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

[winston]

Unwinding carry trades amid a global equities sell-off pushed the Hong Kong dollar to the upper limit of its pegged trading band against the greenback.

The territory's central bank has injected more than $2 billion into the banking system this week in a bid to curb the appreciation in the local currency

[millionairemind]

Nov 21, 2008
HKEF posts record 3Q loss

HONG KONG - THE Hong Kong Exchange Fund (HKEF) made a record loss of 48.3 billion Hong Kong dollars (S$9.46 billion) in the third quarter, as the city was hit by the global financial crisis, officials said on Friday.

The figure follows a HK$20.4 billion loss in the second quarter and brings the Fund's losses for the first nine months of the year to HK$83.3 billion, the Hong Kong Monetary Authority said.

Mr Joseph Yam, chief executive of the city's de facto central bank, said they were facing 'unprecedented challenges' in managing the fund in the financial crisis and warned of further losses.

'The situation in October was indeed very bad. As a result, I expect losses will continue to be incurred in the fourth quarter', he told lawmakers on Friday.

'This means that it will not be surprising to have an overall loss of more than HK$83.3 billion'.

The fund's losses from January to September were mainly due to its stock investments.

It lost a total of HK$56.9 billion on local stocks after the benchmark Hang Seng Index fell 35 per cent during the nine-month period. It has also lost HK$43.2 billion to its overseas stock investments, according to Dow Jones Newswires.

But its in bonds generated a profit of HK$30.6 billion over the same period.

The fund posted record earnings of HK$142.2 billion in 2007, up from HK$103.8 billion in 2006.

The fund, which is made up of a variety of assets including stocks and bonds, amounted to HK$1.426 trillion as of September 30.

It is used by the Monetary Authority to maintain the Hong Kong dollar's peg to the US dollar and ensure financial stability in the territory. -- AFP

[LenaHuat]

MorganStanley's report:

We now forecast Hong Kong exports to fall 5.2% in 2009, the first decline since the collapse in tech exports in 2001. We expect the contraction in trade activity to deal another blow to household consumption (+0.5% in 2009), and private sector investment (-4%).
This should bring overall real GDP growth to -1.2% in 2009, the first annual contraction since 1998. On a quarterly basis, we now see five quarters of sequential (QoQ) contraction.
We forecast YoY growth to remain negative for 3-4 quarters starting from 4Q08.
In our view, 1H09 will likely be especially harsh, with YoY contraction in excess of 3%.
We see rapid disinflation ahead on the back of: (a) weak consumer demand,
(b) correction in international food, commodity, raw materials prices, (c) cheaper imports amidst
US$ strength and slower Rmb appreciation, and (d) gradual downtrend in housing rents.

[winston]

Economy to shrink 3pc in 2009: Goldman

Hong Kong's economy will probably contract 3 percent next year as companies fire workers and consumers pare spending, according to Goldman Sachs Group.

The external growth environment is deteriorating, with a synchronized growth slowdown in the US and China, Enoch Fung, an economist at Goldman Sachs in Hong Kong, said.

The negative wealth effect, due to more subdued asset prices, will become a more significant drag on the consumption cycle in the medium term.

The ongoing financial market volatilities should continue to cast more uncertainty over hiring demand in the financial sector, the main driver of employment growth in the past.

Fung estimated the local jobless rate will rise to 6.5 percent by 2010, from 3.5 percent in October.

BLOOMBERG

[winston]

Economy to shrink 3pc in 2009: Goldman

Hong Kong's economy will probably contract 3 percent next year as companies fire workers and consumers pare spending, according to Goldman Sachs Group.

The external growth environment is deteriorating, with a synchronized growth slowdown in the US and China, Enoch Fung, an economist at Goldman Sachs in Hong Kong, said.

The negative wealth effect, due to more subdued asset prices, will become a more significant drag on the consumption cycle in the medium term.

The ongoing financial market volatilities should continue to cast more uncertainty over hiring demand in the financial sector, the main driver of employment growth in the past.

Fung estimated the local jobless rate will rise to 6.5 percent by 2010, from 3.5 percent in October.

BLOOMBERG

[kennynah]

Hong Kong's Industrial Production Declines In Q3
12/12/2008 5:12 AM ET

(RTTNews) - Hong Kong's industrial production decreased 6.7% year-on-year in the third quarter after falling 4.1% in the second quarter, the Census and Statistics Department said Friday.

