A warning that local interest rates may rise more sharply and sooner than expected – posing downward risk in the homes market – was sounded by the Hong Kong Monetary Authority

April 9, 2014 Leave a comment

HKMA fans local rate hike concerns
Karen Chiu and Imogene Wong
Thursday, March 27, 2014

A warning that local interest rates may rise more sharply and sooner than expected – posing downward risk in the homes market – was sounded by the Hong Kong Monetary Authority yesterday.

But Lui Che-woo, chairman of K Wah International (0173), one of the SAR’s largest developers, sees rates rising gradually.

In its latest half-yearly report, the HKMA says the prevailing low interest rate environment of the past few years, which has fueled a rapid upsurge in home prices, may shift faster than some forecast while inflation in the United States could increase faster than expected.

So local mortgage rates are expected to rise higher than has been predicted, adversely impacting on local housing affordability.

The HKMA estimated that mortgage repayment under a 20-year contract could soar by 30.2 percent if loan rates jump 300 basis points. And income gearing ratio would increase to 83 percent from 64.1 percent.

Reflecting concerns, a homeowner at Grand Promenade in Sai Wan Ho sold a 947-square- foot flat yesterday for HK$16.5 million after slashing the asking price by HK$1.5 million.

Lui, however, said the US Federal Reserve will continue to reduce its monthly bond- buying program gradually. That, he noted, hinged on prevailing US economic conditions.

But the tycoon conceded local property prices are unlikely to surge as before. “You should buy a flat if it’s for self-use,” he said.

Net profit at K Wah slumped 62 percent last year to HK$1.65 billion from 2012 due to a sharp drop in local sales and sales not booked.

Lui also said the firm intends to maintain a 50-50 balance between mainland and Hong Kong projects. And its 4 percent stake in casino operator Galaxy Entertainment (0027) – also chaired by Lui – is a long-term investment.

The firm, which has acquired nine plots for HK$10 billion in the past two years, will this year launch six projects, with five in China.

A final dividend of 10 HK cents was declared – the same as for 2012.

 

Filed under Macro Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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