5
JP Morgan 4.8 4.6
Nomura 4.8 4.5
Standard Chartered Bank 4.6 4.6
Lehman Brothers 4.3 4.3
UBS 2.5 2.5
----------------------------------------------
Median 4.9 4.6

Q1 port cargo throughput up 14%





Total port cargo throughput rose to 62.6 million tonnes in this year's first quarter, up 14% on the same period last year. Inward and outward port cargo rose 12% and 17%, to 36.3 million tonnes and 26.3 million tonnes.



A Census & Statistics Department survey found that on a seasonally adjusted quarter-to-quarter comparison, total port cargo throughput grew 4%, with inward and outward port cargo up 2% and 7%. Seaborne and river cargo grew 15% and 12%, to 45 million tonnes and 17.6 million tonnes.



For inward port cargo, imports and inward transhipment rose 10% and 14%, to 19.1 million tonnes and 17.1 million tonnes. For outward port cargo, exports and outward transhipment rose 22% and 14%, to 9.3 million tonnes and 17 million tonnes.



5.8m containers handled

Hong Kong's port handled 5.8 million containers in the first quarter, up 7% on a year earlier, with laden containers up 8% to 4.8 million, and empty containers virtually unchanged at 900,000.



Among laden containers, inward and outward containers grew 9% and 7%, to 2.4 million and 2.5 million.



On a seasonally adjusted quarter-to-quarter comparison, laden container throughput grew 1% in the first quarter, with inward laden containers virtually unchanged and outward ones up 3%. Seaborne laden containers rose 10%, to 3.6 million, while river laden containers grew 4%, to 1.2 million.



Within inward laden containers, imports dipped 1%, to 800,000 containers, while inward transhipment rose 15%, to 1.5 million containers. For outward laden containers, exports fell 4%, to 900,000 containers, while outward transhipment rose 15%, to 1.6 million containers.



In the first quarter, ocean-vessel arrivals recorded virtually no change over a year earlier at 9,490, with total capacity up 14%, to 99.7 million net registered tons. River-vessel arrivals rose 2%, to 46,360, with the total capacity down 8%, to 25 million net registered tons.

Fast-food giants join inflation race
Hong Kong Standard
Thursday, June 12, 2008

McDonald's and Maxim's have increased their prices to cover the surging costs of pork and rents - and Fairwood looks set to join them.

McDonald's upped its prices by 2 percent from Monday while Fairwood said yesterday - just six months after a 5 percent hike at the end of last year - it may increase its prices by 3 percent before March.

Fairwood is trying to diversify the sources of its meat supplies from the mainland to Argentina and Brazil and cut back its reliance on pork from 30 percent to 10 percent this year.

All three chains said the increases are necessary to absorb the blow of inflation, which has seen pork prices rise by 59 percent, beef by 51 percent and oil by 29 percent in the past year.

A McDonald's spokeswoman said it "tried every possible means to minimize price increases, but with inflation surging, we have no choice but to adjust prices. The rises are also way below the increase in our operating costs."

She added that increases in rents and wages had also put pressure on costs.

Fairwood managing director Chan Chee-shing said mainland inflation has driven operating costs up by 3 percent and that his chain may have to increase menu prices by that amount.

Part of the increase will be passed on to customers.

The menu has also been changed to focus on more seafood and vegetables, rather than meat.

Maxim's said there have been price increases on selected items.

Meanwhile, the Legislative Council had a motion debate on the issue.

Kwong Chi-kin of the Federation of Trade Union lawmaker, who moved the motion, suggested the government provide free meals for poor students, rent- free units for food banks and issue food coupons.

Democratic party chairman Albert Ho Chun-yan accused the government of turning a blind eye to the problem while paying civil servants and the new political appointees generous salaries.

Secretary for Labour and Welfare Matthew Cheung Kin-chung said coupons are not feasible as they will involve high administrative costs.

Meanwhile, a Cost of Living Ranking survey showed Hong Kong has become a less expensive city for expatriates due to currency weakness. Hong Kong dropped 12 places to 97th overall and four places to ninth in Asia.

New company registration up 11.4%




There were 52,824 new local companies registered in the first half of this year, up 11.4% on the same period last year.



Companies Registry statistics released today show 460 new overseas companies established a place of business in Hong Kong, up 45.57% on the same period last year.



The total number of live companies registered at the end of June was 687,865, up 32,827 on the end of 2007. The total number of overseas companies stood at 8,326, which is 245 more than last year's total.



The number of charges on the assets of companies received in the year's first half rose 33.73% to 23,251.



One hundred prospectuses including 34 mutual funds were registered, compared with 132 prospectuses, including 55 mutual funds, during the same period in 2007. The total number of documents received for filing rose 12.03% to 1,041,024.



The total number of summonses against companies for breaches of the Companies Ordinance, mainly for failure to file annual returns was 2,884.



There were 1,023 convictions obtained, compared with 1,111 in the corresponding period last year. The total amount of fines imposed for convictions was $6.54 million compared with $6.17 million last year.

Hong Kong warns of downside growth risks

HONG KONG, Aug 7 (Reuters) - Joseph Yam, head of Hong Kong's central bank, warned of downside risks to the territory's economic growth on Thursday, echoing analysts' views that the city is now vulnerable to global headwinds.

"We do not rule out that economic growth will be worse than expected," Yam told reporters, adding that a slower performance would disrupt a sustained period of rapid economic growth since the city's recovery from the outbreak of the SARS virus in 2003.

The government and economists forecast gross domestic product would increase by around 5 percent this year, down from average annual growth of 7.3 percent over the past four years, but economists also see downside risk in the wake of recent data.

June exports unexpectedly declined from a year earlier and a purchasing managers' index for July showed private sector business activity contracted for the first time in 3-½ years as new orders fell.

While exports could pick up in coming months, the pace of growth is unlikely to match a 9 percent rise in the first half given signs of slowing demand in both the United States and Europe, analysts say. Yam, chief executive of the Hong Kong Monetary Authority, said the fallout from a weak U.S. housing market may be more protracted than first thought.

Domestic demand in Hong Kong is solid, and likely to keep driving economic growth as low unemployment at 3.3 percent is pushing up wages and households, and companies have relatively low debt. June retail sales data, though, disappointed for a second straight month as sales in real terms grew only 4 percent from a year earlier compared with average growth of 11.2 percent over the past year.

Analysts attributed the slowdown in part to rising inflation, which is at an 11-year high, topping 6 percent in June, and starting to erode consumer purchasing power.

"The slowdown in exports and retail sales combined makes for a tougher environment," said Sean Yokota, an economist at UBS.

He forecast only 3.9 percent economic growth this year and a 4.1 percent expansion next year.

"The first half (of 2009) will be difficult as Hong Kong will be vulnerable to an export slowdown," he said. "But as the global economy starts to recover in the second half, Hong Kong will be one of the first economies to recover as well."

China's rapid economic development continues to provide a cushion for the territory, boosting tourism as mainland Chinese flock to shop here, and encouraging mainland companies to list on the Hong Kong bourse and use the services of Hong Kong lawyers, accountants and other professionals.

Kevin Lai, an economist at Daiwa Research Institute, said a weak Hong Kong dollar <HKD=>, which is pegged to the U.S. dollar, is underpinning the domestic economy as China's yuan <CNY=CFXS> currency is gradually appreciating.

"The weak currency means those services are cheaper than a year ago for mainland Chinese," he said.

However, first-half earnings reports this week highlighted the territory's exposure to global economic challenges. High oil prices pushed flagship carrier Cathay Pacific Airways into the red for the first time since the SARS outbreak in 2003, while Bank of East Asia's net profit plunged 52 percent after writedowns linked to the global credit crisis.

Hong Kong's economy shrinks: govt
15 August 2008
Agence France Presse

Hong Kong's economy shrank unexpectedly in the three months to the end of June, hit by high inflation and the global downturn, the government said Friday.

Gross domestic product fell by 1.4 percent, seasonally adjusted, from the previous three months, the first quarter-on-quarter decline since the SARS crisis of 2003.

It was 4.2 percent higher than in the second quarter of 2007 in real terms, well short of economists' expectations for 5.3 percent growth year on year.

Government economist K-C Kwok blamed the global downturn for the slowdown, which followed a sustained period of strong growth.

"The moderation... indicated that the headwinds from the slowing growth in the advanced economies and lingering financial market turbulence had increasingly posed a drag on the economic growth of the Asian region, including that of Hong Kong," he said.

The global economic environment would be "increasingly challenging going forward," the government warned, citing high commodity prices, volatile financial markets and the global slowdown.

Rising inflation across Asia also posed a threat to the region's economies, it said, predicting "moderate" economic growth of between 4.0 and 5.0 percent for 2008 as a whole.

Economic measures in mainland China also needed to be closely watched, it added.

Some economists had worried that China had been tightening the flow of credit too much as it bids to curb high inflation, but Beijing's focus now appears to have shifted to promoting growth.

In Hong Kong, inflation rose to 5.7 percent in the second quarter, pushed up by rising food prices.

Exports grew by 4.4 percent year-on-year in real terms as demand from China and other emerging economies held firm and EU economies continued to expand, the government said.

Employment remained strong but domestic consumption slowed as rising prices, stock market falls and the economic slowdown hit consumer confidence, it said.

Friday's report also revised the government inflation forecast for 2008 upwards from 4.5 percent to 5.5 percent.

But it said an 11 billion Hong Kong dollar (1.4 billion US) package of measures unveiled last month to ease the effect of rising prices would help lower the headline figure in the second half of the year.

The figures were released after the close of the Hong Kong stock market, which fell 1.1 percent on Friday.

Well yeah.

But I guess HK can manage.

Still, if people feel the pinch from the economic crisis is affecting them real bad, then............there's always Cafe De Coral and Mcdonalds to go to. :)

Analytical Accounts of the Exchange Fund

The Hong Kong Monetary Authority (HKMA) released on Tuesday the key analytical accounts of the Exchange Fund at the end of August 2008, reporting an increase of HK$13.4 billion in the foreign assets of the Exchange Fund during the month.

