Date
18 August 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 Tuesday, Dec. 31:

TOP STORIES

Analysts remain upbeat on Japanese stocks next year

Japanese stock markets are expected to remain buoyant next year on improving economic prospects given the deflation-countering measures under the so-called Abenomics policies of the country’s Prime Minister Shinzo Abe, analysts said. However, they warned that the launch of consumption tax in April and fluctuations in exchange rate may adversely affect potential gains in related counters, although the benchmark Nikkei stock index is likely to top the 20,000 levels from the Monday close of 16,291 points, after a record rise of 57 percent this year, the biggest since 1972. Medical and healthcare plays are among top picks for next year.

More internet, technology firms seen listed in Hong Kong in 2014

Interview: More companies from the technology and internet industries will list in Hong Kong next year, said Computershare Hong Kong Investor Services Ltd. managing director Pamela Chung. Other players from financial, real estate and consumption sectors will also take the lead in initial public offering activities, Chung said. However, given a turnaround in overseas stock markets, such as those in Japan, Europe and the United States, foreign company listings can hardly become a trend in the city next year, she said. But foreign capital will continue to look for investment opportunities in Chinese company listings in Hong Kong, Chung added.

BUSINESS AND ECONOMY

Local govt debts jump 67 percent to 17.89 trillion yuan

Local government debt in mainland China has surged 67 percent in two-and-a-half years to a total of 17.89 trillion yuan (US$2.95 trillion) as of the end of June this year, compared with 10.71 trillion yuan at the end of 2010, the National Audit Office said. The proportion that is directly liable to the local governments has grown at an annualized pace of 19.97 percent. Economists said the debt expansion rate is alarming and warned that the country’s growth may be at stake if the government decides to slow down the pace of infrastructure construction in a bid to reduce the speed in incurring new debts.

Hong Kong Telecom to refine financial structure after CSL acquisition, analysts say

Hong Kong Telecom Ltd. (06823) may increase its payouts to holders of its share stapled units amid potential synergy that is likely to be unleashed after it completes the acquisition of CSL and refines its financing structure, analysts said. The operational expenses of HKT are expected to reduce by 10 to 15 percent, with long-term financing costs below the existing rate of 5.6 percent. CSL has generated HK$760 million (HK$98 million) adjusted cash flow for the year ended June, with a net profit of HK$953 million and an EBITDA of HK$3.32 billion.

Hong Kong Monetary Authority speeds up collection of 2003 HK$1,000 notes

The Hong Kong Monetary Authority is coordinating efforts with the banking sector to hasten the pace of phasing out of banknotes of HK$1,000 face value printed in 2003 in a bid to tackle the problem of counterfeits found in the city, an official said in a radio program. The authority called on people to exchange their 2003 notes for 2010 ones at banks. As of Monday night, a total of sixty fake 2003 edition HK$1,000 banknotes have been found.

POLITICS

Unreasonable restrictions in universal suffrage may be overruled by court, Chan says

Interview: The Chinese and Hong Kong governments face the risk of defeat in judicial review if the universal suffrage system for the 2017 chief executive election contains unreasonable restrictions that go against universal covenant on human rights. This is the view of University of Hong Kong Dean of Law Johannes Chan. He urged the two governments to assess the risk of judicial review in the event of a huge number of blank ballots in the election. Chan said the universal human rights charter has stipulated people’s right for election.

Beijing’s attempt to influence Legco election understandable, Lau says

A former top adviser to the Hong Kong government has argued that Beijing’s attempt to influence results of the city’s Legislative Council election was in line with the policy of “one country, two systems”. Lau Siu-kai, who is vice-chairman of the newly-established All-China Hong Kong and Macau Studies Association, said Beijing has an interest in ensuring that the city’s legislature was not being controlled by members who are in confrontation with Beijing. Lau also said Beijing has become increasingly concerned about the relationship between the Hong Kong government and the pro-establishment camp.

EDITORIAL

Property market poses more risk to local government debt problem

China’s local government debt amounted to 17.89 trillion yuan (US$2.95 trillion), including 10.89 trillion yuan of direct debt, which is far below external prediction. Still, banks have provided most of the local debts and the repayment is mainly tied to revenue from land sales. Therefore, local government debts are indeed saddled together with the property market. If property bubbles burst, the ability of local government to repay debts will be in question. The risk related to local governments cannot be underestimated.

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