Following is a summary of major news and comments in the Hong Kong Economic Journal, the parent publication of EJ Insight, on Thursday, Jan. 2:
Hang Seng Index seen rising as much as 16 percent in 2014
The Hong Kong stock market’s benchmark Hang Seng Index may stand in the range of 24,000 to 27,000 points by the end of 2014, given potential support and favorable sentiment on the back of reforms in the mainland, according to estimates by 10 major brokerages. The figures represent a potential rise of as much as 16 percent from the closing level of 23,306 points as of the last trading day of 2013. However, analysts warned that the market could see some volatility in February as debt ceiling woes in the United States may re-emerge.
Mainland stock markets expected to be volatile this year
Stock markets in the mainland are likely to be volatile this year as authorities resume approvals of initial public offerings, with liquidity also expected to remain tight amid bond purchase tapering in the United States. Mainland brokerages forecast that the Shanghai Composite Index will end the year in a range of 1,900 to 2,600 points. The highest estimate translates to a gain of 23 percent compared with the closing level of 2,115 points on the last trading day of 2013. However, about 70 percent of surveyed retail investors believe the benchmark index will not surpass 2,500 points while over 30 percent said it may drop below 1,500 levels, according to Chinese internet company NetEase Inc.
ECONOMY AND BUSINESS
HSI, CEI may benefit from capital flow from US
Interview: Hong Kong’s Hang Seng Index and the China Enterprises Index could benefit from potential capital inflow from the United States through the Exchange Traded Fund market as investors cash in gains after the US stock markets surged vigorously last year, said Victoria Mio, co-head of Asia Pacific equities and chief investment officer for China at Robeco Group. Insurance, banking and property counters are among top picks. Meanwhile, stocks in alternative energy sector, and medical and technology related plays are expected to advance continuously in the coming three to five years.
HKT acquisition of CSL unlikely to be cleared soon by regulator
The Communications Authority in Hong Kong is unlikely to complete its review soon on the proposed acquisition of CSL by HKT Trust (06823.HK) amid complex anti-trust issues, sources told HKEJ. The authority has hired an independent consultant to study the effect of the HK$18.9 billion acquisition, which involves a large number of end users, on the telecommunications market in the city. The acquisition will reduce the number of major service providers in the city to four. The authority has launched a month of public consultation and will take reference to overseas cases in making the decision, the sources said.
SFC refuses to endorse code of conduct set by fund manager groups
The Securities and Futures Commission in Hong Kong has refused to endorse a set of code of conduct guidelines prepared by five professional groups in the fund industry that aim to help market players comply with new regulations on the operation of electronic transaction systems, fund managers said. The watchdog requires not only the sell side, represented by brokerages, but also the buy side, represented by fund managers, to be liable to the due diligence of their systems. Sources close to the watchdog said the industry-driven code of conduct, which provides a check-box framework for market players to follow, basically violates the authority’s disclosure-based principle.
Hong Kong retail sales outlook likely to remain gloomy
Retail sales in Hong Kong may remain sluggish in 2014, with certain months potentially seeing only single-digit growth, economists said. The gloomy prospect is partly due to a slower increase in the number of tourists from the mainland, they said, adding that demand for gold is expected to drop given a fall in the price of the metal. Meanwhile, demand for luxury goods, such as precious watches and jewelry that account for one fourth of the total retail sales, is also expected to be lackluster.
‘Referendum’ vote shows support for more public voices in 2017 CE election
An overwhelming majority of some 62,000 people who voted online or at a polling station at Victoria Park in a “civil referendum” in Hong Kong yesterday supported greater public participation in the 2017 chief executive election. Results of one of the three questions asked show 94 percent voted favorably for having civil nomination element in the 2017 election. Academics said the results show the vote organized by the Occupy Central movement was a success. But the findings would also put pressure on the moderate pan-democrats in their stance on political reform.
New Year’s Day march turnout below expectation
More than 30,000 people joined the New Year’s Day pro-democracy march in Hong Kong, organizers said. Police put the number of participants at 11,000. The Civil Human Rights Front admitted the turnout was lower than expected. Last year, the group said 130,000 people joined the march. A spokesman attributed the low turnout this year to the fact the public consultation over political reform has just begun. He added that they would contemplate different ideas to attract more people to participate in pro-democracy activities.
China Dec PMI growth slowdown signals GDP growth risk in 2014
China’s December purchasing managers’ index stood at 51, representing the first fall in six months and a reversal of the trend of economic expansion. In additional to seasonal factors, the slowdown in PMI suggests the effect of the economic stimulus has become diluted and that key areas of growth are facing constraints. They include investment, exports and consumption. The risk of decline in economic growth in 2014 should not be ignored.
China-Japan ties at a ‘very dangerous’ level after Abe shrine visit
Following the visit of Japanese Prime Minister Shinzo Abe to the Yasukuni Shrine last month, the China-Japan relationship has reached a “very dangerous” stage, HKEJ founder Lam Hang-chi wrote. Accidental conflicts or deliberate attempts by extremists to provoke disputes between the two countries could cause big trouble. It appears that Beijing holds the view that the United States would not enter into a war with China over territorial disputes. But the possibility of the US taking the risk of a conflict with China to seek massive war compensation to help ease its debt burden cannot be ruled out.
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