Foreign assets, representing the external assets of the Exchange Fund, amounted to HK$1,182.7 billion.

The Monetary Base, comprising Certificates of Indebtedness, Government‑issued currency notes and coins in circulation, the Aggregate Balance of the banking system and Exchange Fund Bills and Notes issued, amounted to HK$326.9 billion.

Claims on the private sector in Hong Kong amounted to HK$58.8 billion.

Foreign liabilities, representing mainly obligations under repurchase agreements, amounted to HK$1.9 billion.

The analytical accounts of the Exchange Fund are released in accordance with the International Monetary Fund's Special Data Dissemination Standard (SDDS) and are referred to as the Analytical Accounts of the Central Bank under SDDS

Joseph Yam: Financial innovation and the public interest
September 18, 2008.

Balancing private and public interests is difficult, but necessary.

However fancily or innovatively financial services are packaged and delivered, their essential purpose is to match the needs of investors and fund raisers, and in the process, help the economy to function effectively. It is important to remember that the financial system exists to serve the public interest in effective financial intermediation, not the private interests of the financial intermediaries.

One measure of the efficiency of financial intermediation is of course its cost. We often see marketing materials for financial services promising higher returns for investors and a lower cost of funds for fund raisers. Sometimes they sound so convincing that the very substantial fees charged for the services seem small or at least affordable. How does one reconcile this anomaly? Where is the catch?

To find the answer, one needs to consider the time dimension. For a long time, we did enjoy a happy situation in which investors, fund raisers and financial intermediaries all did well. Innovative products, which I have previously referred to as "alphabet soup", did enable investors to achieve a higher return and borrowers, even those who were actually not very credit-worthy, to have access to cheaper funding. But, all of a sudden, we have a situation where investors are losing large amounts of money and borrowers are being denied access to funds, and some financial institutions even face insolvency. In other words, all of a sudden, the intermediation spread has widened. Investment returns are falling sharply, or becoming negative depending on what financial products one is holding; and borrowing costs have surged.

This sharp widening of the intermediation spread reflects and is compounded by, among other things, risk aversion and de-leveraging by financial institutions, indicating (with the benefit of hindsight) the unrealistic and unsustainable nature of the previous scenario. It turns out that the earlier narrowing of the intermediation spread – the apparently greater financial efficiency made possible by financial innovation – was achieved at the expense of a sharp widening later on. The dynamic linking the intermediation spread of the present and that of the future is a complex one. Essentially it involves the parties concerned overlooking or ignoring the risks associated with financial innovation, allowing them to snowball to a systemic level with serious implications for financial stability.

It is important for financial regulators responsible for financial stability, which is crucial to the smooth functioning of the economy, to keep a watchful eye on financial innovation. But this is easier said than done. In many jurisdictions the financial sector constitutes a strong political lobby. Its views on financial issues are often respected by the authorities and they are often reflected in regulatory policies. Viewed realistically, there is a risk of the private, short-term interests of the financial lobby being given more attention than any adverse implications for financial stability. It is also difficult for regulators to keep up with the market players who are at the forefront of financial innovation. And there is the danger of over-regulation stifling financial innovation. It is a balance that is very difficult to strike.

HK wakes to a nightmare

Benjamin Scent and agencies
Wednesday, October 08, 2008

The holiday's over for Hong Kong investors, who wake up today to find the European financial system teetering on the brink of total disaster.

Three of Britain's largest banks were reported to be begging for partial nationalization, while Iceland tried to escape the specter of national bankruptcy with an emergency loan from Russia and central banks pumped more than US$480 billion (HK$3.74 trillion) into the money markets.

The International Monetary Fund said last night it estimates US$1.4 trillion has been lost in the banking bloodbath. It said financial institutions will need to raise US$675 billion in order to recover.

The Hang Seng Index could drop to as low as 16,200 in the near term in the midst of these uncertainties, brokers said.

"The clock is ticking, and it's one minute to midnight," Barclays Wealth wrote in a note to clients.

"Policymakers urgently need to get some traction in their policy initiatives if disaster is to be avoided."

Some equities rose after news of more emergency measures began to trickle out.

The Dow Jones Industrial Average seesawed between gains and losses.

The Dow initially rose 1.2 percent before trading at 9,950.88 points, down 4.62 points or 0.05 percent, in late morning trading.

Britain's FTSE 100 was up 1 percent by late afternoon, but Germany's DAX index was up only 0.5 percent after a 7 percent decline in Deutsche Bank.

Industry sources said Royal Bank of Scotland Group, Barclays and Lloyds TSB have asked UK fi
nance minister Alistair Darling to give them at least 15 billion (HK$204.55 billion) each. Darling will continue urgent talks over the coming days, with the next round to focus on what form of equity the government would receive in return for providing banks with any injection of funds.

Standard & Poor's yesterday cut the credit rating of RBS for the first time in 10 years. The bank's shares then fell the most in at least 20 years, plunging nearly 40 percent to as low as 0.90, although it improved later to 0.99, a drop of 33.4 percent.

Lloyds slumped 14.4 percent to 2.22 and Barclays fell 12.3 percent at 2.75.

"I thought American institutions like AIG were too big to fail," Singaporean tycoon Oei Hong Leong said yesterday. "Today, it's worse - the European banks are too big to be saved."

The UK Treasury and Lloyds declined to comment, while RBS and Barclays denied asking for money.

In an attempt to shore up confidence, European Union finance ministers agreed to guarantee consumers' bank deposits up to 50,000 euros (HK$212,191), up from the current level of 20,000 euros. Taiwan said it would provide unlimited deposit insurance.

Australia stunned markets with its steepest interest rate cut in 16 years yesterday, slashing the benchmark cash rate by 100 basis points to 6 percent. Investors hoped that central banks in Europe and the United States could follow suit.

Interbank lending was virtually nonexistent again, leading the European Central Bank to pump US$50 billion into money markets. Banks wanted more than double that amount, and were willing to pay a stiff 6.75 percent for the funds that were available.

The Bank of Japan loaned 1 trillion yen (HK$75.74 billion) to banks, while the Bank of England offered US$40 billion.

Iceland sought a four billion euro loan from Russia, pegged the slumping kroner to a basket of currencies and took control of its second-biggest bank to stem a collapse of the financial system.

Russia unveiled an aid package for its banks, offering to channel an extra 950 billion rubles (HK$282.71 billion) of new credit through the two largest state-owned lenders.

Hang Seng Index drops below 16,000

Bloomberg Asia
Wednesday, October 08, 2008

Hong Kong stocks fell, pushing the benchmark index below the 16,000 level for the first time since July 2006, on concern the deepening credit crisis will slow global economic growth and erode corporate earnings.

HSBC Holdings (0005), Europe's biggest bank, declined 2.5 percent after the International Monetary Fund said the world's major banks may need US$675 billion (HK$5.26 trillion) in fresh capital.

Hang Lung Properties (0101), a Hong Kong-based developer, plunged 8.5 percent.

Aluminum Corp of China (2600), the country's largest producer of the metal, tumbled 16 percent after saying third-quarter earnings will fall by more than 50 percent.

The Hang Seng Index lost about 871 points or 5.2 percent, to 15,932 in mid-morning trade.

HK cuts base lending rate to boost liquidity
Bloomberg Asia
Wednesday, October 08, 2008

The Hong Kong Monetary Authority cut its benchmark interest rate to help boost bank lending as the city's economy slows amid a global credit squeeze.

The base rate for banks will drop to 2.5 percent from 3.5 percent Thursday, based on the level of the US benchmark target rate plus 50 basis points, down from 150 basis points, chief executive Joseph Yam said.

The HKMA tracks the Fed Funds rate, which is now at 2 percent, because Hong Kong's currency is pegged to the dollar.

Australia cut its benchmark interest rate on Tuesday by one percentage point, the most since a recession in 1992, sparking speculation that other countries will follow to unlock credit markets.

Aren't you a mod?

I thought this main section was just for photo-threads?

Aren't you a mod?

I thought this main section was just for photo-threads?

The main section of the HK Forums isn't only limited to photos but also current news. Since the global economic crisis is a major issue, this might as well remain in the main section for the time being. If not, I'll move this in the "Life in Hong Kong" section ;)

A year ago, we were at all time high day after day, week after week.
And we are now going down and down everyday.

HK is not the only one with this problem!

Taiwan, HK, China cut rates

BLOOMBERG
Thursday, October 09, 2008

Taiwan, Hong Kong and China lowered interest rates, while Japan and Australia pumped more than US$22 billion (HK$171.6 billion) into money markets, after U.S. and European central banks cut borrowing costs to ease a global credit crunch.

The Hong Kong Monetary Authority cut its base rate to 2 percent to help boost bank lending, tracking yesterday's move by the Federal Reserve.

The Central Bank of the Republic of China (Taiwan) cut the discount rate on 10-day loans to banks by 25 basis points to 3.25 percent.

The People's Bank of China on Wednesday cut its key rate 0.27 percentage point.

Hong Kong shares open down 7.7 percent

AGENCE-FRANCE-PRESSE
Friday, October 10, 2008

Hong Kong share prices opened down 7.7 percent on Friday, as worries over the state of the global financial system
sent markets across Asia into a tailspin, dealers said.

The benchmark Hang Seng Index opened down 1,225.72 points at 14,717.52.

HK's recession risk is rising: John Tsang

AGENCE-FRANCE-PRESSE
Monday, October 13, 2008

Hong Kong's financial chief John Tsang warned the city stood a higher chance of slipping into recession next year as the global financial crisis deepens.

"Under the circumstances, I expect the risk of having an economic recession in Hong Kong next year is getting higher and higher,'' he told legislators.

But Tsang said there was no need for the government to inject capital into the city's banks.

Asked if Hong Kong would follow moves by other nations to inject liquidity into the banking system, Tsang told broadcaster Cable TV: "Absolutely no need.''

"Our banking system is very stable. Their reserves and capital are very sufficient. So, we are not the least bit worried about them,'' he said.

