11 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 Monday, Jan. 27:


SFC calls for stock trading circuit breaker

Hong Kong may need to establish a circuit breaker that will halt the trading of a stock for a certain period of time when the share price fluctuates at a rate exceeding a specified level, in line with the international trend, said Keith Lui, executive director of the Securities and Futures Commission. Central to the issue is how such a mechanism can, over the long term, benefit the Hong Kong stock market which has been endorsing a policy of avoiding unnecessary intervention, Lui said. The bourse operator Hong Kong Exchanges and Clearing Ltd. (00388.HK) has a role to play in the launch of the mechanism, he added.

MPF investment limit on REITs should end, Link chief says

Interview: The 10 percent limit placed on the investment of Hong Kong’s Mandatory Provident Funds in real estate investment trusts (REITs) should be canceled with a view to drawing more capital into the market, said George Hongchoy, director of Asia Pacific Real Estate Association Ltd. and chairman of its Hong Kong chapter. The limit, which does not exist in any other market in the region, has been a key obstacle for the city as it competes with Singapore to become a fundraising hub for REITs in the region, said Hongchoy, who also chief executive of The Link Real Estate Investment Trust.

Undersupply of dim sum bonds hurting yield levels

Interview: There is an undersupply of dim sum bonds, which currently stands at 400 billion yuan (US$66.18 billion) compared with a deposit pool of 740 billion yuan, and this is why the yields of offshore bonds are much lower than the levels on the onshore market, said Hayden Briscoe, director of Asia Pacific fixed income at AllianceBernstein L.P. The yield of a three-year dim sum bond now stands at 150 basis points below onshore renminbi government bonds of the same maturity, Briscoe said, adding that the offshore market also suffers from a relatively low liquidity as the low returns are driving funds to US treasuries.


Nominating body for chief executive election must represent different sectors, Lam says

The nominating body under the universal suffrage for chief executive election may not be broadly represented as required in the Basic Law even if it is elected by all three million registered voters, Chief Secretary Carrie Lam said Sunday. She reiterated that the nominating committee should comprise people representing the interests of different sectors. Representativeness should not be determined by the number of people, Lam said. Her views have shed some light on the government’s interpretation of the term “broadly represented” in the Basic Law.


China should stay alert to fallout of US exit from quantitative easing

In view of the imminent further reduction of bond purchasing by the United States, emerging economies are faced with a looming crisis caused by the outflow of capital. Although China’s economic growth is likely to slow down, its overall situation remains stable. But if emerging economies suffer a blow, China’s trade with these countries will also be adversely affected. China should therefore stay alert to the risk and take precautionary measures. The adverse impact of US tapering of quantitative easing has just begun.


Prospects of political reform consultation look dim, Yu says

Two recent developments have shown Beijing has toughened its stance on Hong Kong, political commentator Yu Kam-yin writes. First, a top-level committee on national security has been set up to counter foreign intervention. Hong Kong’s universal suffrage will no doubt be part of the equation. Secondly, Beijing has stepped up warning against “pro-Hong Kong independence” movement. Recently, “envoys” from Beijing have quietly visited Hong Kong to seek the views of people from the different circles regarding the ongoing political reform debate. They said reform talks might break down. The outlook of the reform consultation does not look promising.

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