Credit Suisse predicts slower Asian growth in 2008 on US Slowdown

Credit Suisse economists have predicted that projected growth of Asia in 2008 will slip on slowing economic growth of the US.

Now, Asia ex-Japan is expected to post 8.3% growth in 2008, as compared with 8.4% predicted this year. As regards growth, China, India and Vietnam are expected to lead the way, however growing inflation remains a concern for all the 3 countries.

Credit Suisse stated that in spite of the recent market volatility, Asian currencies and equities are, in general, still up or flat on the year, and that credit is not widespread among Asian consumers. The exposure of regional banks to CDO/subprime debt seems to be limited, however, the sell-off in credit markets might have created losses resulting in high exposure to foreign currency corporate bonds.

According to Credit Suisse’s Chief Regional Economist for Asia ex-Japan, Dong Tao, “the malaise in the U.S. housing sector is expected to trigger a global slowdown, and Asia’s exports will be affected”. But he suggested that “economic fundamentals in Asia ex-Japan remain solid and regional markets should weather the growth downcycle."

In the Emerging Markets Quarterly report recently published by Credit Suisse’s, average weighted growth for Asia ex-Japan was from the previous 8.6%.revised down to 8.4% for 2007.

Filed under: Business and Economy

Hong Kong remains preferred location for foreign companies

New figures have revealed that Hong Kong remains one of the most preferred locations for foreign companies that manage their operations in the Asia Pacific region. This is mainly due to its low and simple taxation and proximity to mainland China.

According to Mike Rowse, Director-General of Investment Promotion at the government’s investment promotion agency Invest Hong Kong, 60.4% of the 6 440 Hong Kong companies that represent overseas parent companies have regional offices or headquarters in Hong Kong. He said that companies selecting Hong Kong as their primary office in the region are the best advertisement for Hong Kong. Rowse commented that since the handover in 1997, regional headquarters and regional offices number has increased by 55%.

In accordance with the survey, there were several key factors that affected the choice of Hong Kong as a location for regional headquarters and local offices. These favourable factors include the following:

•  low and simple tax system;
• corruption-free government;
• free flow of information;
• absence of exchange controls;
• availability of business services and professional support services;
• political stability and security;
• rule of law and independent judiciary;
• good communication, transport and other infrastructure;
• free port status;
• geographical location.

Unfavourable factors were indicated as well. These were the availability and cost of residential and business accommodation.

The results of the survey also show that all the headquarters, regional and local offices employ about 346 000 people in Hong Kong, which accounts for about 1 in 10 of the working population.

Filed under: HK as a Financial Centre

Ma promotes Hong Kong in Russia

Frederick Ma, Hong Kong’s Secretary for Commerce and Economic Development has spoken at a Trade Development Council seminar in St Petersburg, Russia. Ma has informed Russian business representatives that the unique relationships of Hong Kong with China is the perfect staging post for Russian entrepreneurs to enter the vast Chinese markets.

He stated that Hong Kong has high degree of economic autonomy under “One country, two systems” and indicated that strategic position under the Closer Economic Partnership Arrangement (CEPA) with the Mainland have provided grounds for opportunities that will be benefitial for overseas partners having operations set up in Hong Kong.

Ma came to St Petersburg together with a high-level trade delegation in the end of September. He gave a briefing to Russian local media that was aimed to promote better understanding of economic advantages offered by Hong Kong.

Frederick Ma not only spoke on potential trade growth between Hong Kong and Russia, but also encouraged more co-operation between the tourism sectors of the two countries.

Filed under: International Business Environment

Hong Kong ranked 14th out of 180 countries in CPI

On September 16, 2007, Transparency International, the global nongovernmental coalition against corruption released the 2007 Corruption Perceptions Index (CPI).

CPI relates to perceptions of the degree of corruption as seen by
business people and country analysts and scores countries on a scale
from 0 to 10, where 0 means high levels of perceived corruption, while
10 indicates low levels of perceived corruption.

According to the report, Hong Kong is ranked 14th in the cleanness of its government in a list of 180 countries in 2007, which is evidently a good result.

Also, the result reveals Hong Kong’s stability and even a slight
progress as regards corruption as in 2004 Hong Kong’s was 16th with CPI
score 8.0, in 2005 – 15th with CPI score 8.3, in 2006 – again 15th with
CPI score 8.3, and this year it is 14th with CPI score accounting for
8.3.

The annual CPI, first published in 1995, ranks countries by their
perceived levels of corruption determined by expert assessments and
opinion surveys. The 2007 CPI provides the greatest country coverage
ever as it reveals perceptions of public sector corruption in 180
countries. The index combines 14 expert opinion surveys.

Also, Transparency International revealed the 2007 CPI regional
ranking. It ranked 32 Asia Pacific countries. In this country rank, the
regional leader is New Zealand, which is also the leader in the 2007
Corruption Perceptions Index, followed by Singapore and Australia, and
Hong Kong is ranked 4th. The most corrupted Asia Pacific country is
Myanmar.

Filed under: HK as a Financial Centre

Hong Kong Corporate Governance ranked above Singapore

Brokerage CLSA and the Asian Corporate Governance Association compiled a new report, Corporate Governance Watch 2007 that ranks Hong Kong in 1st place for corporate governance among Asian countries. Accordingly, Hong Kong has knocked Singapore into 2nd place.

The Corporate Governance Watch 2007 report, entitled "On A Wing And A Prayer: The Greening of Governance" assesses the quality of corporate governance in 11 Asian markets as well as provides aggregate data from 582 listed companies. ASGA says it has expanded the survey, tightened the scoring, discussed the way corporate governance rules and described the way best practices are being implemented by companies.