HK shares climb 3.2pc in volatile trade

REUTERS
Monday, October 13, 2008

Hong Kong shares ended the skittish morning session 3.2 percent higher, propped up by global measures to support troubled financial markets and gains in Chinese financial counters on talk of further state-backed buying of shares.

The benchmark Hang Seng Index was up 478.80 points at 15,275.67 after opening 2.4 percent higher.

But the blue chip index had dropped 0.3 percent earlier in the session amid mixed signals from regional markets, as Singapore and South Korean shares notched up gains while China and Taiwan languished in the red.

The China Enterprises Index of top locally listed mainland Chinese companies jumped 4.8 percent to 7,476.29.

We'll rise above it

Bonnie Chen
The Standard
Monday, October 13, 2008

Hong Kong's position as a world financial center remains strong and may even grow as a result of the financial tsunami, the chief executive is expected to say in his policy address.
Chief Executive Donald Tsang Yam- kuen is expected to devote a substantial portion of his speech on Wednesday to the world financial meltdown - and to brace Hongkongers for tough times ahead, according to a government source. But while he will try to boost public confidence, there will be no sweeteners on offer.

Although the public has lost confidence in financial markets and institutions, the chief executive is expected to reaffirm the importance of the sector to Hong Kong's economy.

"After all people around the world still need to invest. Hong Kong may have a chance to emerge as a leading financial market with the collapse of New York and London," the source said.

Tsang will not attempt to predict the economic situation in Hong Kong next year, the source said, especially as the city is still prone to outside factors since it relies heavily on exports and the entrepot trade, which represents around 30 percent of annual gross domestic product.

But the financial industry only represents about 15 percent of GDP and Tsang is expected to say in his address the industry has room for further development.

He will emphasize the importance of maintaining the free flow of capital and also confirm that the dollar peg to the greenback will remain in place, particularly because of the financial turmoil.

Another source said that as a result of robust economic growth at the beginning of the year, GDP growth for this year can be maintained at around 4 percent but the chief executive is not likely to forecast the 2009 GDP growth.

"It is reasonable to expect no sweeteners since a HK$11 billion relief package was offered in June and the financial secretary announced a HK$50 billion giveaway package in March. Also, we are expecting years of deficits," the source said.

With worries over the future economy, the source said no initiatives should be expected in the policy address.

"After all, what the administration needs to do and the general direction were covered in the first policy address last year," the source said.

Follow-ups on the 10 infrastructure projects will be mentioned, as will the West Kowloon cultural district development, the source said.

HK stocks climb for second day

Bloomberg
Tuesday, October 14, 2008

Hong Kong stocks rose for a second day after governments in the US and Europe agreed to buy stakes in banks, easing concern the global credit crisis will worsen and damp the city's economic growth.

HSBC Holdings (0005), Europe's biggest bank, advanced 1 percent. France, Germany, Spain, the Netherlands and Austria committed 1.3 trillion euros (HK$13.70 trillion) to guarantee bank loans and take stakes in lenders.

CNOOC Ltd (0883), China's biggest offshore oil producer, surged 11 percent after crude oil prices had the biggest jump yesterday in three weeks.

The Hang Seng Index was about 675 points or 4.1 percent higher at 16,987 in morning trade.

I'm surprised no one posted this. It remained as one of the top stories on Globe & Mail for most of the day. I think people were half expecting an Iceland situation again.

Hong Kong to suffer 'huge deficit'

DIKKY SINN

The Associated Press

October 16, 2008 at 9:02 AM EDT

HONG KONG — Hong Kong will suffer a “huge deficit” this year as the local economy slows as a result of the global financial meltdown, the territory's chief executive said Thursday.

“Money is very tight at the moment. I'm facing a huge deficit at the end of this year,” Donald Tsang, the territory's leader, told a group of foreign correspondents a day after delivering his annual policy address.

“No one in the world now knows the breadth and depth of this crisis yet ... What I'm sure is the GDP figures are going to fall and unemployment rate is going to rise. That's inevitable.”

The territory, however, is in a better position to endure the turbulence thanks to last year's surplus of more than HK$100-billion ($12.9-billion U.S.), he said. (What a huge surplus... for a city of 7 million... in contrast Canada (pop. 33 million) had surplus of 9.6 billion CAD in 2007)

Hong Kong will not slip into a recession, he predicted, adding that closer economic ties with booming China will help the territory.

“Mainland China, despite this present crisis, I believe will still be growing at a rate of at least 7 to 8 per cent and we are one of the major beneficiaries of that growth,” he said.

Outlining his policy blueprint Wednesday, Mr. Tsang said the local economy grew at a slower-than-expected 4.2 per cent pace in the second quarter, posting its first quarter-on-quarter decline in years.

He described the global financial meltdown as worse than the 1997 Asian financial crisis, saying it would take a far bigger toll on the world economy.

source: http://www.theglobeandmail.com/servlet/story/RTGAM.20081016.whongkong1016/BNStory/Business/

We already have an economic news thread that dates back to 2005. I would strongly encourage people to use it to discuss current economic trends.

HK bankruptcies herald economic downturn, risks for banks

HONG KONG, Oct 20 (Reuters) - A spate of corporate bankruptcies in Hong Kong highlights the territory's vulnerability to the credit crisis and the slowing global economy, clouding the outlook for its banking sector.

In the past two months, six Hong Kong companies have appointed provisional liquidators, including jewellery maker 3D-Gold Jewellery Holdings , formerly Hang Fung Fold, as well as retailer U-Right and toy maker Smart Union , a supplier to Mattel Inc and Disney .

As more businesses are expected to succumb to the pressures of rising costs, weakening demand and difficulty in finding funding amid the credit crisis, analysts say bankruptcies will surge and are cutting their earnings forecasts for Hong Kong banks.

"We believe this is only the beginning of the credit deterioration cycle for Hong Kong banks," Citigroup said in a research note on Monday.

"Retailers and exporters are likely to feel the most pain, given declining property prices, shrinking consumer spending, falling export demand and tightening bank credit."

The Hong Kong General Chamber of Commerce on Monday forecast the territory is heading for a recession, possibly from this quarter. It projects 0-1 percent economic growth in 2009 as the economy feels the effect of a U.S. recession, slower trade and easing growth in mainland China.

"This is the worst economic environment of our lives," said David O'Rear, the chamber's chief economist. "It isn't a slump, a contraction, a downturn or a correction. Companies need to look to their cashflow in anticipation of a very rough ride in 2009."

PRUDENT LENDING

In the banking sector, Citigroup sees Bank of East Asia as most sensitive to rising credit costs, citing its relatively low profitability.

"We estimate that every 50 basis point increase in credit cost would lower BEA's fiscal 2009 earnings by 30 percent, compared to 14 percent for Bank of China (HK) and 9 percent for Hang Seng Bank ," the note said.

Morgan Stanley on Monday slashed its earnings estimates for Bank of East Asia and said its share price, which has already plunged 60 percent this year, could slump to HK$15, from HK$20.80 at Monday's close.

Hang Seng Bank, a unit of global lender HSBC , is Morgan Stanley's top banking stock for 2009 because its earnings should outperform the sector thanks to prudent lending and because it did not sell mini-bonds offered by collapsed U.S. investment bank Lehman Brothers.

Thousands of Hong Kong investors in the bonds lost money and banks that sold the bonds have agreed to compensate them.

The investment bank cut its earnings estimates for smaller banks Wing Hang Bank and Dah Sing Financial , saying aggressive growth in their loan books in the past two to three years will result in sharply higher credit costs.

A potentially sharp rise in bankruptcies in southern China, as well as in Hong Kong, adds to banks' deteroriating outlook.

Clement Chen, chairman of the Federation of Hong Kong Industries, says a quarter of some 70,000 Hong Kong-owned factories in the Pearl River Delta linking Hong Kong and southern China could close down in a worst-case scenario.

"The outlook at the moment is rather grave," he told Reuters. Things could get "most difficult" in the next few months leading up to Chinese New Year, given the need to give out annual bonuses to workers ahead of long seasonal holidays.

Chen urged China to help the export sector by halting appreciation of the Chinese currency, freezing minimum wages in the medium term and reinstating recent export tax rebate cuts.

Hong Kong faces record deficit in 2008/09 -Deloitte

HONG KONG, Nov 13 (Reuters) - Hong Kong is heading for a record HK$80 billion (US$10.3 billion) budget deficit for 2008/09 after offering tax concessions and handouts and as a weakening economy depresses public revenues, Deloitte forecast on Thursday.

Analysts say Hong Kong's economy is heading for recession within the next six months, after four years of robust growth averaging 7.3 percent annually.

Government revenues already appear to be falling with the government posting a HK$48.6 billion deficit for April-September, eight times last year's HK$5.6 billion deficit for the same period.

A full-year deficit of HK$80 billion would reverse a record HK$123.7 billion surplus for 2007/08. It would also top a HK$63.3 billion deficit in 2001/02 when the government was suffering the effects of the bursting of the global dotcom bubble.

Deloitte said the government would remain in the red in 2009/10, forecasting a deficit of HK$20 billion, compared with the government's forecast HK$49.2 billion surplus for 2009/10.

However, Yvonne Law, tax partner at Deloitte, said two consecutive deficits should be manageable because the government had huge fiscal reserves, totalling HK$444.3 billion at the end of September.

Volatile fiscal balances are a feature of Hong Kong's government finances thanks to a small tax base -- salaries tax is a flat 15 percent and there are no sales or capital gains taxes. Two years ago the government proposed a goods and services tax to expand the tax base but was forced to abandon the plan in the face of public opposition.

"The structural problem of a small tax base means that during an economic downturn (government) income falls but expenditure remains static," Law said.

Government income will be hit by a 50 percent drop in the stock market this year as well as falling property prices and worsening corporate profits.

Deloitte said contributors to its estimated HK$80 billion deficit would include a HK$29 billion decline in land premiums; HK$20 billion from falling stamp duty revenue; and HK$15 billion from a drop in corporate profits tax. Salaries tax would decline by HK$6 billion, it said.

