Date
20 October 2017

HKEJ Today: Highlights

Following is a summary of major news and comments in the Hong Kong Economic Journal, the parent publication of EJ Insight, on Monday, Nov. 4:

TOP STORIES

HSBC 3Q net profit seen down 3 to 15 percent

HSBC Holdings Plc. (00005.HK) is expected to report a 3-15 percent decline in its net profit for the third quarter compared with the previous three months, analysts said. With lower revenue seen from the global banking and markets division amid a weak business environment, they forecast the lender’s net profit for the period to come in at about US$3.33 billion to US$4.05 billion, with an estimated 20 percent to 23 percent fall in provisions for non-performing loans. They also anticipate another US$100 million loss to be booked for fair values in debts, restructuring expenses, hedging and write-offs related to certain lawsuits. The lender will release its third quarter results Monday.

Shanghai Stock Exchange cleared to lure business in Hong Kong

Hong Kong’s Securities and Futures Commission has given the go-ahead to the Shanghai Stock Exchange to promote its automated trading services platform in the city, according to information posted on the local securities watchdog’s website. Market observers say the approval can help pave the way for the mainland bourse operator to lure foreign firms for listing on the proposed international board in Shanghai, possibly competing directly with the Hong Kong Exchanges and Clearing Ltd. (00388.HK). They expect the Shanghai international board, which has been on the agenda for five years, to be launched in two to three years, pushing the Hong Kong bourse to review its strategy to keep up with the competition.

ECONOMY AND BUSINESS

Securitization of local government debts may be on agenda at top CPC meeting

Interview: Chinese authorities may allow local governments to securitize their debts and set up asset management companies to deal with their debt issues, said Zhu Haibin {朱海斌}, chief economist for China at JPMorgan Chase & Co. The measure, which is aimed at resolving the local government debt problem in the country, is likely to be discussed during the third plenum of the Communist Party’s 18th central committee that will kick off later this week. Urbanization, domestic consumption and private investment are also expected to be among top priorities on the agenda, Zhu said.

Cinda Asset Management close to listing hearing in Hong Kong

China Cinda Asset Management Co. Ltd. is said to proceed with its listing hearing in Hong Kong as early as this week for a share sale worth up to US$2.5 billion by the end of this month, sources told HKEJ. The asset management firm was established, along with some other entities, to clean up the bad debts of the four largest state-owned banks, namely Industrial and Commercial Bank of China Ltd. (01398.HK), China Construction Bank Corp. (00939.HK), Bank of China Ltd. (03988.HK), and Agricultural Bank of China Ltd. (01288.HK), after the Asian Financial Crisis in the late 1990s. Institutional investors from certain fund houses, however, have been worried about Cinda’s business model, saying they prefer not to invest in the firm unless it is priced at a price to book ratio of 0.5 to 0.6 times.

Huirong mulls expansion plan in Jiangsu next year

Interview: China Huirong Financial Holdings Ltd. (01290.HK) is planning to expand its business to Wuxi, Changzhou and Nantong in Jiangsu province next year, said chief executive Wu Min {吳敏}. The pawn shop operator, which is based in Suzhou, is tapping the rising financing demand from micro to medium-sized enterprises, Wu said, adding that more supportive measures to such enterprises are expected to be pledged by the government at the upcoming top political meeting this month. The firm has been requiring full coverage with collateral in form of real estate and other property rights and aims to further tighten control over lending risks, Wu added.

POLITICS

Nomination body for CE election should be trimmed to 160, Johannes Chan says

A leading legal expert has suggested that the size of the nomination committee for the chief executive election should be drastically reduced to 160 from the current 1,200. University of Hong Kong law professor Johannes Chan said the 160-member body should be mainly comprised of legislators, district council members and representatives from some sectors including civil service. Chan said any candidate who secures support from one-eighth of the nomination committee, or 20 members, should be eligible to run in the universal suffrage election. He cautioned against insistence on the idea of civil nomination.

Free TV market cannot sustain three new operators, W K Lam says

A top government adviser said at least one free-to-air television operator will close down if three new licenses were issued. Convenor of the Executive Council, Lam Woon-kwong, said the finding was contained in a consultancy report they had studied before deciding to issue only two new licenses, not all three who had submitted applications. Running a free-to-air television station is different from running a Hong Kong-style restaurant, he said, adding that they opted for prudence in the issue of new licenses.

EDITORIAL

China A-share market needs an overhaul to boost confidence

International investor Jim Rogers expressed a positive view on China’s A shares at the weekend, saying he began and would increase his portfolio in the market. Also on Saturday, chairman of China Securities Regulatory Commission Xiao Gang said corporate governance of listed companies would be improved. But in view of the present structure and operation of the mainland stock market, investor confidence in A-share market would only improve if there is a drastic overhaul of the system and structure.

COMMENTS

China to focus on economic fruits sharing in next reform stage

The task of “making a bigger pie” for a group of people to get rich first in China has been solved after the country undertook reform in the past 30 years. In the next stage of reform, China should continue to enlarge the pie but also focus on sharing of economic fruits and affluence for all people, Beijing-based commentator Ren Huiwen wrote. Communist Party General Secretary Xi Jinping has personally ordered the speeding up of construction of affordable housing at a Politburo meeting last week. It represented a sharp reminder by Xi to party cadres for them take a pragmatic approach in addressing the pressing needs of the people.

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