Top 10 business news of 2010

中國日報香港版

After the global financial crisis, 2010 was a year in which the world climbed out of the economic trough. Hong Kong rode the recovery wave, despite facing continuing challenges of its own – including a looming property bubble. But the city had its triumphs too, most notably moving a step forward to becoming a yuan businesss hub. China Daily looks back at the stories that shaped the past year.

Fighting against the property bubble

If you take 1997 property price levels as the benchmark, some may also recall Alan Greenspan’s famous phrase, “irrational exuberance” – implying that these halcyon days are numbered. Indeed, prices in the luxury sector have already passed their historical peak and the mass market is hot on its heels.

But with a lot of brainpower at its disposal, the government has been doing its best to come up with a solution. The Urban Renewal Authority, the Hong Kong Monetary Authority – they have all been trying to come up with something to stop a trend that has seen home prices surge 50 percent since the beginning of 2009. Seven whole rounds of measures have been taken this year including initiatives to smoke out speculators and increase housing supply.

But on November 19, the government finally delivered a knockout punch to speculators. It announced punitive stamp duties of up to 15 percent on those buyers who resell within two years, as well as declaring much tighter mortgage restrictions. The red hot property market has cooled since then, but the question remains – for how long? We’re not sure what will happen, but we can safely predict that property will remain a big story in 2011.

Offshore yuan center takes a leap forward

Throughout the year, bankers in the city got excited every time when there was news that Hong Kong is moving closer and closer to becoming an offshore yuan center for the yuan business. And as it takes quite a lot to get a banker excited, you know that this was a big story in 2010.

After the People’s Bank of China and the Hong Kong Monetary Authority signed supplementary and revised agreements on the yuan business in the city on July 19, a flurry of yuan bonds issued by both banks and private companies hit the market.

By the end of November, yuan deposits in Hong Kong reached 279.6 billion yuan, double that of a year ago. In early December, the People’s Bank of China announced a list of newly approved export companies that are qualified to participate in the yuan settlement pilot scheme for cross-border trade. The number skyrocketed to 67,359 from 365, boosting demand for Hong Kong’s established yuan settlement platform. The latest boost has come from the city’s richest tycoon, Li Ka-shing, who is reportedly considering launching the first yuan-denominated initial public offering in the city. 2011 is poised to welcome more breakthroughs in the offshore yuan business.

HKEx to extend

trading hours

Fearing that long lunches are more of a threat than Singapore to Hong Kong’s status as an international financial center, Hong Kong Exchanges & Clearing (HKEx) sought to keep in line with other markets in the region by announcing in November that it is extending its trading hours.

Starting from March 7, 2011, the current four-hour daily trading session will be extended to five hours and an extra half hour will be added from March 5, 2012. HKEx, the operator of Asia’s third-largest stock market, will certainly see trading volume increase while its competitiveness as a trading platform should be given a boost. Or at least that is what some analysts believe. Stock brokers generally applauded the change, despite having less time for lunch. Is nothing sacred anymore?

Soap opera in the HSBC boardroom

We don’t know how many hissy fits were staged or if any tears or blood was shed, but the drama in the HSBC Holdings Plc boardroom showed us that bankers might really be human after all.

Douglas Flint, HSBC’s former finance director, took over as chairman of the bank on December 3, replacing Stephen Green whose unanticipated resignation in September to become the UK government’s trade minister triggered off one unholy bun fight in the boardroom.

After all the upheaval, HSBC Chief Executive Michael Geoghegan announced that he would be stepping down in early 2011 once it was clear that Flint would become chairman.

Geoghegan, who joined the bank at 19, might have believed the position should rightfully have been his. And given that was the tradition for most of the previous 150 years, no doubt this put his nose out of joint. Anyway, once the cigar smoke cleared, it was announced that Geoghegan would be succeeded by Investment Bank Head Stuart Gulliver in March 2011.

Reverse mortgage scheme for the elderly

Hong Kong’s elderly can expect another monthly income stream for the rest of their lives if they sign up for the so-called reverse mortgage scheme.

