HK - Economic Data & News 01 (May 08 - Sep 14)

[winston]

Risk of more Hong Kong bankruptcies as crisis spreads

HONG KONG, Oct 10 (Reuters) - A string of bankruptcies in Hong Kong shows the days of easy money here are over, with more collapses likely if companies fail to manage their debt loads.

Analysts had considered companies in Hong Kong and throughout China as being better protected against the global financial crisis, since local banks remain well capitalised and underlying business fundamentals remain strong compared with other parts of the world.

That is changing by the minute, though, thanks to the credit freeze hitting many Western financial institutions and a pullback by local lenders in response.

Companies that took on loans expecting cheap and readily available financing from banks may be in for a shock.

"You had a lot of treasurers borrow money here, borrow money there and they kept rolling it over into a spaghetti bowl of debt," said a Hong Kong investment banker at a large European bank, who did not want to be named due to the sensitivity of the issue.

"And they weren't too focused on the shortness of maturity profile. They took a view that the markets would always be open.

"The reality is that the credit crunch has truly arrived in Asia," he added.


LIQUIDATIONS PILE

Swimsuit maker Tack Fat Group filed for liquidation last month.

Provisional liquidators were also appointed this week for garment maker and retailer U-Right International Holdings <0627.HK>. Liquidator Deloitte Touche Tohmatsu said the company's problem was rooted in over-investment. It owed about HK$1.2 billion to banks and financial institutions, local newspapers reported.

U-Right operates 95 shops in Hong Kong and has 516 retail outlets in China.

"Our goal now is to find a white knight," Edmund Yeung of Deloitte told the South China Morning Post. "We are restructuring the company and are in talks with two or three potential buyers."

The appointment of provisional liquidators means a company is technically bankrupt.

Last month, provisional liquidators were appointed for Hong Kong luxury watch retailer Peace Mark after the firm suspended its shares for nearly a month and sought a "white knight" suitor to shore up its balance sheet.

The company dived deeper into debt after it paid $368 million to buy Singapore-based luxury watch retailer Sincere Watch.

"This was a wholly preventable train wreck. If only the company had managed its securities," said the banker at the European bank. "They should have cleaned up their debt."

Peace Mark, which sells watches for brands including Rolex, Omega, Rado and Tissot, said on Sept. 3 it could not meet the demands of banks to repay HK$1.22 billion ($156.4 million) in debt, capping months of speculation that it was struggling.

Chow Tai Fook Group, a jewellery manufacturer, late on Thursday agreed to buy Peace Mark for an undisclosed price.

Officials and economists warn the worst has not yet arrived in Hong Kong.

"It will come, particularly if exports deteriorate. That's when consumers will hold off spending," said Paul Tang, economist at Bank of East Asia.

Hong Kong's central bank cut a combined 150 basis points in its benchmark discount window base rate this week in an effort to soothe the tightness in the money market.

But commercial banks kept their lending rates unchanged and threatened a possible increase if the HIBOR, their source of funding, continues to stay high.

[winston]

Tsang Says Hong Kong Must Be Ready to Act Decisively (Update2) By Aaron Pan

Oct. 15 (Bloomberg) -- Hong Kong Chief Executive Donald Tsang said the government should be ready to take ``decisive action'' on the economy and food safety as the risk of a global recession increases and a tainted-milk scandal widens.

Hong Kong's first challenge is external financial turmoil, and strong governance and leadership are needed during what are ``uncertain times,'' Tsang said today, in his second annual policy address since being elected to a five-year term in 2007.

The government is trying to boost confidence amid a global meltdown that has wiped out $7 trillion of market value and prompted partial nationalization of banks in the U.S. and Europe. Hong Kong's Monetary Authority yesterday guaranteed all deposits, after rumors sparked the first run on a bank in the city in more than a decade.

``The risk of global recession is in sight and tainted milk products have triggered concerns over food safety,'' Tsang said. ``The government's role is increasingly important and needs to be redefined. We should be ready to take decisive action to help stabilize the economy and rebuild people's confidence to ride out the difficulties.''

The start of Tsang's speech was delayed briefly when lawmaker Leung Kwok-hung sought to highlight the increase in prices in the city by waving a banana in front of the chief executive's face. Leung, nicknamed ``Long Hair,'' is an activist demanding greater democracy in Hong Kong.

Leung, wearing a red T-shirt with the face of Che Guevara, was expelled from the legislature by security officials for the duration of the address, according to Cammy Fong, a spokesman at the Legislative Council, the city's parliament.

Later in the speech, two other lawmakers were ejected after interrupting Tsang and demanding there be no means test to determine the amount of assistance, or ``fruit money,'' elderly people will receive. One of them threw two bananas at the Legco president's dais.

