19 December 2018

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, Jan. 14:


Retailers see non-staple food prices up over 10 percent

Retailers of non-staple foods are expecting a more than 10 percent rise in the prices of imported items from the mainland for the coming Chinese New Year amid appreciating renminbi. Imported inflation has been a prevailing trend over the past few years, with the exchange rate of the Chinese currency continuously advancing 2 to 3 percent each year. The renminbi, which climbed 2.8 percent last year, has breached the 6.05 level onshore and 6.3 level offshore against the US dollar on Monday, both marking the strongest since the exchange rate reform in 2005.

Costs to mainland brokerages in IPO sponsorship expected to rise

The costs to mainland brokerages involved in sponsoring companies to float their shares through initial public offerings are likely to rise as the China Securities Regulatory Commission tightened their accountability and responsibilities from institutional placements to pricing, analysts and accountants said. The watchdog’s move will inevitably increase brokerages’ compliance costs, squeezing their margins, they said. The CSRC rolled out a reform in the mainland IPO market in November last year, aiming to enhance the market force in the IPO regime by moving it to a registration-based system from an approval-based one.


Renminbi may be freely exchangeable in five years, Tu says

China’s renminbi is likely to be freely exchangeable in five to 10 years time, Shanghai Deputy Mayor Tu Guangshao {屠光紹} told the Asian Financial Forum Monday in Hong Kong. Liberalization of the currency has become a “truly global trend” ever since Hong Kong was allowed to run offshore businesses a decade ago, the city’s Chief Executive Leung Chun-ying said at the same forum. Meanwhile, Alderman Fiona Woolf, Lord Mayor of the City of London, said the foreign exchange transaction of the renminbi has grown about 50 percent over the past year.

ANZ seeks acquisition opportunities in Asia, Smith says

Interview: Australia and New Zealand Banking Group Ltd. is eyeing mergers and acquisitions opportunities in Hong Kong and other parts of Asia, seeking potential value addition over the long term, said chief executive Michael Smith. Citigroup Inc. analysts Craig Williams and Ronit Ghose earlier said in a research report that the Melbourne-based bank may buy stake in Standard Chartered Plc. (02888.HK), although it is unlikely the two banks will merge after any potential acquisition.

China Merchants Group eyes more business in emerging markets

Interview: China Merchants Group, a state-owned conglomerate, is tapping into the rising demand in the manufacturing sectors in emerging markets that are likely to boost the construction of infrastructure, said chairman Fu Yuning {傅育寧}. The group sees those markets as a boon for expansion in its highway and port businesses, aiming to raise the share of its revenue from overseas markets to 20 percent. Europe has passed the worst time in its economy, Fu said, adding that it is not wise any more to put a large bet in the European market at the moment as asset prices have rebounded from their trough.


Income subsidy should only be given to people who work full-time, Fisher says

A member of a government-appointed anti-poverty commission said a new subsidy for low-income families should be limited to those who have full-time jobs. Stephen Fisher, who is also head of the Oxfam charity group, said allowing part-time workers to apply would turn the subsidy into salary subsidies for employers. It is widely reported that Chief Executive Leung Chun-ying would announce the new subsidy in his second policy address at the Legislative Council tomorrow. A four-member family which earns below HK$18,000 is said to be eligible for the subsidy, subjected to a means test.

HK Bar Association chief blasts officials for not calling a spade a spade

Paul Shieh, chairman of the Hong Kong Bar Association, has made veiled criticism against the government for curbing public debate on important issues in the universal suffrage for 2017 chief executive election. “What we do not want is political objections to be presented as legal objections, thereby shutting public debate on the political merits and demerits of legally permissible proposals,” he said at the opening of the Legal Year. Chinese and Hong Kong officials have hinted that the idea of civil nomination proposed by pan-democrats was not in line with the Basic Law.


Renminbi appreciation tipped to continue, but with constraints

China’s central bank set the renminbi’s daily midpoint against the US dollar at a 6.0950 Monday, a record high since the peg ended in 2005. Spurred by global capital inflow and trade surplus, the value of the RMB is expected to rise further to hit the “below 6-level” this year. But given that the share of trade surplus in gross domestic product has dropped from a high point to about 2.2 percent, the room for appreciation of the value of the currency is likely to be limited.


A case of giving more powers to Xi for deepening reform

The centralization of powers in President Xi Jinping is conducive to deeper reform drive in China, Stanford University researcher Shi Litai and a China research institute head Zhu Huizhong wrote. As China’s reform drive has entered the “deep water zone”, leaders need not just determination, but adequate powers to dismantle the vested interests and counter their opposition to reforms. The greater the powers for a leader who has strong commitment and will, the more likely that he or she will succeed in pushing new policies.

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