Following is a summary of major news and comments in the Hong Kong Economic Journal, the parent publication of EJ Insight, on Tuesday, Oct. 22:
China Huirong, Cabbeen lock up HK$20.6 billion in total in Hong Kong share sales
China Huirong Financial Holdings Ltd. (01290.HK) and Cabbeen Fashion Ltd. (02030.HK) have locked up a combined HK$20.6 billion (US$2.66 billion) in their Hong Kong share sales. The two offerings were oversubscribed 243 times and 11 times respectively, sources said. Given an array of new listings ahead that includes Bank of Chongqing Co. Ltd. and Huishang Bank Corp. Ltd. of a fundraising size totaling more than HK$16 billion, the exchange rate of the Hong Kong dollar has surged to a nine-month high on Monday. Currency gurus expect a cumulative HK$100 billion worth of funds will be driven into the market in the short term. However, the uptrend of the Hong Kong dollar exchange rate is unlikely to last long after this wave of new initial public offerings.
Hutchison Whampoa may sell Watson shares in both Hong Kong, London
Hutchison Whampoa Ltd. (00013.HK) is said to be considering three possibilities in selling its shares in its retail arm A. S. Watson Group. The options include Hong Kong, London and a dual-listing in both markets, the Wall Street Journal reported, citing sources from investment banks. The potential share sales may raise as much as US$10 billion for business expansion in mainland China, potentially the biggest initial public offering this year in terms of fundraising size. UBS A.G. has valued the group at HK$206 billion, or 14 times price to EBITDA multiple, which includes its supermarket chain ParknShop that is valued at HK$19 billion.
ECONOMY AND BUSINESS
Physical A-share ETFs boost transaction of synthetic counterparts, iShares says
Interview: Physical A-share exchange-traded funds have actually boosted transaction volume of those synthetic ones, said Jane Leung, managing director at BlackRock Inc. and head of iShares Asia Pacific. There is no evidence showing any mutual exclusivity between the two, given continuous growth in the trading volume, the size of assets and the number of units issued of iShares FTSE A50 China Index ETF (02823.HK) despite the launch of physical ETFs in the market, Leung said, adding that certain institutional investors may have invested in both forms of ETFs for hedging. The China Index ETFs have seen the asset size expand to a record high of US$8.4 billion in February, with transaction volume topping the 124 ETFs listed in Hong Kong.
BoCom said to have bought prime offices in Shanghai from Cheung Kong
Bank of Communications Co. Ltd. (03328.HK) is said to have purchased from Cheung Kong Holdings Ltd. (00001.HK) and Hutchison Whampoa Ltd. (00013.HK) a commercial property development located at Luijiazui Ring Road in the Pudong New District in Shanghai for US$1.16 billion, the Wall Street Journal reported, citing sources. The property is due to be completed by next summer. The transaction reflects increasing demand for prime offices in Shanghai. Singapore’s Ascendas Group has recently sold the Cross Tower to Hong Kong private equity fund Gaw Capital for HK$2.1 billion.
Wu slams govt for ‘killing’ property sector with curbs
Hopewell Holding Ltd. (00054.HK) chairman Gordon Wu has accused the Hong Kong government of “killing” the real estate sector with the property curbs that have been put in place for a year. Wu said the moves have dampened developers’ appetite for refilling their landbanks but were unable to tackle the root of the problem which is an extremely low interest rate environment. Wu also warned of the potential threats from the newly formed free-trade zone in Shanghai, saying the zone could significantly boost its competitiveness and impact Hong Kong in 10 to 20 years.
Pressure for disclosure of information about TV license grows
Two top advisors to the Hong Kong government, Fanny Law and Starry Li, have called for the release of more information about the decision to reject the application of Hong Kong Television Networks for a free-to-air license following the massive rally on Sunday. Law, a member of the Executive Council, said the government should act soon to stop the public outcry from prolonging. A group of pan-democratic legislators plan to make a joint bid to invoke special powers for the Legislative Council to demand more information about the decision from the government.
Occupy Central organizers accused of colluding with pro-independence leaders in Taiwan
China’s semi-official Global Times yesterday launched an attack against three core organizers of the Occupy Central campaign in Hong Kong for colluding with pro-independence activists in Taiwan. The paper alleged in a commentary that the three pan-democrats have become “puppets of foreign forces.” It referred to the meeting between Occupy Central organizers Reverend Chu Yiu-ming and Professor Joseph Cheng and unionist legislator Lee Cheuk-yan and former Democratic Progressive Party chairman Shih Ming Tak during their recent visit in Taiwan.
Strong renminbi weakens Hong Kong purchasing power, puts pressure on peg
China’s central bank set the renminbi’s daily midpoint against the US dollar at 6.1352 yesterday, a record high since the peg between the Chinese currency and US dollar ended in 2005. The possibility of government intervention to ease the uptrend should not be ruled out. The strengthening of RMB will undercut the purchasing power of Hong Kong families as imported inflation will rise. The US dollar peg policy in Hong Kong will face increasing pressure for a change.
Rejection of Wong’s TV license bid boils down to control, Lam says
The financial strengths and independence of Hong Kong Television Networks chairman Ricky Wong that could mean less baggage for him in running free-to-air television service may be the reason behind his failure to get a government license, HKEJ founder Lam Hang-chi wrote. Lam said the authorities may find Wong difficult to control as he did not have a lot of other business interests. Meanwhile, the way Chief Executive Leung Chun-ying handled the matter was a total disappointment. His popularity will head south, Lam said.
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