Mega IPO HK Que

State-owned China Tower ,which operates the telecommunications towers for mainland China telecommunication companies, raised at least HKD54.3 billion (USD6.9 billion) in its IPO today.

China’s central bank the People’s Bank of China (PBOC)  said on Tuesday it will cut the bank reserve requirement ratio (RRR) – currently at 17% for large institutions and 15% for smaller banks – by 100 basis points (bps).

The cut is effective on April 25 and applies to most banks, with the exception of policy lenders such as China Development Bank.

 

Hong Kong’s retail sales grew at its weakest in three months in January, in value terms, due to a decline in tourist arrivals from mainland China and new year holiday distortions. The Lunar New Year fell in January last year but was in February this year. Retail sales in 2017 rose 2.2% in value terms over 2016, ending a three-year slump in the sector.
January tourist arrivals slid 2.6% from a year earlier to 5.33 million, ending four straight months of growth, according to the Hong Kong Tourism Board. Mainland visitors, which accounted for 77% of the total, fell 5.5% on year, in their first drop since August last year.    The total number of visitors increased last year, rising 3.2%, after declining in 2015 and 2016. Of those, mainland visitors were 3.9% higher than in 2016.

 

China tech giant joins USD bond rush run in the latest week. China’s tech firm Tencent was selling four tranches of bonds worth USD 5 billion on Jan. 19, according to the company’s announcement a week earlier.

 

The 4 tranches include 5-, 10-, and 20-year fixed-rate bonds at 2.985%, 3.595%, 3.925% respectively, and 5-year floating-rate bonds at 0.605% over three-month LIBOR.

 

The bonds selling plan is part of the company’s USD 10 billion medium-term bonds issuing plan announced in the previous week, according to China Xinhua News, “the global rating agency Moody’s has assigned a rating of A2, meaning low risk of default, to the Tencent bonds. The rating is one level below China’s business titan Alibaba’s bonds, issued last November”.

 

-Agencies

 

 

 

Chinese companies must repay 4 trillion yuan (USD614 billion) of bonds coming due this year, according to securities firm research. Chinese companies has an aggregate RMB 4 trillion coming due in 2018 and investors may also exercise options to sell an additional RMB 910 billion of securities back to issuers, Bloomberg reported citing Huachuang Securities research. There is a high probability investors who have options to sell back to property developer as well as local government financing vehicle bonds will do so, the report says.

 

– Agencies

Hong Kong’s foreign trade gap widened in November from a year ago, as imports grew faster than exports, data from the Statistics Department showed Thursday.

 

The visible trade deficit rose to HKD39.7 billion in November from HKD34.05 billion in the corresponding month last year. The shortfall was declined from HKD43.96 billion in October.

 

Exports climbed by 7.8% while imports climbed 8.6%, respectively in November from a year earlier.

 

– ACMR and agencies

Standard and Poor’s has cut its long-term rating on Hong Kong, following its cut to China’s sovereign credit rating , to reflect “spillover risks” to the territory.

 

S&P lowered its long-term rating on Hong Kong to AA+ from AAA  after it cut its credit rating on China. The ratings agency cited rising economic and financial risks in China following a prolonged period of strong credit growth as reasons for it cutting its rating on the world’s second-largest economy.

 

Strong institutional and political ties exist between China and Hong Kong, arising from the latter’s status as a Special Administrative Region of China. Consequently, we view a weakening of credit support for China as exerting a negative impact on the ratings on Hong Kong beyond what is implied by the territory’s currently strong credit metrics.

The central banks of China and Hong Kong said on Sunday said non-mainland investors can start trading mainland China’s bonds in a trial beginning on Monday.

 

Trading will initially be “Northbound”, so it will be non-mainland investors to buy and sell China debt.

 

 

 

Hong Kong’s household income inequality rose to a record high last year, a government census has shown. The Census and Statistics Department figures showed that the city’s Gini co-efficient based on monthly household income in 2016 was 0.539. Hong Kong’s figure climbed from 0.537 in 2011 to 0.539 last year, the highest since 1971. Higher scores represent greater inequality.

 

During Hong Kong’s last census in 2011, a score of 0.537 was recorded. The figure has been on the rise since the first measurements were made in the 1971 census. Singapore’s figure was 0.458 last year.

 

The government department attributed the heightened income inequality mainly to the effects of a rapidly ageing population and increase in the number of non-working elderly people.

 

 

 

The census department number put the city behind New York as the world’s second-most unequal city in terms of income. New York topped the list at 0.551 while Washington came in the third place at 0.535. The figures showed a further worsening of Hong Kong’s wealth gap, as the richest 10% households (with a median monthly income of HKD 112,450), earned 44 times more than the poorest 10% (making an average of HKD2,560).

Trading in Hong Kong-listed Sofa Maker was suspended on June 7 after its shares slumped by as much as 15.4%, following a presentation by fund Muddy Waters’ Carson Block against the furniture maker.

Block claimed Man Wah had failed to disclose all of its debt and that there were inconsistencies in its taxes that are “a strong indicator of fraud.”

Man Wah has instructed its legal advisers to file a formal complaint against Muddy Waters with Hong Kong’s Securities and Futures Commission, and said it stands by its Annual Report 2017. Its stock recovered slightly when trading resumed on June 9.

Will You Be Next?

In 2011, Block made headlines following his campaign against Chinese forestry company Sino-Forest Corp., which filed for bankruptcy in 2012. Late last year, he announced he had short sold China Huishan Dairy Holdings Co., which operates the most dairy farms in China, saying the company was worth “close to zero.” In March, its shares fell 85% in a day and they have been halted since.

Short sellers like Muddy Waters borrow shares to sell them with the hopes of buying them back at a cheaper price later on, aiming to profit from a price decline. Detractors say short sellers can sometimes unfairly push share prices lower simply by announcing a new target, whether such moves are warranted or not.

But supporters say the practice can force companies to make sure their business model is sound, their accounting is impeccable and their governance sensitive to stakeholder expectations. The targets of shortsellers like Muddy Waters have typically been enterprises with sloppy accounting and indications of fraud.

Man Wah’s Defense

In a filing with the Hong Kong stock exchange, Man Wah said Block’s presentation “contains allegations which are groundless and contains various misrepresentations, malicous and false allegations and obvious factual errors.”

“The Group has no undisclosed debt,” Man Wah said.

Muddy Waters’ allegations center on loans to a Man Wah subsidiary in China that the short seller says appear on a credit report issued by the People’s Bank of China, the central bank. The loan total is larger than the consolidated debt reported by the group.

Man Wah explained that the cut-off date for the subsidiary’s loans was December 2016, while the consolidated debt report was as of March 2017. It also said that the subsidiary had entered into a forward exchange contract and set-off agreements with the creditor bank.

“The net effect of such agreements is that the loans and deposits had been set-off,” said Man Wah.

The company also rebutted Block’s claims of inconsistencies in taxes, transfer pricing computations, sales growth, export sales and dividends.

– article from CFO Innovation Asia Staff