Following is a summary of major news and comments in the Hong Kong Economic Journal, the parent publication of EJ Insight, on Monday, Jan. 13:
Asian institutions constitute 20 percent funds in ESM bonds
Interview: Twenty percent of investment in bonds issued under the European Stability Mechanism (ESM) that is used for funding indebted European nations, is from Asia, where investors in general are more optimistic toward the euro compared to those in the United States and the United Kingdom, said European Financial Stability Facility (EFSF) chief executive and ESM managing director Klaus Regling. The agency is considering issuing bonds denominated in dollar or Asian currencies in future, as such currencies can draw even more interest from Asian institutional investors, including central banks, sovereign funds and pension funds. The People’s Bank of China and the Hong Kong Monetary Authority are among the potential investors, Regling added.
Mainland IPO reforms to remain a challenge this year, observers say
The China Securities Regulatory Commission has resumed, after more than a year of suspension, approvals of initial public offerings in the mainland, heralding a new page in reforms of the IPO market. Observers, however, noted that the reforms have just begun and this year is going to be another challenging year to the reforms, as market participants, intermediaries and prospective listing candidates need time to familiarize with the new registration regime and adapt to a set of new rules and code of conduct, while investors have to change their mindset in investing. The issues related to high fundraising size, high offering price and high price-to-earnings ratio are unlikely to be resolved soon, they said.
ECONOMY and BUSINESS
New IPOs in mainland expected to drag stock markets
The mammoth number of new listings in the mainland is expected to further squeeze liquidity and drag the overall performance of the stock markets, given an uncertain economic outlook, analysts said. They anticipate that mainland shares will continue to be kept in check in general in the first half of this year. Since the resumption of initial public offerings in early December last year, the Shanghai Composite Index has dropped 8.8 percent. About 1.42 trillion yuan (US$234.71 billion) has disappeared in A-share market capitalization, according to Chinese media reports.
Chow Tai Fook taps new concept flagship for sales growth in mainland
Chow Tai Fook Jewellery Group Ltd. (01929.HK) has invested HK$10 million (US$1.29 million) in its first experience flagship store in the mainland that is aimed to integrate the jewelry maker’s online and traditional retail channels. Another six such flagship outlets will be opened later this year in the country, tapping the increasing number and wealth of the middle class, which is expected to constitute 70 percent of the overall population in five to six years, compared with the current 35 percent. The trend is likely to drive jewelry sales in the market to grow at an annual compound rate of about 14 to 16 percent, the company said, adding that it is also planning to introduce such a concept to Hong Kong.
DBS Bank Hong Kong eyes more business from non-SOEs
Interview: Economic reform in the mainland that encourages non state-owned enterprises (non-SOEs) to expand their presence in previously restricted markets is likely to boost the corporate banking division business, said Ginger Cheng, managing director and large Hong Kong & China corporates head at DBS Bank’s Hong Kong branch. The branch expects contribution from mainland companies to its corporate banking division to grow to 70 percent from about two thirds currently, with a large part driven by non state-owned firms, Cheng said. However, Cheng warned that banking peers have to beware of the relatively low transparency and capacity in financing, management and operation of those private mainland firms.
Young people most supportive of Occupy Central plan, survey shows
More than 38 percent of respondents in a Hong Kong Transition Project survey had expressed support for the Occupy Central movement. The survey conducted among 1,007 people last month showed 54 percent of them were against the blockade plan. It found that most of those who support the pro-democracy civil disobedience plan were young people aged below 30. Those who support the movement, however, are also most worried about possible violence and economic damage it could bring to Hong Kong. Baptist University academics who run the project said the percentage of support was surprising, which should send a warning to the government.
Universal suffrage for 2017 only possible if all parties make concessions, Tsang says
The final universal suffrage blueprint for the 2017 chief executive election will not be the most ideal plan, but a compromise blueprint based on concessions by various parties, said Legislative Council President Tsang Yok-sing. Tsang said he hopes all parties would continue to make efforts to narrow differences. Civic Party chairman Audrey Eu said the major difference between Beijing and the pan-democrats stemmed from Beijing’s insistence on a political filtering process of candidates. She said it would be unfair to put the blame on pan-democrats if political reform end in failure.
Investment system reform urgent as China becomes No. 1 trading nation
China has emerged as the largest trading nation in the world, with customs authorities announcing that the country’s total exports and imports last year hit US$4 trillion, surpassing the United States. But for the long term, the nation’s old growth model driven by capital investment, cheap labor and exports is nearing an end. Meanwhile, drastic changes in the world trade system are imminent. Now that China has become the Number One trading nation, there is even greater urgency for reform of its investment system.
Communist leaders vow to build strong agricultural nation
China’s new leadership has underscored the importance of making farmers rich as part of the mammoth task of building a moderately-affluent nation by 2020, Beijing-based China watcher Ren Huiwen wrote. At the just-concluded national rural work conference, top leaders have vowed to double their efforts to help and boost the development of agricultural industry, improve the livelihood of farmers and solve the rural land problem. Leaders also stressed the importance of food security and the building of a strong agricultural nation.
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