〈Asian Post, March 18, 2017〉The US Federal Reserve's third rate rise in a decade is unlikely to trigger massive capital outflows from Hong Kong and a rapid rise in the city's interest rates, thus the negative impact will be limited on Hong Kong's asset prices in the near term, said investment managers and analysts.
Hong Kong's currency is pegged to the US dollar, which means the city has to follow US monetary policy. But concerns are growing that Hong Kong's weak economic outlook could take another beating if it is forced to raise interest rates. A higher rate also tends to add pressure to Hong Kong's equity market and property prices.
Hong Kong Monetary Authority, the city's de facto central bank, raised the base interest rate by 25 basis points to 1.25 per cent yesterday. Commercial banks in the city have the flexibility to choose if they want to immediately match the increase.
"It's inevitable that interest rates [in Hong Kong] will rise gradually resulting from the US rate increase," said Chordio Chan Siu-ping, head of investment management at Bank of China Hong Kong.
With the Fed signalling that it will continue to normalise the interest rates, money could leave Hong Kong for the US in search of higher yields. "But massive capital outflows are unlikely in the short term," Chan said. "I won't worry about that."
Chan said the Fed is unlikely to act aggressively this year, as the US economic momentum is not strong enough, therefore capital outflows will be slow and gradual.
He expected the US Fed to increase rates no more than three times in 2017.
The impact of the Fed's rate rises on Hong Kong's money market will also be limited, as banks in the city are sitting on ample Hong Kong dollar liquidity and have enough room to delay the rate increase.
"The aggregate balance in Hong Kong banks amounts to HK$260 billion (US$33.49 billion), and this is just a conservative estimate," Chan said. "If including the outstanding amount of Exchange Fund Bills, Hong Kong lenders are probably equipped with around HK$1 trillion."
"Even if capital flows out of Hong Kong, chances are small that the benchmark Hibor [Hong Kong Interbank Offered Rate] will rise rapidly, as the city's financial system has enough liquidity," Chan said.
That could be positive news to property borrowers, as most mortgage loans in Hong Kong are priced against Hibor, the interbank lending rates in Hong Kong dollar. "Hong Kong's housing market will not be affected directly this time, as Hong Kong banks don't have to immediately follow the US with rate increases," said E Zhihuan, chief economist for BOC Hong Kong.
〈China Daily, March 17, 2017〉Hong Kong should find ways to conduct 'breakthrough' cooperation with mainland cities like Shenzhen and Zhuhai and work together to build Guangdong-Hong Kong-Macao Bay Area, said former finance chief Antony Leung Kam-chung at a round-table seminar held by think tank Center for China and Globalization (CCG) in Beijing on Thursday. Antony Leung Kam-chung delivers a speech at a round-table seminar held by think tank Center for China and Globalization (CCG) in Beijing, March 16, 2017. [Photo provided to China Daily]
Hong Kong should find ways to conduct 'breakthrough' cooperation with mainland cities like Shenzhen and Zhuhai and work together to build Guangdong-Hong Kong-Macao Bay Area, said former finance chief Antony Leung Kam-chung at a round-table seminar held by think tank Center for China and Globalization (CCG) in Beijing on Thursday.
'When we signed Closer Economic Partnership Arrangement (CEPA) in 2003, our cooperation became 'closer', so now we should aim for 'breakthrough' ones,' said Leung, currently CEO of property developer Nan Fung Group.
His idea also resonates with the plan outlined in this year's Government Work Report 'for the development of a city cluster in the Guangdong-Hong Kong-Macao Greater Bay Area'.
This year will mark the 20th anniversary of Hong Kong's return to the motherland. Leung said the next 10 years will be key to the future of Hong Kong.
As one of the most globally connected regions, Hong Kong's future is closely linked to the emerging trends. Leung used 'VUCA', namely vulnerable, unclear, complex and ambiguous, to describe the future world, which is under great impact from new technology, globalization, aging population and so on.
〈China Daily, March 15, 2017〉Swire Properties, one of Hong Kong's oldest and largest builders of luxury homes and grade-A offices, said yesterday that it would continue to bid competitively for development sites put up for sale by government tender in the city, "if something suit us".
