We know the Chinese have a propensity to raise money against almost anything (commodities, trade receipts, export inventory, tech goods), but in Hong Kong the Wall Street Journal reported on Tuesday that some lenders are even willing to accept borrowers’ beloved handbags as collateral.
From the WSJ: Read more
Time for some property porn.
It comes from the 2013 Demographia International Housing Affordability Survey – a piece of work often quoted by bubble hunters and rubbished by the property bulls who babble on about flawed methodology. Read more
Uh oh. This can’t be good.
From SocGen’s cross asset research team on Monday (our emphasis): Read more
The Hong Kong government is stepping up its scrutiny of local internet businesses after US authorities led a high-profile crackdown on Megaupload, the file-sharing website accused of copyright theft, which was set up in the Chinese territory in 2005. Hong Kong Customs, which has been working with the Federal Bureau of Investigation on the Megaupload case for more than a year, said that it would set up an electronic crime investigation centre later this year, reports the FT. Media companies have called on the territory, which is also home to Filesonic – another “cyberlocker” site that allow users to upload their digital files to be saved in the internet cloud – to increase its focus on potential copyright infringers following the Megaupload case.
Bloomberg reports on staling housing markets in Asia that have been hit by government efforts to prevent the real estate bubbles that Western economies have seen burst over the last few years. Property prices in Hong Kong have decreased by 6 per cent since June and Barclays analysts estimate a drop of 25 per cent could be seen by 2013. Would be Hong Kong homebuyers have to find large deposits, as well as stumping up extra transaction taxes and facing rising interest rates. The WSJ reports that banks in Hong Kong have also been seeing a decline in yuan deposits as increasing amounts of the currency is used to pay mainland suppliers. The outflow of deposits, as well as tighter lending conditions in China have motivated banks in Hong Kong to raise additional yuan funds in order to move further into the market. Flight to the to US dollar has also led to decreases in deposits.
Forecast-busting results from technology behemoth Apple triggered a bounce in US stock futures and sparked a return to bullish form for global risk assets after a brief hiatus on worries about tortured Greek debt negotiations, the FT reports. The FTSE All-World equity index was up 0.3 per cent, copper was higher by 0.7 per cent to $3.83 a pound, a four-month high, while gold was edging forward 0.2 per cent to $1,668 an ounce. The FTSE Eurofirst 300 was up 0.1 per cent in early action after Asia rose 0.9 per cent, despite Shanghai and Hong Kong remaining closed for the lunar new year holiday. S&P 500 futures pointed to Wall Street opening Wednesday’s cash session with a gain of 0.3 per cent after Apple, now the world’s biggest company by market capitalisation, reported record quarterly revenues of $46.3bn.
The FT reports that Yao Gang, vice-chairman of the China Securities Regulatory Commission, has pledged to “deepen” China’s capital markets reforms and to make sure Hong Kong is one of the main beneficiaries of the changes. Speaking at the Asian Financial Forum in Hong Kong, Mr Yao said the CSRC would lower the size threshold for Chinese companies listing in Hong Kong and “open the door wider for small and medium enterprises to list in Hong Kong”. Until now, Chinese listings in Hong Kong – one of the main routes for foreigners to invest in China – have been dominated by large state-owned enterprises such as banks and energy companies. Mr Yao added that the regulator would allow qualified foreign institutional investors greater access to renminbi with which they can invest in Chinese companies on the domestic market.
As FT Alphaville has written before, China effectively manages four different price paths for its currency, the renminbi.
Critical for its future flexibility, however, is the exchange between the so-called offshore CNH and the onshore CNY market. Read more
Citic Securities, China’s biggest brokerage by market value, declined in its Hong Kong trading debut, Bloomberg reports. Shares in the company fell fell as much as 11 per cent to HK$11.90 and traded at HK$12.2 at 11:01am. Citic Securities, which is also listed in Shanghai, sold 995.3m shares at HK$13.30 each last week, raising HK$13.2bn ($1.7bn) in Hong Kong’s biggest public stock offering in more than three months. Several other companies have cancelled or postponed planned IPOs in Hong Kong. The Hang Seng rose as much as 4.3 per cent on Thursday but the Hang Seng China H-Financials Index, which tracks large Chinese financial stocks listed in the city, has dropped nearly 16 per cent between Citic Securities priced its shares and Thursday.
FT Alphaville has talked volumes about China’s cash-for-copper collateral obsession.
Recently, however, speculation has picked up that these trades have started to be unwound — mainly because the Chinese government caught up on the funding loophole, and moved to restrict it. Read more
China has sold Rmb20bn ($3.1bn) of sovereign bonds in Hong Kong, the biggest ever offshore renminbi bond issuance, meeting with huge demand from investors clamouring for assets in the Chinese currency. The Chinese finance ministry issued Rmb15bn in bonds to institutional investors, with the remaining Rmb5bn directed at retail investors. That total dwarfed the Chinese ministry’s Rmb8bn issue in Hong Kong last November, says the FT.