Government expenditure, meanwhil,e is rising as the government offered HK$40 billion worth of temporary tax concessions and handouts in its annual budget in February when the economy was still strong. In the summer it provided HK$11 billion in relief for the elderly and low-income groups to cope with rising inflation, which peaked at 6.3 percent in August.

Chief Executive Donald Tsang said last month that the government faced a "huge" fiscal deficit for the year ending March 2009 as a result of the global financial crisis but the government has yet to revise its initial forecast for a HK$7.5 billion deficit. (US$=HK$7.8)

HSBC Cuts 500 Jobs in Asia on Deteriorating Economies

By Cathy Chan

Nov. 17 (Bloomberg) -- HSBC Holdings Plc, Europe's largest bank by market value, said it has cut 500 jobs in Asia, citing deteriorating economic conditions and a ``cautious outlook.''

Some 90 percent of the losses will fall in Hong Kong. The layoffs represent about 2 percent of the bank's total workforce in the city, Hong Kong-based spokesman Gareth Hewett said today. Two months ago, HSBC fired another 1,100 workers in its global banking and markets division.

``Such decisions are always exceptionally difficult to make and are a result of organizational changes in a number of areas as well as the deteriorating economic conditions and our cautious outlook for 2009,'' Executive Director Peter Wong said in a letter to employees obtained by Bloomberg News.

Banks and brokerages worldwide have cut 158,000 jobs and announced $709 billion of writedowns and credit losses since the subprime-mortgage market collapsed last year. Morgan Stanley, Goldman Sachs Group Inc., Royal Bank of Scotland Group Plc and UBS AG have all announced redundancies in response to waning client demand.

HSBC's Asian cuts will affect all customer groups and some back office functions, Wong said. The bank will ``make every effort'' to seek redeployment opportunities for the affected employees, both within the bank or externally.

As the global financial crisis cut exports and spending has cooled, Hong Kong's economy entered its first recession since 2003 when the deadly severe acute respiratory syndrome, or SARS, epidemic struck. The Hong Kong government has been forced to lower its full-year growth forecast to between 3 percent and 3.5 percent.

HSBC, the first European bank to report losses on U.S. subprime assets, has set aside $42.3 billion for bad loans since the start of 2006. Still, business in Asia is resilient and the bank won't cut the dividend or seek government help to raise capital, Chief Executive Officer Michael Geoghegan said on Nov. 11 after the bank announced its third-quarter profit.

To contact the reporter on this story: Chia-Peck Wong in Hong Kong at cpwong@bloomberg.net
Last Updated: November 17, 2008 07:15 EST

source: http://www.bloomberg.com/apps/news?pid=20601080&sid=aXxO8tSd6mjo&refer=asia

Hong Kong's economy 'highly exposed' to global slowdown: IMF
8 December 2008
Agence France Presse

Hong Kong's economy is "highly exposed" to the crisis in global financial markets and is headed for a marked slowdown, the International Monetary Fund said in a report released Tuesday.

However, the Asian financial hub has made welcome moves to try to mitigate the effect of the global slowdown and its finances were in a solid position, the IMF said in a report on the territory's economy.

"As one of the most open economies in the world and with its focus on financial and trade services, Hong Kong... is highly exposed to the unfolding crisis in international financial markets and to the slowdown in the global economy," the IMF's review of the city's economy during 2008 said.

"There are now clear signs of economic deceleration."

"Following several years of impressive economic performance marked by robust growth and rising disposable incomes, the Hong Kong economy is headed for a marked slowdown," it added.

Despite the challenges, the report said contingency planning in recent years and a large fiscal surplus would help the city battle the fallout from the global slowdown.

The IMF welcomed government measures to stimulate domestic demand and preserve liquidity in the troubled financial sector.

It added the city should retain the peg between the Hong Kong and United States dollars, continue with planned infrastructure projects and encourage greater co-operation with mainland China.

However, it warned that the city's worsening pollution provided a threat to the city's future growth prospects.

The IMF warning comes after Hong Kong chief executive Donald Tsang on Monday said the city, which is already technically in recession, faced a further slowdown in 2009, but insisted it remained in a strong position.

Tsang also unveiled additional government measures to stimulate the economy, including boosting a loan scheme for small and medium-sized businesses to 100 billion Hong Kong dollars (12.8 billion US).

Hong Kong faces hefty deficits in next 2 yrs - PWC

HONG KONG, Dec 11 (Reuters) - Hong Kong faces record fiscal deficits over the next two years as the economic downturn and global financial crisis depress government revenues, PricewaterhouseCoopers said on Thursday.

The accountancy firm forecast the government would turn a record fiscal deficit of between HK$65.3 billion ($8.4 billion) and HK$72.3 billion, at least, for the year ending March 2009.

"We think that number is possibly optimistic, it's before any fiscal measures (in the budget)," Guy Ellis, a partner at PricewaterhouseCoopers, told a press lunch.

In April-October, the first seven months of the financial year, the government posted a HK$37.3 billion deficit, compared with an HK$18.2 billion surplus a year earlier.

Accountants Deloitte and Ernst and Young both forecast a 2008/09 fiscal deficit of around HK$80 billion, overturning a record HK$123.7 billion surplus in 2007/08.

Ellis said he expected corporate and income tax revenues to drop 20 percent in this fiscal year, while revenue from land sales and stamp duty would also decline, after the territory slipped into recession in the third quarter.

PWC sees government finances remaining in the red in 2009/10, forecasting a HK$68.9 billion deficit, compared with the government's estimate for a HK$49.2 billion surplus. Part of the deficit would be due to a drop in the government's investment income, which is invested in the Exchange Fund which is on course to make a loss for calendar 2008.

Investment income is calculated according to a six-year average and PWC forecast it would drop to HK$30 billion in 2009/10 from HK$42.4 billion in 2008/09.

A Reuters poll published on Thursday forecast the recession would last well into next year and projected economic growth of just 0.2 percent in 2009 and 3.5 percent in 2010.

That compares with average annual growth of 7.3 percent over the past four years.

The government has introduced a raft of fiscal measures this year, including one-off tax cuts and waivers on public housing rents and utility bills. Financial Secretary John Tsang has hinted he may introduce more measures in his budget on Feb. 25, potentially creating a much bigger 2008/09 deficit.

Hong Kong's government finances are highly volatile because of a narrow tax base -- only a third of wage earners pays income tax.

Persistent fiscal deficits would force the government to try and expand its revenue base, PricewaterhouseCoopers said, potentially reviving the idea of a goods and service tax, which the government proposed two years ago but was forced to abandon in the face of public opposition.

The government can withstand fiscal deficits for a few years, PWC said. It has healthy fiscal reserves totalling HK$455.6 billion at the end of October, and is the world's eighth-largest holder of foreign currency reserves. It also had a HK$416.9 billion accumulated surplus on its Exchange Fund at the end of October and the government has no significant debt.

However, fiscal reserves have dropped from HK$476.4 billion at the end of June and the accumulated surplus is down from HK$486.1 billion at the end of September. (US$=HK$7.8)

Morgan Stanley sees slow HK, China market recovery

SHANGHAI, Dec 19 (Reuters) - Morgan Stanley expects a long and tumultuous U-shaped bottom in China and Hong Kong stock markets as the economy continues to worsen despite government aid, its Asia strategist said on Friday.

Weakening exports and a shaky real estate market are leading to a capital spending recession that could drag economic growth down below 6 percent next year and cause companies' profits to drop, Jerry Lou told a financial conference in Shanghai. "It's the first time in a decade that I don't feel confident to see clearly the economic landscape in six month," Lou said.

"It's a virtue to be patient in buying stocks under such circumstances. China's economy is already huge and open, so recovery needs time."

The government has unveiled a 4 trillion yuan ($584 billion) economic stimulus package, cut interest rates, injected liquidity into the banking system, slashed taxes and encouraged lending to cushion a slowdown in China's economy.

However, Lou said the government could only prevent a crisis, not change the market's downtrend.

For example, the 4 trillion yuan package was far from enough to reinvigorate an economy where companies are increasingly reluctant to spend and banks are less willing to lend, he said.

The government's latest real estate policies aimed at boosting home purchases won't change peoples' expectations that property prices will fall further.

"No government has yet proved successful in rescuing the property market," Lou said. "The world's last asset bubble is now bursting."

Lou also said that low valuations may not justify investments now in Chinese stocks, where 87.6 percent of listed companies are highly cyclical. Profits at industries such as steel and banks would fall sharply during an economic downturn.

He suggested investors sell Internet Technology (IT), property and banking stocks, but could buy less cyclical stocks including consumer staples and telecommunications if valuations become attractive.

($1=6.85 Yuan)

HK's outward processing trade to China in Q3 2008

Dec 18 (Reuters) - Hong Kong's Census and Statistics Department issued the following data on Thursday on the estimated value of the territory's outward processing trade with China in third quarter of 2008.

Outward processing trade involves the shipment of raw materials to mainland China for manufacturing. Finished products are then shipped back to Hong Kong for re-export.

(rounded figures in billions of Hong Kong dollars and year-on-year percentage change in brackets):

3rd qtr 2008 2nd qtr 2008
Total exports to China 128.61 (+19.1) 130.82 (+ 8.1)
Domestic exports to China 3.67 (-25.1) 3.73 (-31.4)
Re-exports to China 124.94 (+21.2) 127.09 (+ 9.9)
Imports from China 208.01 (+ 8.5) 204.16 (- 1.3)

Hong Kong, China agree swaps, steps to boost economy

China plans to enact a series of landmark measures, including currency swaps and easing travel restrictions, to boost Hong Kong's economy and take another step toward allowing the yuan to trade more freely.

Economists said the moves would help increase the supply of yuan and potentially widen the yuan's acceptance in the region as the world's fourth largest economy gains in importance as a driver of regional growth.

This month China inked a $28 billion currency swap deal with South Korea on top of an existing $4 billion credit line.

Donald Tsang, Hong Kong's leader, said on Friday China and Hong Kong -- which Beijing views as a laboratory for globalizing the yuan -- will sign a currency swap agreement, and allow "eligible" companies to settle trade in yuan in the territory.

