〈Asian Post, September 23 2017〉Hong Kong stocks dropped yesterday led by financials and property after S&P Global Ratings downgraded Hong Kong and the mainland's credit ratings in two separate moves.
The Hang Seng Index fell 0.8 per cent or 229.80 points to 27,880.53, paring this week's gain to 0.3 per cent, while the H-shares index lost 0.8 per cent to 11,109.
S&P Global Ratings lowered Hong Kong's long-term issuer credit rating to AA-plus from AAA yesterday morning, hours after it downgraded the mainland's sovereign credit rating to A-plus from AA-minus, citing "very strong institutional and political linkages" between China and Hong Kong.
Late Thursday, the rating agency said the mainland downgrade reflected its views that "a prolonged period of strong credit growth has increased China's economic and financial risks".
Capital inflows to the Asia region are expected to continue however and yesterday's market drop was merely a knee-jerk reaction to S&P's rating downgrade, analysts said.
"Hong Kong's link with China is increasing so a change in the sovereign rating for China affecting the city is inevitable," said Freeman Tsang, head of China and Hong Kong at Legg Mason. "But overall this is going to be a short-term factor for investors unless there is a real sharp decline in foreign exchange reserves and our overall balance sheet."
In line with the downgrade, S&P cut ratings for the mainland units of three foreign banks, including HSBC Holdings, Hang Seng Bank and DBS Bank.
In response to the cut, the drop in HSBC shares had the sharpest impact on the index.
The stock slipped 0.6 per cent to HK$76.20, contributing to a 17 point loss in the benchmark. Other financial counters also fell, with China Construction Bank shedding 0.8 per cent to HK$6.62 while Ping An Insurance dropped 1.6 per cent to HK$61.60 and China Life Insurance edged down 0.8 per cent to HK$23.65.
In addition, real estate developers faltered with China Resources Land sliding 3.9 per cent to HK$25.65. Shares of car manufacturers were weak. Geely Automobile Holdings fell 3.5 per cent to HK$23.35
〈The Standard , September 22 2017〉Financial Secretary Paul Chan Mo-po says Hong Kong must follow the US Federal Reserve's pace in raising interest rates if the economy is to be sustained, but investors should beware of some of the effects.
Investor caution is a must as US rate rises might push up Hong Kong asset prices, Chan said, and property projects commencing in the next few years will be affected. Still, SAR interest rate adjustments depend on the availability of onshore capital.
The Hong Kong Monetary Authority said the Fed's plan to start shrinking its balance sheet may lead to capital outflows from Hong Kong.
As the gap between Hong Kong and US interest rates continues to widen, the Hong Kong dollar will weaken toward 7.85 against the greenback, said the authority's acting chief executive, Eddie Yue Wai-man.
"When it touches 7.85, we'll see a capital outflow," he said. "Then the Hong Kong interest rate will slowly increase."The Hong Kong dollar has been pegged at 7.8 to the US dollar since 1983 but can trade between 7.75 and 7.85.
But Yue noted that Hong Kong's deposit and lending rates remained unchanged despite four US rate hikes since December 2015.
"The timing, the pace of capital outflow and arbitrage activities are affected by different factors," he added. "But as the gap widens a Hong Kong interest rate hike is bound to happen."
The HKMA has issued exchange bills for two consecutive months, which tightened market liquidity. Additionally, the Hong Kong Interbank Offered Rate has been reacting to the issue of the bills and a narrowing balance sheet, with the overnight rate jumping 23.68 points to 0.5102 yesterday and the weekly rate hitting 0.5275. However, the Hongkong and Shanghai Banking Corp has responded by maintaining its current lending rate of 5 percent and saving rates.
〈The Standard , September 22 2017〉Another house from Mount Nicholson has sold for HK$620 million, as property consultants believe the US Federal Reserve announcement to start balance sheet reduction in October will only have limited impact on the local property market. The 7,981 saleable square foot house from the joint development project by Wharf (0004) and Nan Fung fetched about HK$77,684 per ssf.