Production in the wearing apparel industry excluding footwear showed the largest decrease of 22.1%, followed by a 17.9% fall in production in the textiles industry including knitting.

On a seasonally adjusted basis, industrial production dropped 3.1% compared with the second quarter.

At the same time, the official report showed that the producer price index increased by 5.5% in the third quarter of 2008 over a year earlier. In the previous quarter, prices were up 6.7%.

Separately, the statistical office said the total gross value of construction works performed by main contractors in the third quarter of 2008 increased 5.6% in nominal terms over a year earlier to HK$24.0 billion. After discounting the effect of price changes, the total gross value of construction works fell 3.2% year-on-year in real terms.

On a seasonally adjusted quarter-to-quarter basis, the gross value of construction works declined 3.7% in nominal terms. This follows a fall of 6.5% in the second quarter.

[millionairemind]

Dec 13, 2008
HK injects $740.7m into mkt

HONG KONG - HONG KONG'S central bank, the Hong Kong Monetary Authority, confirmed on Saturday it had injected HK$3.875 billion (S$740.7 million) into the city's banking system late on Friday in New York trading to stem an appreciating Hong Kong dollar.

It was the second injection on Friday after the authority injected HK$3.1 billion into its currency market in the afternoon as the Hong Kong dollar hit the top end of its trading range.

The Hong Kong dollar is pegged at 7.8 to the US dollar but can trade between 7.75 and 7.85 to the US dollar.

It was quoted at 7.7501/02 against the US dollar in late Asia trading on Friday.

Hong Kong's currency has been boosted by the unwinding of carry trades and fund inflows into the territory this week, dealers said. -- THOMSON REUTERS

[millionairemind]

December 15, 2008, 8.19 pm (Singapore time)

HK central bank intervenes 3x to defend currency peg
HONG KONG - The Hong Kong Monetary Authority said it intervened three times in less than two hours in the foreign-exchange market on Monday to defend Hong Kong dollar's peg to the US dollar.

The de facto central bank bought a total of HK$5.85 billion (US$750 million) worth of the US currency in three interventions, its spokeswoman told AFP. The moves came after the local currency repeatedly hit the upper trading band of HK$7.75 to the US unit.

Under the city's pegging system, the Hong Kong dollar is set at 7.80 to the US dollar, but is allowed to trade between 7.75 and 7.85.

The three interventions will increase Hong Kong's aggregate balance to HK$97.20 billion on Wednesday, she said.

Traders said they expected the US dollar to remain in a tight range between 7.750 and 7.751 in the near term, since many market participants had closed their books and gone on vacation.

'Investors' interest in carry trade is nearly zero because of the narrow gap between Hong Kong and US rates. Also, many traders won't make aggressive bids with the year-end approaching,' a senior trader at a local bank told Dow Jones Newswires. -- AFP

[millionairemind]

Always nice to have BIG brother back you up

Report: China will help HK

BEIJING - CHINESE Premier Wen Jiabao promised Hong Kong's chief executive on Friday that Beijing will take steps to help the territory weather the global financial crisis and keep its economy growing, the government's China News Service reported.

Mr Wen told Donald Tsang at a meeting in Beijing that the central government will strengthen financial cooperation with Hong Kong and further open mainland service industries to Hong Kong companies, the report said.

The report said Mr Wen presented a list of 14 measures 'to support Hong Kong's financial stability and economic development.' It gave no details of other measures and did not say how many of them were new.

Hong Kong has been battered by the slump in global demand for Chinese goods, a large share of which pass through the former British colony.

Hong Kong is a Chinese territory but has its own currency and fiscal policy. -- AP

[winston]

Hong Kong Richest 1% Keep Michelin Eateries, Priciest Bars Open By Chia-Peck Wong

Dec. 22 (Bloomberg) -- Hong Kong businessman Dino Sadhwani spends HK$10,000 ($1,290) on a typical, twice-a-week night of dining and partying at the city’s top-end restaurants and clubs. That’s after some belt tightening.

Before the global financial crisis cut the value of his stocks portfolio by 40 percent and reduced his company’s projected sale of hammers and drill bits to the U.S., Sadhwani, 25, would spend up to a third more at exclusive joints like Zuma and China Club. He is also taking one vacation this year, instead of the usual four.

Even with the cutbacks, the dining bill of Hong Kong’s richest 1 percent, such as Sadhwani, remains large enough to keep some of the city’s most expensive eateries going amid the recession, said Nick Debnam, KPMG’s partner in charge of consumer markets in Hong Kong.