Tsang, on a trip to mainland China to seek succor with the city's economy tipping into a recession, told reporters Beijing had agreed in principle to pleas to jumpstart a city increasingly reliant on the world's fourth-largest economy.

"This is a very substantive advance in our efforts to overcome the current financial crisis, as well as strengthening Hong Kong as a global financial center and a servicing center," said Tsang, who holds the title of chief executive.

Those were part of 14 measures, including allowing more Chinese to visit Hong Kong and opening more of the mainland's services industry to the territory, to help Hong Kong overcome the global financial downturn.

While no details have been announced about the proposed currency swap, economists said this was a step in the right direction in Beijing's efforts to let the yuan become freely convertible eventually, though no timeframe had ever been set.

"This will be a first step" toward liberalizing the yuan regime, said Hang Seng Bank economist Irina Fan. "It's all part of the bigger picture of building Hong Kong as a settlement center for RMB and allowing RMB business outside of mainland China."

The swap arrangement though may take time to be implemented, Fan said.

"Especially after the financial tsunami, all the other countries -- including China -- will be very cautious in opening up their capital account," Fan said.

SHOT ON THE ARM

More immediately would be a boost to Hong Kong's economy, at least for the short term.

Hong Kong is unlikely to emerge from recession until the second half of next year, a Reuters poll showed last week, as rising job insecurity depresses consumption and exports contract amid global woes.

About half of Hong Kong's overseas visitors originate from China -- and in 2007 spending by Chinese visitors accounted for 20 percent of overall retail sales.

Since 1985, China has been Hong Kong's largest trading partner, and trade volume, stripping out re-exports, was $175.7 billion in 2007, according to DBS.

"Hong Kong companies weren't able to settle trades previously in Hong Kong and you had to be on the mainland. Now it's a lot easier," said Mitul Kotecha, head of global foreign exchange research, Calyon in Hong Kong.

"It simply helps local (Hong Kong) companies dealing in China and makes it less complicated. It makes access to yuan funding a lot easier."

Tsang also said the central government supports the plan of Chinese firms such as China Development Bank and China Investment Corp to develop or expand branch networks in Hong Kong. And Beijing will encourage its companies to list in Hong Kong.

"The motherland will always be Hong Kong's strong backstop," Chinese Premier Wen Jiabao said.

The planned swap agreement won't prompt Hong Kong to abandon its currency peg with the U.S. dollar, Calyon's Mitul said.

http://uk.reuters.com/article/gc06/idUKTRE4BI2TP20081219?pageNumber=3&virtualBrandChannel=0

^ I've set up a separate thread to track special arrangements between China and Hong Kong amidst the economic woes :

China Supports HK Amidst Economic Woes
http://www.skyscrapercity.com/showthread.php?t=770760

HK economy to contract 9.1pc this year, says Fitch
10 June 2009
The Standard

Fitch Ratings yesterday revised downward its forecast for Hong Kong's GDP, saying it would contract by 9.1 percent this year, much more severe than other forecasts that predicted a fall of between 3 percent and 7 percent.

Fitch's forecast was the lowest, with Moody's estimating a fall of 7 percent, and the government a drop of 6.5 percent. Credit Suisse and JPMorgan expect the economy to contract by 5 percent, while Morgan Stanley forecasts a 3.8 percent drop.

Chief Executive Donald Tsang Yam- kuen responded by saying Hong Kong's economy was fundamentally good and the financial sector was stable, and that he believed the stimulus plan would help the economy.

Citing the uncertain external outlook dragging on the export sector, Fitch Ratings said the Hong Kong economy would perform worse than its initial forecast of a 6.4 percent contraction.

"Hong Kong is an extremely open economy and uncertainty in the global economy would have a negative impact on its export business to have a further decline," explained James McCormack, managing director of Sovereign Ratings.

However, McCormack said Singapore and Taiwan would perform even worse.

"The worst [for the Hong Kong economy] has come but its growth will remain slow," he said.

Fitch estimates Hong Kong will have mild growth of 1.2 percent next year and has assigned an AA rating for the SAR's economic outlook.

McCormack said Hong Kong could benefit from the growing mainland economy, but there could be a negative impact from over-lending.

Despite China being seen as the first country likely to recover, its sovereign rating had not been lifted from "stable" because it was feared that the easing of lending could hurt the economy.

Daniel Poon, assistant chief economist at the Hong Kong Trade Development Council, said although exports suffered a decline of around 20 percent during the first four months of the year, there were signs of a slow recovery in the second half.

Merrill Lynch chief Asian economist TJ Bond said: "Hong Kong is likely to struggle against the medium-term headwind of weak global demand," but added: "We expect a sharp upturn in the second half of the year."

Merrill Lynch raised the city's economic growth forecast to 3.8 percent next year from 2.9 percent previously, due to the liquidity boom. It maintains its 2009 forecast of a 3.1 percent contraction.

Hong Kong seen pulling out of recession in Q2, still weak

HONG KONG, Aug 12 (Reuters) - Hong Kong probably followed Singapore and pulled out of recession in the second quarter as trade with mainland China improved, but its economy remained weak and consumer spending was depressed by a drop in tourism, a Reuters poll shows.

Economists expect the economy grew on a seasonally adjusted quarterly basis in April-June after declining for four quarters -- the city's longest recession since the Asian financial crisis in 1997/98.

Only a handful of respondents gave precise quarterly forecasts, but their median estimate was for a 1.1 percent increase in gross domestic product.

That would reverse a 4.3 percent quarter-on-quarter contraction in the first three months of this year, the economy's worst performance since such records began in 1990.

"The economy improved a bit in the second quarter, but investment remained weak. We won't see the effects of fiscal stimulus until the second half," said Cheng Cheng-Mount, an economist at Citigroup in Taipei.

The global downturn also sent its Asian neighbours Taiwan, Japan, Singapore and Thailand into recession. All are heavily reliant on exports, which collapsed after the global economy went into a tailspin last year.

In recent months there have been signs that the worst of the downturn may be over, with China's growth rebounding, but demand for Asian goods in key Western markets remains stubbornly weak.

Singapore surged back to growth in the second quarter, growing by an annualised 20.7 percent. However, officials in Singapore, Japan and South Korea this week all warned that the economic outlook was uncertain despite signs of improvement.

EXCESS LIQUIDITY

Hong Kong's exports picked up in the second quarter from the first quarter while a rebound in stock and property prices, and fewer layoffs have taken some pressure off consumers. Still, they remain cautious about spending and the city continues to feel the effects of the global downturn.

The poll forecast that GDP shrank 5 percent in the second quarter from a year earlier, compared with a 7.8 percent decline in the first quarter.

However, economists expect the government on Friday to upgrade its full-year GDP forecast to a smaller contraction than the 5.5-6.5 percent decline it last forecast.

Export volumes slumped by 16.3 percent in the first six months of this year, from a year earlier, but jumped 13 percent between the first and second quarters on a seasonally adjusted basis, helped by improving demand from China.

Rising asset prices meanwhile are creating a wealth effect as Hong Kong equities have rallied 80 percent since a global rebound in stocks began on March 9 while property prices have rebounded 20 percent this year, buoyed by low interest rates.

Asset prices are also benefiting from fiscal stimulus around the world, which is creating excess liquidity and prompting investors to put money in Hong Kong to gain exposure to China's rapid growth.

Tourism, however, has been hit hard by the global recession and H1N1 flu outbreak. Tourists account for 20-30 percent of Hong Kong's retail sales, and their numbers were down 3.4 percent in the first half of this year and 15 percent in June.

The government has introduced fiscal stimulus in the form of tax rebates and subsidised utility bills to help consumers. It has also brought forward key infrastructure projects to create thousands of jobs, although they will not begin to get under way until the second half of this year.

However, the unemployment rate, now at 5.4 percent -- its highest in nearly four years -- is rising much more slowly and some analysts say it is close to peaking.

Percentage forecasts for Hong Kong's second-quarter gross
domestic product (percentage change from a year earlier):
Bank of China (HK) -3.0
Daiwa Research Institute -4.0
Calyon -4.5
Bank of East Asia -4.9
Hang Seng Bank -5.0
Standard Chartered Bk -5.0
Citigroup -5.5
HSBC -5.6
ING Financial Mkts -5.8
Nomura -6.4
-----------------------------------
Median -5.0
First-quarter GDP -7.8

Hong Kong emerges from recession: government
14 August 2009
Agence France Presse

Hong Kong began to pull out of recession in the second quarter, government figures showed Friday, but officials warned against complacency.

Hong Kong's GDP grew 3.3 percent in the second quarter compared to the first three months, ending four consecutive quarters of contraction, the government said in a statement.

The rise was much stronger than the 1.7 percent quarter on quarter growth predicted by economists in a Dow Jones Newswires poll.

On a year-on-year basis, the financial hub's GDP fell 3.8 percent in second-quarter following a 7.8 percent fall in the first quarter, the figures showed.

Financial secretary John Tsang said Hong Kong people had shown resilience in the face of the global slowdown, and said government stimulus measures had also helped.

"I am glad that the strategy of the government to stabilise the financial system, support enterprises and preserve employment has yielded positive results," he said.

"(However) as the global economy is still subject to uncertainties, we cannot afford to be complacent."

The government raised its GDP forecast for this year to a 3.5-4.5 percent decline from its previous forecast of a 5.5-6-5 percent contraction. GDP grew 2.4 percent in 2008.

It also cut its forecast for inflation to a 0.5 percent rise, from its previous forecast of a 1 percent rise.

Two of the city's key sectors -- financial services and exports -- have been pummelled in the past year by the global slowdown, but there have been some indications that decline has slowed in recent months.

Hong Kong emerges from recession

http://img21.imageshack.us/img21/4113/462046170077800481.jpg
Exports and stock market gains boosted the economy

The economy of Hong Kong has emerged from recession, posting growth of 3.3% in the three months from April to June.

The seasonally adjusted figures were better than had been expected and the government has raised its forecast for growth in the whole year.

It followed the emergence from recession of Singapore, which grew an annualised 20.7% in the second quarter.

Hong Kong's growth was negative for four consecutive quarters, starting in the second quarter of 2008.