Knight Frank senior director Thomas Lam Ho-man said the impact of the Federal Reserve's balance sheet reduction on Hong Kong property market is limited, while the impact of an interest rate hike would be higher.
"Purchasing power remains in the market, and most people are buying for self-use," Lam said.
Vincent Cheung Kiu-cho, Colliers International's deputy managing director for Asia valuation, said the effect of balance sheet reduction to the SAR is light because much capital is coming from the mainland.
Meanwhile, Sun Hung Kai Properties (0016) deputy managing director Victor Lui Ting said the show flats of the company's new project in Lohas Park - Wings at Sea - have received positive response from the public, and the firm will soon decide whether to put more units on the market. SHKP launched the first price list for 208 flats from Wings at Sea on Tuesday.
Sun Hung Kai Real Estate Agency assistant general manager Andy Chan Hon- lun said the company received a lot of enquiries about the project's three- bedroom units, and that there is a chance that the company will launch more three- bedrooms units. He said the second batch to be launched will be no less than 104 flats.
Wheelock Properties will put on sale 90 flats from Oasis Kai Tak on Sunday, with discounted prices ranging from HK$6.11 million to HK$32.15 million.
〈The Standard , September 21 2017〉New World Development posted a 26.5 percent year-on-year increase in underlying net profit to HK$7.13 billion for the year ended June 30, after stripping out the one-off disposal gain of five projects in the mainland. The developer's net profit dropped 11.4 percent year-on-year to HK$7.68 billion.
Revenues fell 5 percent to HK$56.6 billion. Earnings per share were 80 HK cents, and a final dividend of 33 HK cents was declared. NWD's attributable contracted sales in Hong Kong totaled HK$15.6 billion, exceeding its annual sales target of HK$10 billion.
The number was mainly attributable to contracted sales of flats from its residential projects such as Skypark in Mong Kok, Pavilia Bay in Tsuen Wan, and Mount Pavilia in Clear Water Bay, among others. New World executive vice chairman and general manager Adrian Cheng Chi- kong said yesterday the developer's property sales target for the new financial year will remain at HK$10 billion.
The developer's gross rental income in Hong Kong was HK$1.58 billion. The company said that as at June 30, its land bank in Hong Kong for immediate development comprised total gross floor area of about 10 million square feet, including about 4.7 million sq ft for residential purposes.
It also said it has an agricultural land bank in the New Territories with total site area of about 17 million sq ft pending for land use conversion.
〈Asian Post, September 21 2017〉New World Development is considering a financing scheme to help university graduates buy homes with "super low" down payments.
The scheme is only for first-time buyers. Adrian Cheng Chi-kong, an executive vice-chairman of New World, said the scheme would be structured with a "super low down payment" and longer repayment period at an interest rate close to the market level. "Graduates from the eight universities in Hong Kong who have stable income after two to three years working experience are eligible for the scheme," he said.
Cheng said down payments could be as low as "several hundred thousand dollars" for flats costing HK$5 million. There would also be incentives, such as the company absorbing the stamp duty.
Homebuyers can get up to an 80 per cent loan under the Hong Kong Mortgage Insurance scheme for flats priced between HK$4 million and HK$6 million. That means buyers must pay an initial HK$1 million for homes costing HK$5 million.
Cheng said the financing proposal would include restrictions to prevent speculation, such as buyers must be end users and the reselling of flats.
"The plan is still under study. Our new project, Parkville, in Tuen Mun can serve as a test case either this year or next year," he said. About 10 per cent of the project's 100 units would be allocated for the proposed scheme, he said, adding that it might be extended to other projects where there was strong demand from young people if the plan received a positive response.
"We heard university graduates have difficulties in saving enough to buy property. So we have this idea to help those who have stable income after working for two or three years," Cheng said.