[winston]

HK has no plans to change currency peg

HONG KONG - Hong Kong has no plans to change its currency peg as the link to the US dollar remains the right policy, Chief Executive Donald Tsang said on Thursday.

'Our linkage with the US dollar is the right policy for now and for the foreseeable future,' Mr Tsang told reporters.

'If the US dollar sinks, we will sink with it,' he said.



Financial Secretary John Tsang and Joseph Yam, chief executive of the Hong Kong Monetary Authority (HKMA), the central bank, have repeatedly stressed Hong Kong's commitment to the peg.

Mr Yam, meanwhile, has come in for criticism over the HKMA's supervision of banks after more than 30,000 Hong Kong investors recently suffered losses on credit-linked notes, known as mini-bonds, offered by collapsed US investment bank Lehman Brothers.

Some legislators have called for Mr Yam to resign to take responsibility for the HKMA allowing banks to sell risky products to the public.

Donald Tsang told reporters on Thursday that he did not plan to ask Mr Yam to step down.

'There is no plan for me to ask Mr Yam to leave,' he said.

'Particularly at this time, each and every hand must be on deck and work, so Mr Yam will be with us for a very long time.'

Mr Yam, however, has been expected to retire next year and be succeeded by Norman Chan, who runs the Chief Executive's office and was formerly Mr Yam's deputy at the HKMA.

The HKMA declined comment. -- REUTERS

[millionairemind]

Donald Tsang on RTHK phone-in programme. Photo: RTHK.

CE plays down deficit concerns

17-10-2008

The Chief Executive, Donald Tsang, has played down concerns that Hong Kong is facing the prospect of a huge deficit as a result of the global financial crisis. Speaking on an RTHK phone-in programme, Mr Tsang said the figure won't be greater that the $100-billion surplus the territory recorded last year. He also said the government is not planning to strengthen the territory's banking regulations in the wake of the Lehman Brothers minibond dispute. Mr Tsang said the local financial sector is already well regulated. He also said the government is waiting for local banks to respond by today to its proposal that minibond holders should be refunded the current value of their investments. He said alternative suggestions would be put forward if the banks reject the idea.

[iam802]

Two Banks May Face Sanctions in Hong Kong Lehman Probe

http://online.wsj.com/article/SB1224224 ... lenews_wsj

Two banks were referred for possible sanctions Friday in Hong Kong as part of an investigation into the sales of structured products backed by Lehman Brothers Holdings, and institutions that sold these products sought to resolve the scandal by agreeing to buy them back at market value.

The Hong Kong Monetary Authority said Friday it had referred 24 cases --involving two banks that it declined to identify -- to the Securities and Futures Commission regarding allegations of misconduct and "mis-selling" against the lenders, the agency said in a statement.

Thousands of Hong Kong investors claim they ......

Wonder which are the 2 ?

[millionairemind]

Hong Kong Finance Chief Warns of More Challenges (Update1)

By Cathy Chan

Oct. 18 (Bloomberg) -- Hong Kong Financial Secretary John Tsang warned of further economic challenges ahead for the city amid global financial turmoil, company closures and investment losses.

``The financial crisis will have a considerable economic impact on the economy, and people in Hong Kong should be ready for the challenges,'' he told reporters today after officiating at a ceremony. ``Still, Hong Kong's fundamentals and its system are healthy and our economy remains very strong.''

Tsang's comments came after three Hong Kong retailers and a toymaker collapsed within two weeks and as tightened credit conditions make it more difficult for smaller companies to refinance debt. Hundreds of Hong Kong investors protested in the streets last week over losses on so-called minibonds guaranteed by bankrupt Lehman Brothers Holdings Inc.

``We expect Hong Kong's economic activity will be very slow but still outperform other counties in Asia in the next six months,'' said Kenny Tang, director of Tung Tai Securities Co. in Hong Kong. ``China will contribute to Hong Kong's meager growth looking forward, and the city still has a solid financial basis, backed by its strong reserves and lack of foreign debt.''

Tai Lin Radio Service Ltd., a 60-year-old Hong Kong electrical appliance retail chain, was forced to close yesterday after accumulating HK$100 million ($13 million) debt.

Funds Frozen

U-Right International Holdings Ltd., operator of about 600 clothing outlets in the city and in China, had funds frozen after it was unable to meet a demand to pay HK$850 million of debt. Hong Kong's High Court on Oct. 6 appointed Deloitte Touche Tohmatsu as liquidator of the Hong Kong-listed company.

Smart Union Group Holdings Ltd., a Hong Kong-listed contract toymaker, said yesterday the city's High Court appointed two liquidators to take control of its assets. The company closed two factories in China's Guangdong province, Shanghai-based National Business Daily reported.