The growth of 3.3% compares with a revised contraction of 4.3% for the first three months of 2009.

The government was previously expecting the economy to contract by between 5.5% and 6.5% in the whole of 2009, and is now predicting a contraction of between 3.5% and 4.5%.

Economic growth is measured by gross domestic product (GDP).

"The GDP data was much better than we expected, partly because the exports were better and partly because of a pick-up in private consumption," said Paul Tang, chief economist at Bank of East Asia.

"Private consumption is being driven up by stock market gains and by the property sector, which started doing well."

Although there has been growth compared with the previous three months, the economy is still running below last year's levels, with a year-on-year contraction of 3.8%.

Private consumption in the second quarter rose 4% compared with the previous three months.

It was boosted by the stock market, which has rebounded 80% since early March, as well as property prices, which have risen 20% this year.

===
ANALYSIS
Vaudine England
By Vaudine England, BBC News, Hong Kong
Two things have made global financial meltdown obvious in Hong Kong: daily protests by people who bought what they thought were safe bonds but turned out to be worthless when Lehman Brothers collapsed, and the seemingly permanent sales in the malls.

The larger-than-usual number of ships moored in waters south of Hong Kong, or travelling light in and out of southern China's factory zones, has been another clue, as has the growing numbers of homeless and unemployed, some of them returning from jobs on the mainland.

But for the majority still in jobs, and without negative equity given the continued buoyancy of Hong Kong's property market, there has not been an obvious recessionary feeling.

A recent survey suggested Hong Kongers were spending - and saving - as much as usual. Hong Kong has always had an optimistic feeling about it.

http://news.bbc.co.uk/2/hi/business/8201056.stm

CPI falls more than expected
21 August 2009
The Standard

Hong Kong's composite consumer price index last month fell 1.5 percent, the biggest decline since April 2004, beating the market forecast of a drop of 1.4 percent.

Underlying inflation, excluding the government's relief measures, was minus 0.3 percent.

The government expects underlying inflation to remain slightly negative in the coming months as local price pressures continue to subside and import prices remain soft.

Food prices dropped 0.6 percent in July and the price of electricity, gas and water declined 42.3 percent, helped by the government subsidy of electricity charges, which was launched last September.

``We expect growth of the price index in the fourth quarter, as the base effect starts to dissipate and the electricity charge subsidy ends,'' said Standard Chartered regional economist Kelvin Lau Kin-hang.

``But it may not be a very dramatic change as there will still be a rates concession.'' He projected the inflation rate in the fourth quarter to be 0.5 percent to 1 percent.

Housing rentals could increase more. Residential rents grew 2.7 percent in July.

Standard Chartered forecasts that the composite price index for the whole year will grow 1 percent over 2008, while the government predicted a moderate growth of 0.5 percent. The inflation rate for 2008 was 2.4 percent.

Hong Kong July bankruptcies up 36 pct yr/yr

HONG KONG, Aug 21 (Reuters) - Bankruptcy petitions in Hong Kong surged 36 percent in July from the same month a year ago, but the jump was lower than an 89 percent year-on-year rise in June as the economy picked up, government data showed on Friday.

The territory recorded 1,475 bankruptcy petitions last month, down 9 percent from 1,619 in June and compared to 1,081 in July 2008.

Hong Kong's economy grew a seasonally adjusted 3.3 percent in the second quarter, and the Hong Kong government upgraded its full-year forecast to a 3.5-4.5 percent contraction from a previous forecast of a 5.5-6.5 percent decline.

IMF urges Hong Kong to do more to rein in asset prices

HONG KONG, Dec 3 (Reuters) - Hong Kong should step up tightening of bank lending to ease asset price inflation, the IMF said on Thursday, as the city's surging property prices have raised the risk of an asset bubble.

"With substantial liquidity in the system, there is a prospective risk that a credit-asset price cycle could take hold, ultimately leading to macroeconomic volatility," the International Monetary Fund said in the final version of an annual report on Hong Kong, published on Thursday.

The Hong Kong government has already warned of the risk of a property bubble as mass residential property prices have risen 30 percent this year and luxury property prices have surged by more than 40 percent.

In late October the Hong Kong Monetary Authority reduced the mortgage limit for luxury property to 60 percent from 70 percent for luxury property and capped the maximum loan amount for mass-market property at HK$12 million (US$1.5 million).

It has also told banks to be prudent in lending.

The IMF said Hong Kong authorities should go further to ease price pressure. It suggested they ensure that banks differentiate appropriately between loans to finance investment properties and by tightening eligibility criteria for mortgage insurance.

"In addition, the authorities could explore lowering the existing maximum debt servicing ratio for mortgages (which is currently set at between 50 and 60 percent) based upon the nature and size of the underlying loan," it said.

The surge in property prices is partially driven by wealthy mainland Chinese, who are snapping up luxury apartments, and by the view that Hong Kong interest rates will stay low for some time. Hong Kong tracks U.S. interest rates because its currency is pegged to the U.S. dollar.

Hong Kong equity prices have also rallied, rebounding 70 percent since March, amid keen demand for the Hong Kong-listed shares of mainland Chinese companies which are likely to benefit from the Chinese economy's return to robust growth and expectations that the Chinese currency could soon start to appreciate again. (US$=HK$7.8)

Lee Jong-Wha: "V-shaped" Asian recovery in 2010


Asia's developing countries should achieve an aggregate 6.6% GDP growth or more in 2010, says Professor Lee Jong-Wha, Chief Economist of the Asian Development Bank. On the sidelines of the Asian Financial Forum 2010 in Hong Kong, Professor Lee says his strong regional forecast contrasts with an expected U-shaped recovery globally.


xKd1kmdDM3Y

Hong Kong's economy 'to grow 5%' in 2010
Apartments and houses in Hong Kong
Property prices have surged over the past year

Hong Kong's economy will grow by between 4% and 5% this year, Financial Secretary John Tsang has said in his annual budget speech.

Gross domestic product (GDP) shrank by 2.7% in 2009, far less than the 3.3% contraction the territory's government had last predicted in November.

Hong Kong's economy, which relies on the financial sector and exports, was battered by the global economic crisis.

It emerged from recession in the second quarter of last year.

The economy grew by 2.3% quarter-on-quarter in the final three months of 2009, Mr Tsang said.

But he warned that major risks remained, including the possibility of a property bubble, as prices have risen sharply over the last year.

Luxury homes tax

Mr Tsang also announced that taxes on the most expensive homes would be raised for the first time since 1999.

Stamp duty on luxury homes - those costing more than $20m Hong Kong dollars ($2.57m; £1.67m) - will rise to 4.25%, from the current 3.75%.

A 29% surge in house prices - pumped up by buyers from mainland China - has raised fears that prices are rising too fast.

"While the local property market is still reasonably healthy, we must not lose sight of the increasing risk of a property bubble developing with the global economic recovery," Mr Tsang said.

However, the unexpected income from the increased home sales has boosted Hong Kong's public finances during the past financial year.
http://news.bbc.co.uk/2/hi/business/8533496.stm

Hong Kong and China are recovering big time in 2010 and a new bubble seems ready to start again (especially property which are again to the roof in HK); the buying opportunity was short.

HK's consumer prices up 2.8%
HONG KONG, March 22 (Xinhua) -- Hong Kong's consumer prices rose 2.8 percent in February over the same month last year, up on the 1 percent rise in January, the Census and Statistics Department said on Monday.

Netting out the effects of the government's one-off relief measures, the underlying inflation rate was 1.6 percent. The increase on January was due to the difference in the timing of the Chinese New Year, resulting in a surge in prices for package tours, fresh vegetables, meals bought away from home and poultry.

The department said overall price pressures have inched up but were still tame in early 2010. Import prices in overall terms are likely to stay soft in the near term, in the face of the excess capacity in the global economy.

Locally, the expansion in production capacity brought about by productivity growth and rising investment in recent quarters should help alleviate the pressure on local business costs. The inflation rate, whilst likely to climb up further as the economic revival takes hold, is likely to remain relatively modest in the near term. http://news.xinhuanet.com/english2010/china/2010-03/22/c_13220761.htm

Old article, but I suppose it is still relevant.

Guarding Against Complacency: Hong Kong
By Michael Schuman / Hong Kong Thursday, Jan. 21, 2010

Jennifer Falco had dreamed of a career in high finance, though she never expected that dream to take her to Hong Kong. The 28-year-old American quit her Wall Street job to get an M.B.A. in Milan, then headed to London. But with the financial crisis setting in, there was no full-time job to be had. After a short stint at Goldman Sachs, her boss gave her some valuable advice: "Go East, young woman." So Falco packed up and moved to Hong Kong, where she found an internship in equity finance at HSBC in September 2008 that later became a permanent position. "There's a lot of hiring now. Business is picking up," Falco says. "People are like, let's move to Asia and see what we can do."

With good reason. Hong Kong is benefiting at the expense of its Western rivals. While New York and London suffered through bank failures, controversial government bailouts and large-scale job losses, Hong Kong's stature as a capital of world finance has been enhanced by the lure of continued big deals and big money in a fast-rising Asia. Initial public offerings on Hong Kong's stock exchanges raked in over $31 billion in 2009 — more than the markets in New York and London combined, according to PricewaterhouseCoopers. Even more importantly, the attitude of Hong Kong's politicians and regulators towards its financiers is more supportive than in the West. There's no talk here of confiscatory penalties on bonuses or extra taxes, and no public hearings on the evil-doings of big finance. "There have never been economic and political conditions as favorable as they are today to take a much more advantaged position against New York and London, when they're down and we're up," says Benjamin Hung, CEO of Standard Chartered Bank in Hong Kong. "It's the chance of a lifetime."

Hong Kong's biggest edge is its special relationship with China. Shanghai may dominate the country's domestic financial industry, but Hong Kong is still China's premier international finance center. That crucial role helped Hong Kong piggyback on China's performance last year. Hong Kong's stock market was buoyed by Chinese firms tapping foreign investors, as well as international companies looking to list China-linked assets. American gaming giants Wynn Resorts and Las Vegas Sands completed IPOs of their Macau operations in Hong Kong, raising a combined $4.3 billion.

