Greetings from a cold and clear Beijing. Here’s what’s making news in Hong Kong.

City Telecom pushes forward with station opening

City Telecom, which has been waiting for a free-to-air TV license, officially opened the Hong Kong Television Network yesterday at an event that included screenings of short films shot by the station and performances by actors dressed as City Telecom Chairman Ricky Wong. Commenting on the event, Wong said that Hong Kong needs to increase creativity and do away with the monopolization of television broadcasting by a small group.

Pro-establishment lawmakers urge Leung to explain his illegal structures

Last night, Chief Executive Leung Chun-ying met with 26 legislators from the Democratic Alliance for the Betterment and Progress of Hong Kong and another pro-business grouping of legislators. The pro-establishment legislators proposed three possible methods for Leung to provide more explanation on his illegal structures, including explaining in writing, calling a press conference or addressing LegCo. The goal would be for Leung to answer once and for all the remaining questions that the public has. Several legislators have said that Leung should make these explanations soon.

Fifty-one new Hong Kong restaurants are in Michelin Guide

The new Michelin Guide has been released. It now lists 286 Hong Kong restaurants, among which 51 have recently been added. Some people are pleased with the new list and others are not. The Mandarin Oriental Hotel’s Man Wah Restaurant and Pierre, the hotel’s French restaurant, have been removed from the guide. Meanwhile, some restaurants that made it to the list this year expressed concerns that their landlords might use the recognition as an excuse to raise their rents.

At Kreab Gavin Anderson we represent Standard Life Investments in Hong Kong. These are very insightful regular columns by their Chief Strategist. I rely on them and hope you find it useful.

Global Spotlight
30 November 2012

Andrew Milligan, Head of Global Strategy, Standard Life Investments

Despite the booms and busts of the past decade, the global economy has more than doubled in size between 2000 and the end of 2012. One of the key engines was global trade – the greater integration and interdependence between nations and regions. However, in the past year this factor has become less positive, as demonstrated by global trade slowing to a crawl. According to data gathered from the Netherlands Bureau for Economic Policy Analysis, also known as the CPB, global trade rose by only 0.8% in September. This followed three months of negative or zero growth as the realities of the Euro-zone crisis and weakness elsewhere in the world economy began to bite. Looking into 2013, the direction of global trade trends will provide important signals for investors about whether to take on board more risk.

Recent trade trends have resulted in winners and losers. On a local currency basis, Latin America and Central & Eastern Europe have seen their export volumes increase the most over the last 12 months. At the other end of the spectrum, Japan and a range of Asian emerging economies saw declines in export volumes. In the important middle ground, China and the U.S. have been winning market share while Europe, despite a lower Euro, has only seen a small increase in export volumes. This partly reflects changes in real exchange rates, which remain a key determinant of trade data, but also a shifting competitiveness across regions as well as the impact of policy tightening in countries such as China.

Asia is likely to be a crucial region in determining the fate of global trade during 2013. The signs are already encouraging with seasonally-adjusted exports expanding by an average of 2% month-on-month in September and October in China, Korea and Taiwan. This in part reflects a stabilisation of the Chinese economy but also points to a wider improvement in global growth. With the Euro-zone crisis easing and with a solution (of sorts) for the US ‘fiscal cliff’ in sight, some of the most significant drags on business sentiment appear to be lifting. This has already been feeding through to some Asian economies, particularly those that remain heavily dependent on end-markets in the OECD. In Taiwan, exports rose by 3% year-on-year during October, supported by a 5.6% and 5.9% surge in export orders to the US and Europe respectively. There was a similar revival in Korean export data in October with exports up 11% on a seasonally adjusted annualised basis.

To be more confident, however, we need to see these trends becoming more broadly based. In Hong Kong exports declined 2.8% year-on-year in October, down from 15.2% growth posted in September. In India, the October figures were even more depressing with the gaping trade deficit now meaning that export values account for just 52% of import values. It is not just national disparities across the region that are a concern. We are also witnessing a sector bias to Asian export trends. On the one hand, the high-technology sector appears to be bolstering Asian trade figures, with emerging Asian tech exports up nearly 6% in September on a US dollar basis. On the other hand, industrial goods exports remain far less robust, as highlighted by the 13% year-on-year fall in Thailand for this sector during October. In addition, the resources sector does not appear to be doing so well with exports from commodity regions across the emerging markets still contracting (in value terms) on an annual basis.

