Hong Kong

HK exchange makes risky $2.2 bln LME bet

15 Jun 2012

The exchange is paying an alarming 58 times last year’s earnings for the London Metals Exchange - even factoring in its new fee structure. There are no cost synergies, so all depends on whether mainland Chinese buyers will be allowed to play more on foreign commodity markets.

Graff’s new luxury paradigm hits the rocks

31 May 2012

Falling markets and the Facebook IPO flop have helped sink Graff Diamonds’ $4 billion Hong Kong listing. But Graff came with hard-to-sell quirks. The bet that investors would buy into a “new” kind of luxury at a time of risk aversion was too optimistic.

High-end luxury looks exposed as China slows

31 May 2012

Hong Kong’s arts auction and property market is cooling as mainland Chinese buyers retreat. Tighter credit and China’s political cycle have both played a role. The hardest hit could be “hard” luxury products like sports cars and watches, often assumed to be the most resilient.

Li Ka-shing opts for succession China-style

30 May 2012

The HK tycoon has avoided a power scramble by naming his eldest son as heir to his business empire. To ensure Li’s values prevail, his successor will be surrounded by long time acolytes. It’s much like what’s happening in Beijing. In both cases, the newbies will need new tactics.

Graff Diamonds IPO gleams but doesn’t dazzle

21 May 2012

The diamond merchant’s Hong Kong listing taps directly into the growth of the 0.1 percent. But even the super-rich are vulnerable to a financial crisis. A sober appraisal, which hinges on the value of Graff’s enormous stockpile, suggests the $4 billion price is fair but no steal.

Hong Kong’s LME bid is big bet on China flows

10 May 2012

Hong Kong’s bourse has joined the bidding for the London Metal Exchange. If it can attract more volume from China, that would make up for the lack of obvious cost savings. But Beijing may open up anyway. HK’s lack of metals expertise makes the move look ambitious.

Jailing IPO bankers is a step too far

25 Apr 2012

Hong Kong talk of allowing lawsuits against negligent sponsors sounds fair. Reputation isn’t the safeguard it was. But the regulator’s idea of adding criminal liability may just damage the market’s efficiency. And it misses the real problem: investors lap up overpriced deals.

Hong Kong still haven for tycoons – and investors

30 Mar 2012

Two property moguls have been nabbed by the corruption watchdog. It’s a welcome sign that the city’s plutocrats aren’t untouchable. While conspiracy theories abound, they are far-fetched. If politicians wanted to clip the tycoons’ wings, there are more effective ways to do so.

Prudential’s threat to quit UK isn’t just hot air

12 Mar 2012

The insurer is reviewing its domicile, citing the burden of European regulation. Upping sticks to Hong Kong wouldn’t protect Pru from all the reforms, and would yield few tax savings. But if the new rules turn out bad, decamping to its main growth market would make sense.

Political flameout shows risks hidden in China

17 Feb 2012

Rising star Bo Xilai has suffered an embarrassing but mysterious setback. Compare that to Hong Kong would-be leader Henry Tang. His problems are as mundane as Bo’s are opaque. When it comes to political risk and transparency, investors in the PRC are basically flying blind.

HK’s dimsum bonds no longer too hot to eat

17 Jan 2012

Yields of yuan bonds in Hong Kong have risen to a year-high, as investors now expect to gain less from the currency. But a less frothy market attracts more quality investors. Development of the swap market helps make dimsums a viable funding alternative for multinationals.

Hong Kong needs to add polish to its IPO crown

9 Dec 2011

Asia’s financial centre is set to cede IPO leadership back to New York. Deal flows from China are strong and global giants like to list close to the world’s biggest growth market. But HK’s listing process may have to be shorter and simpler if it is to quickly regain top spot.

Michael Kors IPO cut from same cloth as Prada’s

6 Dec 2011

The U.S. designer’s eponymous firm is seeking a luxury price tag of up to $3.6 bln in a New York float. It’s an all-American fashion name and the high-end valuation isn’t out of line with Prada’s Hong Kong listing this year. But Kors may struggle to keep up the pace of growth.

PCCW spinoff can’t unwind tycoon discount

23 Nov 2011

Richard Li’s conglomerate snagged a generous $3.8 bln price tag for its Hong Kong telecom business, thanks to a promise of fat dividends. But the spinoff exposes an inconvenient truth: the mogul’s own holding company is valued at almost 40 percent less than the sum of its parts.

Richard Li’s financial alchemy fails to wow

12 Oct 2011

The HK tycoon’s plan to spin off his telecoms business into an innovative trust structure is designed to unwind PCCW’s huge conglomerate discount, while preserving his control. The cost is unnecessary complexity, and potential dilution of minority shareholders.

HK banks’ yuan strategy looks bad for earnings

11 Oct 2011

Taking deposits in the Chinese currency isn’t the opportunity it first seemed for Hong Kong’s lenders. The business is barely profitable, and migration of savings into yuan has exacerbated a HK dollar shortage, pushing up the cost of deposits and threatening to hurt margins.

IMF financial crisis indicator bodes ill for China

21 Sep 2011

The fund has found a measure of credit growth that could predict crunches. It makes the Middle Kingdom look precarious and heralds problems for Turkey and Vietnam. The IMF’s crisis-spotting record is lousy. But overheating nations shouldn’t dismiss what seems a sensible metric.

Ackman’s gamble on Hong Kong unlikely to pay

16 Sep 2011

The activist fund manager is betting Hong Kong will re-peg its currency higher against the dollar. That may make sense given divergent economies, but could hurt the city’s competitiveness and do little to combat inflation. Bets like Ackman’s only encourage authorities to dig in.

StanChart investors should not get carried away

3 Aug 2011

The lender’s income is growing at a double-digit clip and it is hiring, not firing. Even better, costs are under control. But StanChart’s premium valuation leaves little room for error. A first-half hiccup in India is a reminder that emerging market growth is seldom linear.

HSBC supertanker will take time to turn around

1 Aug 2011

CEO Stuart Gulliver wants to make the bank more efficient, but emerging market wage inflation means costs are still rising. Factor in new capital rules, and HSBC’s return on equity is also well below target. It’s no surprise the bank is planning to slash another 25,000 jobs.