Now Hong Kong has a front-row seat for one of the next waves of financial globalization — the emergence of the developing world onto the stage of international finance. For the past decade, Beijing's leaders have looked first to Hong Kong when testing financial reform, seeking global expertise or reaching out to the international investor community. That policy looks set to continue. "Hong Kong," says Richard Vuylsteke, president of Hong Kong's American Chamber of Commerce, "is now the logical gateway for investment out of China."

The potential can be seen in the city's burgeoning business in China's currency, the renminbi (or RMB). Beijing's leaders are experimenting in Hong Kong with the liberalization of its tightly controlled currency, with the eventual goal of making it more widely used in international finance and trade. Hong Kong banks have amassed $8.4 billion in RMB-denominated deposits since 2004, after they became the first financial firms outside mainland China that Beijing allowed to offer RMB accounts, credit cards and other services. Last September, the government chose Hong Kong to offer its first international RMB-denominated sovereign bond. Tse Kwok-leung, head of economic research at the Bank of China in Hong Kong, says that the RMB business "is a new driver that gives new momentum to the Hong Kong financial sector going forward."

The world's bankers are taking notice. One of the key ways in which Hong Kong appears to be benefiting from its robust outlook is an inflow of expertise — the lifeblood of a finance center's competitiveness. Hung of Standard Chartered says that the bank was able to lure top-notch talent to Hong Kong due to the severe impact of the financial crisis on the West. While the Western money capitals have witnessed tens of thousands of job losses, the number of people employed in finance and insurance in Hong Kong dipped only slightly in late 2008, then began to recover last year. More importantly, Hong Kong, with low taxes, a pleasant lifestyle and strong business opportunities, is becoming more desirable for many than New York or London. Instead of just a brief résumé-building stop on the way to Wall Street or the City, bankers are beginning to consider the Asian hub as a base for long-term careers. "People see Hong Kong as a springboard to participate in the Asian growth story," says Kelly Driscoll, senior managing director at State Street Global Advisors in Hong Kong. "With the prospects here in Asia and Hong Kong, this is the place to be in coming years."

Credit Suisse, for example, has brought several senior bankers into its Hong Kong operations. But the city's most notable new resident is HSBC CEO Michael Geoghegan, who is relocating from the megabank's headquarters in London to Hong Kong. The move "further positions the Group for the shift in the world's center of economic gravity from west to east," HSBC said in a statement.

To keep capitalizing on that seismic shift, however, Hong Kong still has work to do. Though strong in equities and currencies, Hong Kong's finance industry is weaker in other important segments, such as bonds and commodities. And Hong Kong has to guard against counting on China alone, no matter how bright its outlook may be. For more than 150 years, Hong Kong has excelled at linking China to the outside. Now its financial industry must continue to find new ways to do so, if it wishes to lead the next developments in global finance. "Hong Kong cannot just look up to the north," says Hung of Standard Chartered. "It has to remain connected to the rest of the world."



http://www.time.com/time/specials/packages/article/0,28804,1955058_1955463_1955512,00.html

I guess the HK economy is still up-progressing, getting better n better

I guess the HK economy is still up-progressing, getting better n better

That's what I think too, the outlook is not pessimistic at all. I reckon the economy growth will be driven by the construction of all those state-of-the-art infrastructure in HK, such as HK-Macau-Zhuhai Bridge, High Speed Rail, Kai Tak development and WKCD.

Q2 GDP up 6.5%


Hong Kong's Gross Domestic Product rose 6.5% in the second quarter, following an 8% rise in the first quarter, marking the second quarter of above-trend growth.



Financial Secretary John Tsang said today that on a seasonally adjusted quarter-to-quarter comparison, GDP grew 1.4% in the second quarter.



Exports up

Total exports remained strong in the sustained global economic recovery. Total exports rose 20.1% in real terms over a year earlier. The Asian markets still outperformed other markets by a wide margin.



Total exports to the Mainland showed a double-digit year-on-year growth, even against a higher base of comparison in the second quarter. Exports to Taiwan, Japan, Korea and Singapore all had double-digit growth of 15% to 30%.



Services exports grew 16.9% over a year earlier. Inbound tourism continued to benefit from the increase in Mainland visitors and the recovery in regional markets.



On a seasonally adjusted quarter-to-quarter basis, exports of services grew 0.8% in real terms in the second quarter.



Domestic demand was resilient, with private consumption spending up 4.6% year-on-year in real terms due to general improvement in the overall economic situation and incomes.



Investment spending rose 15.2%. Further growth in public-sector works boosted construction activity, while machinery and equipment acquisition also maintained strong momentum.



Labour market

The underemployment situation improved, although the seasonally adjusted unemployment rate rose slightly, to 4.6% in the second quarter.



Inflationary pressure rose in the second quarter, as underlying consumer price inflation climbed to 1.5%. The forecast rate of the headline consumer price inflation remained unchanged at 2.3%.



Overall flat prices went up 1.5% after a rise of 6.5% in the first quarter of 2010. Transactions in the second quarter fell 2.6% over the previous quarter.



The global economy remained on track to recovery in the second quarter. However, the outlook for the external environment has become more uncertain as the sovereign debt problem in Europe, leading many European economies to introduce austerity measures, posed downside risks.



Given the growth momentum in the United States has weakened, Hong Kong's year-on-year export growth may experience some moderation in the second half of the year.

Hong Kong, Portugal tax treaty in force
(Shanghai Daily/Xinhua, June 4)


HONG KONG, June 4 (Xinhua) -- The agreement between Hong Kong and the Portuguese Republic for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income has come into force, according to the Hong Kong government news website Monday.

The agreement was signed in March 2011. It came into force on Sunday after the completion of domestic procedures on both sides. However, it will be in effect in Hong Kong on April 1, 2013, the time to assess tax issue.

http://www.shanghaidaily.com/article/article_xinhua.asp?id=74871

New package of policies for HK to increase economic ties
(Shanghai Daily/Xinhua, June 28)


CHINA will further promote the development of the offshore yuan market in Hong Kong as part of a new package of policies for city ahead of the 15th anniversary of its return to China.

The move comes ahead of President Hu Jintao's three-day visit to Hong Kong tomorrow to mark the anniversary.

The package covers increasing cooperation in overseas investment, education, tourism, science and technology between China's mainland and the city, as well as cooperation between Hong Kong and Guangdong Province, the central government said yesterday.

The Chinese government will encourage joint ventures between the Shanghai and Shenzhen stock exchanges and their Hong Kong counterpart, and allow the listing of exchange-traded funds in Hong Kong and the mainland.

In April, China more than tripled the quota for RMB Qualified Foreign Institutional Investors to 70 billion yuan (US$11 billion), a program that allows the Hong Kong units of financial companies to invest offshore yuan in the mainland's capital markets.

Meanwhile, market watchers said yuan-denominated bonds sold in Hong Kong may double to 300 billion yuan this year from 2011. The city has been a vital offshore yuan market and testing ground for China's external financial policies.

"The yuan has become the world's third-biggest trading currency," ANZ China said in a weekly report yesterday. "In the first four months, the value of cross-border trade settlement in yuan jumped 17 percent in Hong Kong from the same period of last year to 748 billion yuan. Meanwhile, yuan-backed foreign direct investment topped 75.4 billion yuan in the first five months, which is as much as 25 percent of total inbound investment in the period."

Moving forward to promote yuan exposure in the offshore markets, China will also improve the development of offshore yuan products in Hong Kong to support trade and investment settlement in the currency, facilitating long-term investment from the city in the mainland's capital markets.

To further boost economic and trade cooperation, the central government will sign another appendix agreement to the Closer Economic Partnership Arrangement with Hong Kong, and push firms from the mainland and the city to invest abroad together.

The link between Hong Kong and neighboring Guangdong Province also got a boost.

Hong Kong colleges are encouraged to set up educational institutions in the province. Youth centers will be set up in Guangzhou and Shenzhen to expand exchanges between students from both sides. Hong Kong financial institutions are allowed to set up consumer finance companies in the province, especially in Shenzhen, while a pilot financial reform program will be implemented in the Pearl River Delta region to promote cooperation between the city and the province.

China UnionPay yesterday said its accumulated yuan-backed bankcard transaction value has totaled nearly 330 billion yuan in Hong Kong by the end of last month.


http://www.shanghaidaily.com/nsp/Business/2012/06/28/New%2Bpackage%2Bof%2Bpolicies%2Bfor%2BHK%2Bto%2Bincrease%2Beconomic%2Bties/

Corporate Indonesia is most bullish; HK the least
(Yahoo! Finance/CNBC, July 10)

Companies in Indonesia, Southeast Asia's largest economy, are the most optimistic in Asia, with almost 9 out of 10 firms expecting their businesses to improve in the third quarter of the year, while Hong Kong, whose open economy is increasingly tied to mainland China, is the most pessimistic, according to a quarterly survey conducted by Standard Chartered.


Indonesia is less dependent on exports and more reliant on domestic demand compared to its peers elsewhere in Asia, and its middle-class, along with per-capita income, is growing, the British bank said in the survey. These themes shield the country from weakness in demand in U.S., Europe and China, Asia's biggest export markets.



"The overall (global) economy is still very much focused on defensive mode," Clive McDonnell, Head of Equity Strategy, Standard Chartered, told CNBC Asia "Squawk Box" on Wednesday. "Yes, Indonesia does export quite a bit of coal to India and China so there are nuances there. Indonesia stands out from its North Asian peers because it is domestic-demand focused."


more: http://finance.yahoo.com/news/corporate-indonesia-most-bullish-hong-033455755.html

Hong Kong and its trade ties with US thriving 15 years on
Thursday, June 28, 2012
Government Press Release

http://gia.info.gov.hk/general/201206/28/P201206280173_photo_1038861.JPG

Hong Kong Commissioner for Economic and Trade Affairs, USA, Mr Donald Tong, told a distinguished gathering today (June 27, New York time) that the ever-growing strong business ties between the US and Hong Kong since the handover had proved the continued appeal of Hong Kong that was grounded on the successful implementation of the "One Country, Two Systems" principle.