“The chunk of the population that eats at these sorts of places once or twice a year is going to disappear,” Glenn Maguire, chief Asia-Pacific economist at Societe Generale SA in Hong Kong, said in an interview. Still, the rich are likely to keep returning to their favorites. “They may, instead of having a holiday, go out for a nice restaurant meal instead.”

Government data show Hong Kong’s restaurant receipts rose 14 percent to HK$20 billion in the three months ended Sept. 30, even as the local benchmark Hang Seng Index fell 18 percent from the preceding quarter as the effect of the U.S. slowdown spreads.

HK$16,888 A-Head Dinner

At Gaddi’s, the French restaurant at The Peninsula, about 40 guests paid HK$16,888 each for a Dec. 18 dinner to celebrate the five-star hotel’s 55th anniversary, according to a spokeswoman.

The price tag, excluding a 10 percent service charge, covered six courses, such as Atlantic blue lobster and slow- roasted venison loin. Each course was paired with a wine of the 1953 vintage, including a Chateau Margaux.

Petrus, with one Michelin star from the guide’s inaugural local edition launched last month, is expected by its managers to sell out its eight-course New Year’s Eve dinner at HK$4,088 a head.

Clients don’t mind splashing out as they “don’t want to get caught up in the rut” of bad economic news, said Ilona Yim, director of communications for the Island Shangri-La, where the restaurant is located. “They want to enjoy a good meal.”

‘Gourmet Paradise’

Hong Kong’s tourism board promotes the city as a “Gourmet Paradise” for its diversity of cuisine for every budget. Frequent sightings of movie stars and tycoons at bolthole eateries show the city’s ardor for good food. Hong Kong became the third Asian city after Tokyo and Macau where top Michelin chef Joel Robuchon has opened a restaurant.

“If you get into a Michelin restaurant or into those top trendy places, you will find they are relatively recession- proof,” said Debnam.

Restaurants also have room “to buffer their margins” amid the drop in food costs and removal of wine taxes in Hong Kong, Maguire said.

Recent statistics are more sobering. Revenue of Hong Kong eateries fell an average of 10 percent in November, with upmarket eateries among the worst performers, said Lok Kwok-on, chairman of Hong Kong Federation of Restaurants & Related Trades, earlier this month.

On Nov. 14, the Hong Kong government cut its growth forecast for the city this year to between 3 percent and 3.5 percent from the previous estimate of 4 percent to 5 percent. Chief Executive Donald Tsang warned the city’s 7 million people of a difficult 12 months ahead and called a recession next year “inevitable.”

Dragon-I

That might prompt the less well heeled to hunt for bargains like the HK$1 noodle dish Tasty Congee & Noodle Wantun Shop’s plans to sell in January. Still, places such as Gilbert Yeung’s Dragon-I, one of Hong Kong’s trendiest dining and entertainment spots, will be able to ride out the recession, thanks to clients such as Sadhwani, said Debnam.

“The slowdown is definitely a concern,” said Sadhwani, whose parents own Hong Kong’s Holiday Inn Hotel and who has a penchant for Audemars Piguet watches. “But I want to enjoy life as I’m young and I’m single.”

Yeung, who has hosted Sting and David Beckham at his 6,000- square foot venue, said regulars, including Sadhwani and his posse of models and tycoon’s sons, aren’t spending less.

“I still see a lot of Dom Perignon’s floating around,” Yeung, 42, said in an interview. A 750 milliliter bottle of the champagne costs HK$2,200 at Dragon-I.

Partying Every Night

Michael Chan, a 31-year-old private banker whose annual salary tops HK$1 million, said he’s been out on the town about five nights a week, spending as much as HK$3,000 each time to beat the gloom.

“It’s a choice that I make to continue to go out and enjoy life,” Chan said.

Bonnie Gokson, Hong Kong socialite and former Chanel Inc. executive, said Sevva, her trendy restaurant and bar, is “pretty packed all the time” in the past few months as the rich pursue their “passion for entertaining and dining out nicely.”

Still, Dragon-I isn’t immune to the economic slump. Its turnover since October has fallen at least 10 percent, Yeung said.

Yeung said some clubs in Hong Kong’s central district “are suffering” and may have to close next year unless they buck up.

Until then, owners may have to hope that the economy doesn’t worsen further.

“If the financial situation deteriorates,” Sadhwani said, “This is the first place I’d cut spending.