Interesting story breaking on IFR this Tuesday lunchtime:
RTRS-PREMIER LEAGUE CHAMPIONS MANCHESTER UNITED PLANS $1 BLN IPO IN SINGAPORE BY YEAR-END – IFR Read more
Japan’s economy contracted 1.3 per cent on a seasonally adjusted and annualised basis in the second quarter, much less than the 2.7 per cent contraction that had been forecast, the WSJ says. Personal spending provided much of the boost to the figure, falling 0.1 per cent instead of 0.5 per cent as predicted. Analysts now expect Japan to return to growth at the strongest pace among the major economies during the third quarter, although the strengthening yen may dampen recovery, reports Reuters. Hong Kong’s surprise shift into recession last week is nevertheless a warning sign for the global recovery as a whole, says Bloomberg.
France’s economy posted no growth in the second quarter, contrasting with 0.9 per cent growth in the first three months of 2011 and adding to concerns over the world economy, says Reuters. Household spending had been expected to fall behind in the second quarter but the data follow an industrial contraction in June, and will throw next year’s 2.25 per cent growth target into doubt, the FT reports. Analysts warned that France’s deficit reduction plans would increasingly be hostage to growth. Hong Kong has delivered a shock 0.5 per cent contraction in its economy after export growth tumbled, increasing fears of a global slowdown, reports Bloomberg.
The Hong Kong government sold a plot of land at a price far lower than estimates, with local developers describing the transaction as the clearest sign yet of a correction building in the world’s most expensive residential property market, reports the FT. The 2.3-hectare site in the luxury Kau To Shan residential area only attracted one bidder offering the minimum price of HK$5.5bn (US$704m) on Tuesday, compared with surveyors’ pre-sale assessments ranging between HK$7.25bn and HK$9.25bn, according to a Bloomberg survey. This came as average sale prices had slipped 2.5 per cent from May’s post-Asian financial crisis peak, according to Midland Realty’s property index, while secondary transaction volumes had fallen to a two-year low.
Hong Kong’s securities regulator is tapping Ashley Alder, head of the Hong Kong office of London-based law firm Herbert Smith, as its new chief executive, the FT says. The Securities & Futures Commission will announce the decision, made by a committee that included government officials, on Monday, according to a person familiar with the timing of the appointment. The person said that in choosing Mr Alder, a UK national, the regulator “hopes to raise the independence of the regulatory world. He added that “the feeling was that a local is more susceptible to pressure from China”. Mr Alder succeeds Martin Wheatley, another British citizen, who left Hong Kong in June after six years at the regulator to take up an appointment in London.
Italian fashion house Prada raised $2.1bn in a Hong Kong IPO on Friday, about a fifth lower than initially sought, as risk aversion weighed on the deal, reports Reuters. The Milan-based company priced its IPO at HK$39.50 a share, the bottom of a revised indicative price range issued on Thursday, according to three sources with direct knowledge of the deal. Prada had originally targeted garnering up to $2.6bn. The lower-than expected raising comes a day after luggage maker Samsonite International fell about 8% in its HK trading debut. Despite the glamour around Prada’s IPO, increased volatility in global markets and Samsonite’s poor debut weighed on the offering, with Prada cutting the mid-point of its IPO on Thursday. BeyondBrics asks whether the timing of Prada’s HK IPO could have been any worse.
Samsonite, the luggage maker backed by London-based CVC Capital Partners, sold shares at the bottom end of a revised price range in its Hong Kong initial public offering, Bloomberg reports, citing two people with knowledge of the matter. The company raised HK$9.73bn, some $250m less than the maximum originally sought, with shares priced at $HK14.50. The news agency says two-thirds of companies listed on the Hang Seng this year have fallen below their offer price.
We knew that China’s efforts to internationalise the RMB were moving along nicely, but thus far CNH deposits (yuan held offshore in Hong Kong) are still a relatively small part of China’s total deposit base.
But a new paper from RBS notes that as a percentage of Hong Kong deposits, they’re becoming a big deal indeed, and quickly: Read more
Samsonite, the suitcase manufacturer, has kicked off a $1bn-$1.5bn initial public offering in Hong Kong, becoming the latest consumer goods group to choose to list in China, reports the FT. Prada, the Italian fashion house, plans to float in Hong Kong next month, while luxury shoe group Jimmy Choo is also eyeing a listing, after L’Occitane, the French cosmetics company, raised $700m in a landmark Hong Kong IPO last year. Samsonite – owned by buy-out group CVC , with a near-70% stake, and UK bank RBS – will start gauging investor demand for the share sale on Thursday. It plans to start the bookbuilding process and set a price range for the shares on May 30, which are due to start trading in Hong Kong on June 16. The WSJ notes Samsonite’s fortunes have greatly improved since its troubles in the financial crisis.
The downgrades are starting to rain down on CPP, the credit card and identity theft insurer that’s attracted some unwanted regulatory heat.