Speaking at a reception in New York to celebrate the 15th anniversary of the establishment of the Hong Kong Special Administrative Region, Mr Tong said the US exports to Hong Kong had grown by 140 per cent to over US$36 billion since 1997, making the city the 10th largest export destination for US products.

The US also tops the list of country with regional operations in Hong Kong, he said, with over 1,300 US companies which represents 70 percent more than that of 1997.

Mr Tong highlighted significant progress made by Hong Kong in various areas to showcase the spectacular economic growth in Hong Kong since 1997:

- HK's GDP has grown by 38 percent to over US$240 billion. Per capita GDP has risen by 30 percent to over US$34,000.

- Market capitalisation of the Hong Kong Stock Exchange, increased by over 400 percent to US$2.5 trillion.

- The number of non-local companies in the city has increased by three times to nearly 7,000.

- The cargo throughput handled by our airport has doubled, making Hong Kong the No.1 air cargo hub in the world.

- The container port, the third busiest in the world, is handling 50 percent more cargo traffic than it did 15 years ago.

On the economic and trade links with the Mainland, Mr Tong said they had further strengthened since 1997, making Hong Kong "the only place where the China advantage and the global advantage converge."

He said, "Hong Kong is now the largest external investor in the Mainland, accounting for over 40 percent of Mainland total realised direct investment. In return, Mainland entities provide the largest source of external investment in Hong Kong. Aside from our traditional gateway role to the burgeoning Mainland market, Hong Kong has also been given a vital role in assisting Mainland companies to go global."

In recent years, he said Hong Kong had emerged as a platform for RMB offshore business. At present, Hong Kong has the largest liquidity of RMB outside the Mainland of China. Last year, over 90 percent of total RMB trade settled with the Mainland was conducted through banks in Hong Kong.

Also speaking at the reception, Director of Hong Kong Economic and Trade Office (HKETO), New York, Miss Anita Chan, said that the bustling New York-Hong Kong trade ties and the many New York-based companies, such as luxury retailer Coach Inc. and renowned wine merchant Acker Merrall & Condit, setting up operations in the city since 1997 bore testimony to the strength and advantages of doing business in Hong Kong.

She said New York exported the most to Hong Kong among all 50 states last year. The total export volume jumped by four folds, making Hong Kong the second largest export destination for New York in 2011 compared with 1997 (when Hong Kong occupied the sixth place).

The reception, held by HKETO, New York, was well attended by around 300 leaders and influencers from business, political and academic sectors. Consul General of the People's Republic of China in New York, Mr Sun Guoxiang and Deputy Permanent Representative of the People's Republic of China to the United Nations, Ambassador Wang Min, graced the reception. There were video and photo shows to highlight Hong Kong's development and achievements in the last 15 years.

The Hong Kong Economic and Trade Office in Washington, DC hosted a reception on June 26 to mark the 15th anniversary. Chinese Ambassador to the US, Zhang Ye-sui, graced the reception. Around 300 guests from the Administration and Congress, as well as members of the think-tank, business, diplomatic and media communities were in attendance.

Japan's best "Kobe Beef" exported to HK
(China Economic, July 19)

Top-quality Japanese beef known as "Kobe Beef" was exported to Hong Kong for the first time on Wednesday by a beef marketing organization based in western Japanese city of Kobe.

Kobe Beef Marketing and Distribution Promotion Association said that a Cathay Pacific plane carrying about 1,300 kg of the beef took off from Kansai International Airport in Osaka Prefecture on Wednesday evening.


more: http://en.ce.cn/Industries/Consumen-Industries/201207/19/t20120719_23504353.shtml

HK's unemployment rate for Q2 stands at 3.2%
(China Daily, July 20)

HONG KONG -- Statistics released on Thursday showed that Hong Kong's seasonally adjusted unemployment rate stood at 3.2 percent from April to June, the same as that from March to May.

The underemployment rate also remained unchanged at 1.4 percent. According to the latest labor force statistics released by Hong Kong Census and Statistics Department on Thursday, total employment increased by around 8,800 from 3,662,600 to 3,671,400, and the labor force also increased by around 11,000 from 3,785,900 to 3,796,900.

The number of unemployed persons (not seasonally adjusted) increased by around 2,100 from 123,400 to 125,500. Over the same period, the number of underemployed persons also increased by around 600 from 54,000 to 54,600.

more: http://europe.chinadaily.com.cn/business/2012-07/20/content_15603113.htm



Taiwanese most financially literate group in Asia-Pacific: poll
(Want China Times/CNA, July 20)

Taiwanese people and New Zealanders are the most financially literate groups compared with people from 12 other areas in the Asia-Pacific region, a Master Card survey showed Thursday.

The index of financial literacy was based on a survey of consumers in 14 areas across the Asia-Pacific region and covered basic money management, financial planning and investment knowledge. Taiwan and New Zealand were tied at the top of the list, while Hong Kong, Australia and Singapore were second, followed by Malaysia.

In a similar poll in 2010, Taiwan was in fifth place. The poll showed that people in Taiwan, Hong Kong and China have the best knowledge of investments, understand their loan situations and have some advanced financial concepts such as investment diversification and inflation.


more: http://www.wantchinatimes.com/news-subclass-cnt.aspx?cid=1102&MainCatID=11&id=20120720000051

Li Ka-shing shifts assets to elder son
(Shanghai Daily, July 21)

LI Ka-shing, Hong Kong's richest man, has transferred a one-third stake in a family trust from son Richard to elder son Victor, moving to consolidate succession planning for an empire worth more than HK$850 billion (US$110 billion).

more: http://www.shanghaidaily.org/nsp/Business/2012/07/21/Li%2BKashing%2Bshifts%2Bassets%2Bto%2Belder%2Bson/

Li Ka-shing consortium to buy up UK gas gas supplier
(Want China Times, July 27)

Li Ka-shing, CEO and founder of Hong Kong's largest consortium Cheung Kong Holdings, has united his subsidiaries to try to acquire Wales & West Utilities, one of the UK's eight major gas suppliers.

The companies include Cheung Kong Holdings, Cheung Kong Infrastructure Holdings, Power Assets Holdings and the Li Ka Shing Foundation, together spending £645 million (US$998 million) for the deal to take a 100% stake in WWU.

more: http://www.wantchinatimes.com/news-subclass-cnt.aspx?cid=1206&MainCatID=12&id=20120727000063


HK welcomes Shanghai investors
(Shanghai Daily, July 31)

HONG Kong welcomes Shanghai companies of consumer goods and retailers to set up or expand their businesses in the special administrative region, and via it to tap the bigger overseas markets.

more: http://www.shanghaidaily.org/nsp/Business/2012/07/31/HK%2Bwelcomes%2BShanghai%2Binvestors/

Chinese vice premier urges mainland, HK companies to join hands for overseas investment
(Shanghai Daily, Aug. 22)

HONG KONG, Aug. 22 (Xinhua) -- Chinese Vice Premier Li Keqiang, in a congratulatory letter to an investment summit opened on Wednesday in Hong Kong, has urged companies from the Chinese mainland and Hong Kong to join hands in participating in global competition and expanding bigger development space.

"China's opening-up is entering a new phase. It is necessary for us, and we do have the capability, to speed up the pace of the 'go global' strategy," Li said in the letter, which was read out by Director of the Liaison Office of the Chinese Central People's Government in Hong Kong Peng Qinghua.

"It is my hope that mainland and Hong Kong companies should seize the new opportunities, brought forward by structural adjustment of the world economy and possible technological and industrial breakthroughs, play out respective virtues and create new cooperation models to join hands in participating in global competition and expanding bigger development space, so as to push ahead cooperation and exchange between the mainland and Hong Kong to a new level," Li said.

more: http://www.shanghaidaily.org/article/article_xinhua.asp?id=90407

MasterCard Worldwide Index of Consumer Confidence
(MasterCard Worldwide PR, Aug. 15)

Singapore, 15 August 2012 - Consumer confidence has picked up across Asia/Pacific markets as concerns about slow growth lessen in the region, according to the latest MasterCard Worldwide IndexTM of Consumer Confidence, released today.

The MasterCard Worldwide IndexTM of Consumer Confidence ('Index') is based on a survey conducted between 24 April 2012 and 10 June 2012 on 11,376 respondents aged 18-64 in 25 countries within Asia/Pacific, Middle East and Africa. This is the 39th survey of consumer confidence conducted since 1993. Now in its 20th year the Index is Asia/Pacific's most comprehensive and longest running consumer confidence survey. The Index score is calculated with zero as the most pessimistic, 100 as most optimistic and 50 as neutral. The Index and its accompanying reports do not represent MasterCard's financial performance. Consumers in the region remain most optimistic in the markets of India (82.1 Index points), China (77.4), Vietnam (77.2) and Thailand (75.8), while the least optimistic markets are Japan (23.6), Taiwan (25.7) and Australia (39.2).

Overall, nine out of 14 Asia/Pacific markets polled recorded positive improvements when compared to the second half of 2011 with a regional rise from 52.1 Index points in the second half of 2011 to 57.2 index points in the first half of 2012. The last MasterCard Index of Consumer Confidence showed an improvement in sentiment for only 5 out of the 14 markets. For the region as a whole increases were recorded across all key indicators of regular income (from 64.5 to 71.9 Index points), employment (49.3 to 54.0 Index points), economy (49.3 to 51.8 Index points), quality of life (49.6 to 51.7 Index points) and stock market (47.9 to 56.5 Index points).

complete report: http://www.masterintelligence.com/ViewRegionReport.jsp?hidReportTypeId=2&hidRegionId=1&hidUserId=null

For those wondering why the above article got posted here even though it didn't mention Hong Kong, the link had more info :

Hong Kong, which dropped 38.7 Index points in the last Index, improved by 21.9 Index points to lead the region, followed closely by South Korea (up 21.4 Index points), Malaysia (up 17.1 Index points) and New Zealand (up 15.3 Index points).