The government-sponsored Hong Kong Mortgage Corporation (HKMC) announced on December 16 that it is to launch a reverse mortgage pilot scheme by the middle of 2011.

Under the scheme, home owners aged 60 or above can apply for a reverse mortgage loan with approved banks and receive monthly payments for the rest of their lives.

The elderly can expect steady cash flows to improve their standard of living while staying in their own homes. However, a HKMC survey shows that only 44 percent support the idea and less than 25 percent of respondents would actually consider taking out such a loan. Reverse mortgages have also drawn criticism elsewhere with the agreements being hard to understand. Some also worry that the elderly may be preyed upon by brokers or lenders. And it has been pointed out that in Hong Kong those most typically drawn to the scheme would be the very poor, who would draw very little in return.

SFC chairman to step down in June

Preventing PCCW Ltd from going private due to alleged manipulation of shareholder votes, securing jail sentences for insider trading, boosting protection for retail investors after the Lehman Brothers mini-bonds fiasco, the city’s financial market watchdog was not shy of making bold moves in the pursuit of better corporate governance for Hong Kong.

However, the news that Martin Wheatley, the chief executive officer of the Securities and Futures Commission, will leave before his contract expires, prompted people to ask questions about the future of corporate governance in the city after his departure. Wheatley said on December 11 that he will leave his post in June 2011, three months before his contract expires. Wheatley’s successor has not been named yet, but investors are sure to keep a close eye on who gets the post and whether he or she will protect their interests.

Regulators tighten derivatives rules

Financial derivatives products, obscure and risky by nature, helped ignite the global financial crisis in 2008. But to keep in line with global commitments agreed by the G20 on better regulation and supervision of the products, Hong Kong’s regulators got in on the act. Though small compared with other markets, the Hong Kong Monetary Authority said December 10 that it will set up a central registry, requiring financial institutions to report their OTC (over-the-counter) derivatives transactions and keep their records on an electronic database. Meanwhile, HKEx will operate a central counterpart clearing facility. The initiatives are designed to improve transparency.

Hontex IPO funds frozen by court

The Securities and Futures Commission made an unprecedented move earlier in the year as it cracked down on one firm that just wouldn’t play by the rules. The SFC filed a complaint on March 30 saying that Hontex International, a Taiwanese-controlled mainland fabric maker, had violated the rules by providing misleading information during the firm’s IPO at the end of 2009. Later in April, the Court of First Instance granted an order which stopped the company from moving its HK$1 billion IPO funds out of the city. This was the first time that the regulator had sought a court order to freeze the IPO cash of a newly-listed firm, and the toughest move it had ever made against a newly-listed company.

City tops world IPO market rankings

The local bourse was crowned the world’s top IPO market in 2010 for the second consecutive year and many market watchers believe the momentum will continue in 2011. The local IPO market raised HK$450 billion in aggregate new capital and was shored up by several heavyweight bourse listings.

Agricultural Bank of China raised HK$98.2 billion of capital in June, while American International Insurance raised HK$138.3 billion of funds in October. Meanwhile, HKEx did its best to attract new companies and diversify its constituents. United Company Rusal, the city’s first-ever primary offering from a company based outside of Asia, raised HK$17.3 billion in Janurary. L’occitane, a French beauty products maker, raised HK$5.49 billion in April. And in December, Vale completed its secondary listing in the form of Hong Kong depositary receipts (HDR).

Mainland accounting standards get nod

HKEx said on December 10 that it will allow locally-listed mainland firms to file financial statements compiled based on mainland accounting standards and audited by accredited mainland auditors. Meanwhile, mainland regulators will also recognize financial statements of Hong Kong-based companies, compiled and audited based on the city’s accounting standards when they list on the mainland.

Following this mutual recognition, the 64 A+H share companies and 100 H-share-only firms, representing 11.5 percent of overall listed companies on the local bourse, need now prepare only one set of financial statements based on mainland accounting rules, rather than two sets of reports as currently practiced. This new arrangement will reduce compliance costs of mainland-incorporated companies that list here, potentially inviting more IPOs in the future.