16 July 2019

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 Friday, Dec. 20:


Hong Kong interest rates may surge before US raises Fed funds rate, Tsang warns

Interest rates in Hong Kong may surge well before the United States Federal Reserve increases its key rate, the city’s Financial Secretary John Tsang warned after the US central bank unveiled plans to start tapering its bond purchases in January. Given that a large amount of money has come into Hong Kong since the US bond purchases started as part of the Fed’s quantitative easing measures, such funds may flow out of the city soon, Tsang said, adding that homeowners should be alert to interest rate risks. Separately, Secretary for Financial Services and The Treasury Chan Ka-keung said it is unlikely that Hong Kong would relax its property curbs any time soon despite potential capital outflows.

Deeper China reform to bolster Hong Kong as renminbi offshore center

The central government’s pledge of speeding up the liberalization of the services sector can help Hong Kong fully utilize its competitive advantage and realize its potential as an offshore renminbi center, said Liu Shijin {劉世錦}, deputy director of the Development Research Center of the State Council. China’s services industry liberalization will be aided by the proposed further opening-up of the country’s capital markets and the convertibility of the Chinese currency in certain financial transactions, as endorsed by leaders at a top political meeting in Beijing last month, Liu said.

Renminbi may appreciate 2 percent next year, economist says

Interview: Ma Jun {馬駿}, chief economist for Greater China at Deutsche Bank A.G., said the renminbi may appreciate 2 percent next year, considering the outlook for the Chinese economy. Despite a vow to hasten financial reform and renminbi internationalization, the exchange rate cannot be boosted to a great extent in the short run, he said. The Shanghai pilot free-trade zone cannot dramatically increase the use of the Chinese currency at the international level, Ma noted.


Swire Properties buys commercial building in key move

Swire Properties Ltd. (01972.HK) has entered into an agreement to purchase DCH Commercial Centre from CITIC Pacific Ltd. (00267.HK) for HK$3.9 billion (US$502.99 million), heralding the prospects of further expansion of the reconstruction plan of the second phase of TaiKoo Place. The acquisition target occupied a gross floor area of about 389,000 square feet in eastern Hong Kong Island, where Swire Properties has a core portfolio. The transaction is expected to be completed in January.

Shanghai free-trade zone to find it difficult to replace Hong Kong, Ma says

The Shanghai pilot free-trade zone can hardly replace Hong Kong, given its deficiencies in traffic network and legal system, said Ma Jun {馬駿}, chief economist for Greater China at Deutsche Bank A.G. However, the zone may match with Hong Kong in terms of competitiveness over the long run, Ma said, adding that it may have a negative impact on Hong Kong’s renminbi business, unless the source of renminbi funds in the zone is coming from the mainland rather than overseas.


New Beijing demand on CE’s duty visit may erode HK autonomy, academics say

China’s top official in charge of Hong Kong affairs Wang Guangya said the annual duty visit of the city’s Chief Executive should be “formalized”. Following a meeting with Leung Chun-ying, who ended his duty visit yesterday, Wang said the Hong Kong chief should not just report the achievements of the past year, but also the deficiencies. Leung said he has already given a “full, comprehensive, objective and factual” work report. Academics fear the new demand from Beijing would erode the city’s high degree of autonomy.

Anson Chan plans to join New Year democracy march

Former Hong Kong chief secretary Anson Chan said she will join the January 1 march to show her support for universal suffrage. She said the turnout of the rally on the New Year’s Day would be seen as a barometer of public support for democracy. She called on people to join the rally to give backing to the idea of civic nomination for electing the chief executive through universal suffrage in 2017. Chan said she fears that Beijing and the pro-establishment camp in the city have already set too many restrictions over the election.


Tapering outflows looks inevitable

The US Federal Reserve’s decision to cut its bond-purchases by US10 billion beginning next year marks a small step towards putting an end to the quantitative easing program. The most difficult step ahead is ensuring a smooth end of the easy-money policy by the incoming Fed chairwoman Janet Yellen while lowering unemployment and keeping price stable. The formal ending of QE will usher changes in the flows and preferences of risks in international capital funds. As the US dollar gets stronger, the trend of outflow of funds from Asia looks inevitable.

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