Joint broker JPMorgan has cut its forecasts and is worried the FSA probe revealed late on Monday could land CPP with a large fine, while the company’s other adviser, UBS, has put its rating under review. Elsewhere, Citigroup has removed its buy rating on CPP and Canaccord Genuity is simply advising clients to sell. Read more
Aluminum producer China Hongqiao Group is raising US$1.1bn from a revived Hong Kong initial public offering, but other IPOs in the city struggled as earthquake devastation in Japan added to fears of instability in the Middle East and spiralling inflation in Asia, reports the WSJ. Australian billionaire Clive Palmer’s Resourcehouse delayed plans to launch on Monday a $3bn IPO that was recently approved , said people familiar with the deals, while Hong Kong’s biggest IPO so far this year—the US$167m deal by China Kingstone Mining – priced at the bottom of an indicative range. In Singapore on Friday, Hutchison Port Holdings set an IPO price that could raise US$6.1bn in the world’s biggest IPO so far in 2011, but a S$1bn IPO by US buy-out group KKR of its precision engineering group MMI Holdings unit was postponed due to weak market conditions. Hongqiao earlier scrapped a plan to raise up to US$2.2bn in January amid deteriorating market conditions.
HSBC moved to curb speculation at the weekend that it is considering relocating to the low-tax environment of Hong Kong due to growing UK regulatory burdens, saying its preference was to remain in London, reports the FT. The move came after a Sunday Telegraph report saying HSBC had told key shareholders it is preparing to quit London for HK. But people close to the bank suggested some investors wanted to promote the relocation idea in hopes it would boost HSBC’s share price. They said that while the bank is conducting its scheduled triennial review of the issue this year, it was highly unlikely to reach a decision to leave the UK. Even so, said some investors, speculation about a possible move strengthened HSBC’s position with the government in negotiations over regulatory issues.
Capital & Counties, the UK property group, is in talks with one of Asia’s wealthiest families in Asia to provide funding for the multibillion pound redevelopment of the Earls Court site in west London, one of the city’s largest development schemes and potentially the most valuable, reports the FT. CapCo is in talks about a joint venture with the Kwok family, which controls Hong Kong’s largest listed property developer, Sun Hung Kai Properties. The family has been behind some of HK’s biggest property schemes and is looking to diversify its wealth amid spiralling Asian property values. CapCo is continuing the talks directly with the family.
Property-to-ports conglomerate Wharf Holdings said on Thursday it plans to raise HK$10.05bn ($1.3bn) through a rights issue in Hong Kong to fund property and related investments in China, reports the WSJ. The HK-listed company said it plans to sell 275.4m shares at HK$36.50 each by issuing one share for every 10 of its existing shares. The offer price of the new shares represents a 31% discount to the company’s closing price in Hong Kong on Thursday of HK$53.05.
Prada, the Italian fashion group, is set to list on the Hong Kong stock exchange as early as May as it seeks to tap growing Asian demand for luxury goods, reports the FT. The decision by the group, majority owned by designer Miuccia Prada, her family and her husband, CEO Patrizio Bertelli, is a first for Europe’s high-end fashion industry and underlines HK’s rising status as a hub for international listings. Analysts say that in a robust HK market, the group could be worth as much as €5bn-€6bn, whereas Milan, among the weakest markets in the past year, would provide less chance of achieving that. But don’t hold your breath, suggests the WSJ, noting that Prada’s road to listing “has been long and filled with potholes”.
Swiss commodities trader Glencore International plans a dual listing of its shares in Hong Kong and London, in a deal that could raise $7bn to $10bn, reports the WSJ, citing people close to the matter. The decision marks a milestone for the closely-held commodities-trading giant, which plans to simultaneously list in the two cities, possibly in April or June. Part of the share offering will be reserved for institutional investors but another part will be allocated to HK retail investors, the people added. The Source notes that the Glencore rumour mill is “back in full swing” and says that despite reports of listing plans, a merger with UK-listed miner XStrata, in which it holds a 35% stake, remains Glencore’s preferred option.
China Hongqiao, one of China’s largest private aluminium makers, plans to go public in Hong Kong around Feb 11 in efforts to raise as much as $2.2bn, reports the FT. The group’s IPO plans signal new confidence in a sector beset last year by overcapacity fears and China’s energy restrictions. The company will offer 1.74bn shares on the Hong Kong exchange priced from HK$7.10 to HK$9.90, raising $1.6bn to $2.2bn, with an option to expand the 15% in event of high investor interest. Hongqiao aims to use the funds to nearly double annual aluminium production from the current 1m tonnes by the end of 2012. The WSJ adds that JPMorgan, ICBC International, Bocom and BNP Paribas are joint bookrunners for the IPO.
Chinese stock exchanges, including the Hong Kong bourse, have raised almost triple the amount of money secured by initial public offerings across the US in 2010, says the FT. Hong Kong takes the crown as the world’s biggest centre for new listings, raising $52.8bn in IPOs this year — compared with $42bn in the US. Mainland exchanges including the up-and-coming Shenzhen Stock Exchange raised $66.9bn, according to Dealogic. Some 190 companies, mostly small or medium-sized enterprises, have raised a combined $28bn in Shenzhen, with an additional 104 companies raising $12.9bn on ChiNext, China’s nascent board for start-ups.