``The retail industry is definitely one that will be severely affected by the ongoing crisis,'' Tsang said. ``The health of small-to-medium-sized enterprises in Hong Kong is very important to us.''

Government Plan

The Hong Kong Association of Banks, which includes HSBC Holdings Inc. and BOC Hong Kong (Holdings) Ltd., agreed yesterday to a government plan to buy back Lehman's minibonds at market prices, after consumer allegations that sellers misrepresented the risks involved in the securities.

The Hong Kong Monetary Authority, the city's de facto central bank, said yesterday it referred to the Securities and Futures Commission 24 cases related to sales of the Lehman- guaranteed products.

``We're very happy about the banks accepting our buyback suggestion,'' Tsang said today. ``We will continue investigating some of the false-selling cases and establish a mechanism to facilitate dispute settlements between the banks and the investors.''

[winston]

Credit-crunch casualties hit Hong Kong sentiment
By Craig Stephen

HONG KONG (MarketWatch) -- The mood in Hong Kong has gone from fear to gloom, as evidence mounts that the financial contagion is fast spreading from financial institutions to the real economy. Most likely this dashes hopes of any quick equity-market recovery.

Priority to date has been to shore up liquidity in the banking sector, but now emergency aid is being demanded by the ailing corporate sector as a string of corpses emerge.

The bankruptcy Friday of electronics retail chain Tai Lin Radio Services -- the third largest in Hong Kong -- comes a week after local retailer U-Right (HK:627: news, chart, profile) succumbed to the financial crises.

Over in neighboring Guangdong factories are shutting amid predictions things could get much worse. Hong Kong-listed appliance maker BEP International (HK:2326: news, chart, profile) plans to lay off 1,500 workers this week, days after toymaker Smart Union (HK:2700: news, chart, profile) went into liquidation taking with it 6,500 staff.

Over the weekend, Federation of Hong Kong Industries Chairman Clement Chen said the credit crunch could bankrupt a quarter of Hong Kong-owned small and medium businesses by next Chinese New Year (Jan. 26), costing 2.5 million jobs.
The government at least has been quick to act.

Last week, the Hong Kong Monetary Authority moved to guarantee all bank deposits, saying it is ready to use the HK$1.4 trillion dollars in the Exchange Fund.

Now, attention has turned to helping small businesses. The government says it will boost its guarantee on half of loans up to HK$12 million, and all the money can be used for operating expenses, up from HK$2 million previously.

This will be welcome but much depends on the external turmoil abating. The Hong Kong interbank offered rate has hardly budged, and with more rumors of hedge fund-related liquidations, it is hardly surprising banks are still reluctant to lend.

While these latest government measures are aimed at smaller businesses, corporates big and small are facing challenging
times.

One new problem caused by sharp falls in stock and asset prices is that debt suddenly looks much more onerous if we use newly shrunken market capitalizations as a proxy for the balance sheet.

While market cap covenants on loans are unusual, this makes bankers uneasy when debt needs to be rolled over. Companies with funding questions outstanding are being avoided, as this will at the very least be an overhang on share prices until shown otherwise.

Even if a corporate could get a bond away in this market, what interest would they need to pay if Warren Buffet is getting 10% on his preferred Goldman shares?

If the cost or availability of bank loans is unpalatable, watch out for discounted rights issues or placements that dilute existing shareholders.

It is worth remembering that Hong Kong's family-owned companies, where much of the wealth is held privately outside listed entities, can use this as a means to increase ownership on the cheap. Last week major shareholder Richard Li controversially sought to use the low share price of PCCW (HK:8: news, chart, profile) to take Hong Kong's once proud fixed-line telecom operator private. Media reports said board members questioned whether the move would be seen as unfair to minorities, although we have still to see the offer price.

[kennynah]

what the heck is "underemployment" ???

**************

Hong Kong's Jobless Rate At 3.4% in July-September
10/20/2008 10:16 AM ET

(RTTNews) - Monday, Hong Kong's Census and Statistics Department announced that the jobless rate stood at 3.4% on a seasonally adjusted basis in July to September period, compared with the 3.2% recorded in June to August period.

At the same time, the underemployment rate reached 1.8%, down from 1.9% reported in the earlier period.

Meanwhile, the number of unemployed persons increased 4,900 in July to September period, from 129,100 persons seen in June to August. During the same period, the number of underemployed persons decreased 2700.

[blid2def]

Means people who're officially employed, but who're not doing anything, hence, under-employed?

[kennynah]

ok...sounds meaningful.....

then what of those who are officially unemployed but doing something? what would be the term, economists classify this lot under