Bearish commentators would argue that this suggests the recent policy easing is not yet gaining traction. However, the House View is more positive that policy is starting to work as monetary transmission mechanisms slowly mend. Indeed, there is a more optimistic interpretation of the disparities within the recent trade data. We may be seeing market forces at work, with those sectors and nations best capable of efficiently allocating resources increasingly winning out. This may suggest that some of the political and credit blockages are beginning to clear, and that the ‘event risk’ associated with the US fiscal cliff, the Euro-zone sovereign crisis and the transfer of power in China may be starting to fade. The pick-up in the high technology sector also bodes well for global capital spending, and may prove a lead indicator for a loosening of purse strings from hesitant corporates. All in all, trends in Asian trade flows may be an important signpost for the direction of the global economy. If they stall, we may be witnessing another false dawn in this painfully protracted global recovery. If momentum can be sustained, it may indicate that the major economies, and therefore equity markets, can make positive headway into 2013-14.

Link:

http://www.standardlifeinvestments.com/market_views/global_spotlight/index.html

Leung urges business leaders to “shout at” those who impede policymaking

Speaking at a Hong Kong General Chamber of Commerce event yesterday, Chief Executive Leung Chun-ying urged attendees to “shout at” anyone who they found obstructing the realization of policy. This has prompted some people to criticize Leung for fomenting discord and sowing divisions. In response to Leung’s advice, Labor Party legislator Kenneth Chan said that Leung’s failure to respond to the notices that the Buildings Department had sent to Leung regarding the illegal structures at his Peak property was the real obstruction of policy implementation.

Leung’s illegal room is 60 percent larger than he claimed

Last night, the Buildings Department sent another team to investigate the illegal room located at Chief Executive Leung Chun-ying’s larger of two homes on Peel Rise. The investigators discovered that the illegal room is 320 square feet and not the approximately 200 square feet that Leung claimed last Friday. In total, the two houses have 801 square feet of illegal structures. The Buildings Department surveyor who went to the house refused to comment on the legality of the structures or whether an order had been given to demolish them.

Kowloon Bus applies for an 8.5 percent fare increase

Kowloon Bus has announced that it has applied for government permission to raise its fares by 8.5 percent, or about five cents per trip on average. According to the company, this price increase will bring in an extra HK$500 million in revenue. The announcement says that Kowloon Bus is aware that its new ticket prices will be unpopular but feels obligated to raise fares in light of the fact that 70 percent of its routes are losing money. The announcement also mentions an increase in the costs of labor and fuel as contributing factors to its decision. To help deal with these problems, next year, Kowloon Bus will submit a route consolidation plan to the government. An academic has said that the government will probably only allow a partial fare increase.

Want Want Chairman wants investigation at ATV

Yesterday, Tsai Eng-meng, Chairman and CEO of Taiwan’s Want Want Holdings, applied to the High Court to have an independent investigator appointed to sit on ATV’s Board of Directors. He said that since ATV Chairman Wong Ching had taken charge at the station, the management of the station had gotten more and more disorderly and the station had appeared frequently in the media. Tsai’s company, Antenna, is one of the major shareholders of ATV. The judge allowed Tsai’s case, saying that Tsai had raised a serious question.

Leung didn’t respond to four letters from the Buildings Department

Yesterday, the Buildings Department released a statement saying that it had discovered in June 2012 that a brick wall at Chief Executive Leung Chun-ying’s residence was not located in the place that an external wall should be according to the building plan. The statement said that the department had attempted to contact Leung four times in writing to investigate the matter, but that Leung had not responded.

Yesterday, Leung offered an explanation of his failure to respond. He said that he had not replied because he did not think that responding was convenient at a time when he was the defendant of a lawsuit raised by Albert Ho, a losing candidate for the position of Chief Executive, over the validity of Leung’s win. However, Civic Party legislator Ronny Tong believes that Leung attempted to conceal information from the court. Tong said he thought that Leung was worried that he would lose the lawsuit if the court knew that he was aware that his property contained an illegal structure.

KC Chan says that there are too many MPF products

Yesterday, Secretary for Financial Services and the Treasury KC Chan said that Hong Kong currently has too many Mandatory Provident Fund (MPF) products and that those products are too complicated. He said that this situation does not protect the interests of savers. He also said that thinks that MPF products should be standardized and reduced in number so that consumers will understand what they are buying.

Turn on the speakers. If you like disco and old movies then this would be heaven!

Rita Hayworth is “Stayin’ Alive”

Ever think of debt as a weapon? How about the fact China holds US$1 trillion in debt from the United States. The Pentagon says they’re not concerned. I am. Read more:

China’s U.S. debt holdings aren’t threat, Pentagon says.