Chief executive Guy Bradley said the firm's appetite for land in Hong Kong remains strong even though aggressive bidding by mainland developers has escalated prices in the city. "Hong Kong is a competitive market, and we are used to it," he said.
Although the US Federal Reserve raised the base lending rate by a quarter point on Wednesday, he said it was too early to gauge the impact on the Hong Kong property market. "Market sentiment is positive this week," he said.
His remark comes ahead of three new projects that have attracted more than 20,000 prospective buyers for the sale of about 1,000 units put up for sale on Friday and Saturday, the strongest initial response since November last year.
They are Wheelock Properties' Monterey development in Tseung Kwan O, Cheung Kong Property Seanorama development in Ma On Shan, and Sun Hung Kai Properties' Cullinan West atop Nam Cheong Station.
Bradley comments came after Swire Properties reported a 7 per cent increase in 2016 net profit to HK$15.05 billion. Revenue for the period rose 2 per cent to HK$16.8 billion. Underlying profit, a measure that excludes revaluation gains in investment properties, edged up 1 per cent to HK$7.11 billion, missing the HK$7.29 billion revenue expected by 14 Bloomberg analysts.
There was a marginal increase in core profit last year, as there was a small decrease in underlying profit from property investment and a small increase in core earnings in property tradingSwire chairman John SlosarThe slight increase in gross rental income to HK$10.77 billion last year, up 0.53 per cent from 2015, was partly due to the fall in retail rents in Hong Kong.
〈Shanghai Daily, March 14, 2017〉ASIA-PACIFIC cities have some way to go to match their European and North American counterparts regarding intensity of investment even though they are increasingly sought-after real estate investment destinations, said a report released by property service provider JLL.
Only four cities in the region — Sydney, Melbourne, Hong Kong and Tokyo — managed to inch into the top-30 list, which ranks cities around the world by measuring the volume of direct commercial real estate investment in a city over a three-year period relative to its economic size.
The four cities ranked eighth, 16th, 28th and 30th, respectively, according to JLL’s latest Investment Intensity Index.
“Although the emerging cities of Asia-Pacific are attracting an ever greater share of global real estate investment, our latest index shows there is some way to go before they punch their weight in terms of investment intensity,” said Megan Walters, head of research for JLL Asia-Pacific.
“The balance is starting to shift, however, as real estate investors are looking more and more to developing cities to satisfy their diversification requirements.”
An estimated 60 percent of the global office development pipeline until 2020 is set to be in emerging markets, JLL’s data showed.
Meanwhile, Shanghai and Beijing have immense opportunities to expand their real estate investment intensity, according to JLL.
〈Asian Post, March 14, 2017〉The US Federal Reserve has perfected the art of telegraphing rate rises to minimise market volatility. As expected, Fed chairwoman Janet Yellen raised short-term interest rates by 25 basis points to a range of 0.75 to 1.00 per cent. The announcement was not entirely free of surprises though. Some influential investors and analysts had expected a more aggressive pace of tightening, but the Fed said it would stick with a previous projection of no more than three rate increases this year. As a result, the US dollar, which has been strengthening against major currencies in the past month, immediately came under pressure.
For rate-sensitive Hong Kong, Yellen has brought a mixed message. Fewer rate rises are certainly welcome for mortgage holders and the property market in general. But the Fed chair said monetary policy has hit a turning point. This means rate rises would come more frequently than once a year, as experienced in 2015 and 2016. Increases in mortgage payments for Hong Kong homeowners have a way to go in coming years, given that borrowing rates have been at historical lows in the past 10 years. Those who wish to enter the property market, where prices have hit record highs, need to be especially cautious in the face of almost certain increases in interest payments. It remains to be seen whether the prices of flats in the city would moderate in a tightening environment.
Major stock markets, however, took heart from Yellen's suggestion that the Fed's policy outlook had not changed significantly since December and that it would not rush to judgment about the impact of possible tax cuts and increased fiscal spending by the Republican-led Congress. Looser fiscal policy emerging from Congress has led to speculation that the Fed would accelerate the pace of rate rises, but a majority of policymakers led by Yellen say robust economic data in the US enable them to take a wait-and-see approach to Congress' promise of cutting taxes and loosening fiscal spending under stimulus policy advocated by the Donald Trump White House.