The report now includes 87 questions under 5 categories:
"Corporate Governance Rules and Practices",
"Enforcement",
"Political and Regulatory Environment",
"Accounting and Auditing Standards",
"Corporate Governance Culture".

In the beginning, the report discusses both the strengths and weaknesses of the corporate governance regime in each market as well as provides a short regulatory overview of each chapter written by the ACGA team.

The report was last published in 2005. Singapore was considered to be superior in terms of corporate governance then.

This year report shows that Hong Kong took the lead over Singapore. Singapore is followed by India 3rd place, Taiwan is the 4th and Japan is the 5th.

Filed under: HK as a Financial Centre

HK develops 5 pronged Financial Centre Strategy

Asia Financial Forum has already been described previously. However, its results have not been discussed.

At the Forum, Hong Kong’s Financial Secretary John Tsang announced that Hong Kong’s administration has developed a 5 pronged strategy in order to bolster the jurisdiction’s role as a global financial centre for mainland China.

The 5 broad areas are as follows:

• to expand the presence of the Territory’s financial institutions on the Mainland;
• to offer the jurisdiction’s financial instruments to the Mainland;
• to raise Hong Kong’s role in the outward mobility of Mainland funds;
• to develop its handling of renminbi-denominated transactions;
• to dovetail the infrastructure of the financial systems of Hong Kong and the Mainland.

Financial Secretary expressed his confidence that the 5 pronged strategy will strengthen the jurisdiction’s role as a global financial centre for China as a whole. He said that the hard work has been done to boost Hong Kong’s interface with the Mainland’s developing market and systems, and that even more work will be done to promote Hong Kong’s financial services to the rest of the world.

Filed under: HK as a Financial Centre

Hong Kong – China’s largest foreign investor

According to a new report, companies in Hong Kong injected the most investment into China in the 1st 8 months of 2007. Hong Kong’s input accounted for USD 14.1 billion of the USD41.95 billion total.

Besides Hong Kong, such offshore financial centres as the British Virgin Islands and the Cayman Islands remained a favoured source of investment into China. Hong Kong is followed by the BVI accounting for USD 9.91 billion. The Cayman Islands accounted for USD 1.51 billion.

The 1st 10 investors (Hong Kong, the British Virgin Islands, the Republic of Korea, Japan, Singapore, the United States, the Cayman Islands, the Samoan Islands, Taiwan, and Mauritius) accounted for 86.55% of all foreign investment into China in the 8 months of 2007 (till the end of August 2007).

It should be noted that offshore jurisdictions figure so prominently in China’s foreign investment statistics to a great extent because of China’s tax structure for foreign and domestic companies, which is to be replaced on January 1, 2008. Most foreign invested companies currently pay a much lower rate of corporate tax than their domestic counterparts as they qualify for different incentive schemes and deductions which are not available to local companies.

Filed under: Offshore Companies

Panel finds HK Regulator’s processes appropriate

The Hong Kong Securities and Futures Commission’s (SFC) Process Review Panel has stated that in its decisions and actions the Commission adhered to internal procedures in all cases under review.

However, according to the panel chairman Anthony Chow, the 6th annual report that covers the SFC’s work in 2006 identified areas with "room for improvement". He explained that in 2006 the panel reviewed 40 completed cases and the procedures of the SFC that cover different areas of its work, and found that the SFC had been adhering to its established internal procedures in their decisions and actions. However, certain areas for improvement has been also identified by the panel.

The review evaluated 6 of the key functions of the Commission, which are the following:

• licensing of intermediaries;
• inspection of intermediaries;
• authorisation of collective investment schemes;
• handling of complaints;
• investigation and disciplinary action;
• processing of listing applications under the Dual Filing regime.

Financial Secretary John Tsang welcomed the report. He said that the 6th annual report of the panel provides “a comprehensive review of the adequacy of selected internal procedures of the Securities and Futures Commission”. He thanked the panel for a number of constructive recommendations aimed at improving the transparency, efficiency and consistency of the SFC’s procedures. Tsang thanked Chow and members of the panel for being dedicated to enhance the quality of market regulation in the past year.

Filed under: Investment Environment

HK must fully use the potential and opportunities of CEPA

In the middle of September, Financial Secretary of Hong Kong John Tsang said on that the jurisdiction’s industry must keep abreast of the mainland China’s development and the growing influence of globalisation and economic integration. It also must prepare to use the opportunities and fully tap the potential of the Closer Economic Partnership Arrangement (CEPA).

Tsang opened the CEPA Supplement IV Business Forum with Vice Minister of Commerce Liao Xiaoqi.

Financial Secretary said that CEPA has established a brand new economic platform to further bolster the status of Hong Kong in both regional and international markets. CEPA has also managed to bolster the jurisdiction’s economic recovery and to enhance the access of professionals to the market of the Mainland China.

Tsang stated that the forum aimed at updating Hong Kong industry on CEPA’s implementation progress as well as at better understanding of the new liberalisation package and business opportunities.

The forum, which was one of the Hong Kong Special Administration Region’s 10th anniversary celebration events, was attended by about 400 Hong Kong traders and professionals.

It should be noted that CEPA is the 1st free trade agreement between Hong Kong and China that covers liberalisation and co-operation measures in trade in goods and services and trade and investment facilitation.

The agreement was signed in June 2003, and then further 4 supplemental agreements were agreed to add new products and services to the scope of the agreement. Supplement IV was signed in July 2007. In accordance with it,  the Mainland will introduce 40 liberalisation measures in 28 services areas, including banking, tourism, environmental services, etc. The provisions will come into effect on January 1, 2008.

Filed under: Hong Kong and China