HONG KONG - Stocks in Hong Kong continued their weeklong rebound, reaching a high not seen since mid-March, an exception in an otherwise depressed Asian markets. Increases were driven by a solid performance from the telecoms and growing stability in the commodities market after a tumultuous fortnight.
Following an early peak in trading Friday, the Hang Seng Index still closed up two-thirds of a percent, at 22,547. The index has been steadily recovering since an 18th April five-month low. Telecom stocks were up across the board with the notable exception of PCCW, who ended the day down half a percent.
Asian markets were down with the Shanghai Composite down 1 percent on concerns of a long holiday weekend, and the Japan’s Nikkei fell 0.3 percent. Japanese investors were slightly on edge as they awaited the result of the first Bank of Japan meeting held with new governor, Haruhiko Kurodo. The central bank however did release a report indicating a slightly strengthening of the Japanese economy.
In Hong Kong, China Telecom delivered its first increase in profits in over a year profit during the first quarter of 2013. Net income was up 10 percent to 4.7 billion yuan. Eva Yip, an analyst at Sun Hung Kai Financial, said in an interview with Bloomberg that increasing mobile data consumption was driving profits across the sector.
“[China Telecom] has been highly successful in monetizing 3G opportunities,” she said.
The transport sector also performed well with Chinese battery and car manufacturer, BYD Company, gaining 12.15 percent on the day. In the company’s first quarter results, released yesterday, net profit was reported to have quadrupled due to rising car sales in China. As of the end of March, profits were 112.4 million yuan.
Domestic car manufacturers like BYD Co. are likely to face increasing competition as foreign carmakers invest more in the country. Czech manufacturer, Skoda, announced yesterday that they aim to double car sales in China by 2018. Volkswagen also said that they plan to add a third to its China-based workforce by the same year.
19 million cars were sold in China during 2012 (almost a quarter of a million of which were Skodas). Analysts expect this to grow to 30 million over the next 10 years, according to Automotive News Europe.
In Europe, news that the United Kingdom had narrowly missed a triple-dip in to recession carried the FTSE 100 to a three-week high, closing up 10.53 points higher. The British chancellor, George Osborne, welcomed the news as a sign of a “healing economy” despite growth only being one-third of a percent in the first quarter of 2013.
The German DAX continued its rapid recovery from the recent commodities volatility, almost matching a two-week old high. The index had gained 4.6 percent since the Monday open. Gold Exchange-traded Funds (ETFs) have gained 2.7 percent over the last 3 days in New York, after a mid-April plunge in prices that began with Cyprus’s plans to sell much of it’s reserves.
Analysts in Hong Kong think now might be the time to start picking up discount stock. As earnings results are coming through, confidence is returning to individual companies. Larry Jiang, chief strategist at Guotai Junan International Securities was told Reuters, “This might be a good time for value investors to start accumulating some positions.”
HONG KONG – PCCW, the communications giant chaired by Richard Li, is facing a HK$4.3 million charge after incorrectly charging customers over a two day period in 2012.
The error, which occurred in November, affected approximately 1.3 percent of PCCW’s combined users from their Now TV and Netvigator broadband offerings. The company only spotted the problem after manually reviewing credit card charges made to customers.
According to the Communication Authority, the incident violated PCCW’s licensing conditions. The company was issued with a strong warning not to let it happen again.
The incident came as HKT, PCCW’s subsidiary telecoms operator, took the same authority to court over Apple’s network-locking practices in the city.
The iPhone 5, Apple’s first fourth-generation high speed data (LTE) device, was initially only permitted – by Apple - to run on Smartone’s high-speed network. Smartone, a direct competitor to PCCW in the mobile market in Hong Kong, partnered with the American company to serve as the launch partner for the device in the city.
Shortly after the launch in September, HKT filed a complaint with the regulator. The Communications Authority began a period of consultation with the mobile community, which included a December committee to discuss the ramifications of Apple’s restrictions.
In November, the iPhone 5 and iPad Mini were enabled – again, by Apple - to run on the Three and CSL networks, but still not those of PCCW Mobile and China Mobile. Today, Apple’s device continues to only functions on PCCW’s lower speed third-generation (3G) network. PCCW say that this decision has cost them “hundreds of millions of dollars”.
HKT has now made an application for a judicial review, citing the authority’s 1997 “SIM Lock” statement which forbade the supposedly anti-competitive practice of tying customers to networks.
Despite this challenge, HKT revenue for 2012 was up 6 percent, driven in-part by a 25 percent increase in turnover from their mobile division.
No stranger to legal action in Hong Kong, HKT also filed a separate judicial review in early March to challenge the government’s fee for connecting mobile subscribers. The annual charge was reduced from HK$8 to HK$7 on March 1st, but PCCW say that this still means that the government is getting “far in excess” of what it should be receiving.
In an article by the South China Morning Post, the government’s licensing fund – set up to handle the incoming fees – was reportedly receiving HK$67 million in excess of statutory requirements.
Despite the legal uncertainty, PCCW has been performing well on the Hong Kong stock market, closing today at 3.78, equaling a February high not seen previously seen since early 2009. Competitors Smartone and Hutchinson have been trending downwards over the last month, while PCCW was up 2.16 percent overall on their March 12th opening.
The shop is hidden away two stories up on a busy Hong Kong street - you could miss it if you were not looking for it. Set just above a foot massage store are a set of sliding doors, behind which lie an Alice-in-Wonderland experience of speciality coffee tasting.
Sitting on the store’s tiny wooden deck at the rear of the store, Mike Fung, the Rabbithole’s part owner and General Manager portrays himself as someone that is deeply passionate about his work.
“[This job] is more than full time,” he said early on in the interview. “We’re very focused.”
Fung, who founded the store with a group of fellow coffee lovers in late 2011, said that he has a simple philosophy behind the Rabbithole. “We want to share what we know,” he said referring to his fellow “geeks” that got together to build the store.
Surprisingly, he was not always a fan of coffee. After spending 5 years working at a media agency in Brisbane, it was a friend there that introduced him to the world of coffee. The friend, a part-time barista, made him a café mocha – a latte style coffee, with chocolate syrup added.
“That’s how I got started,” said Fung. “I slowly got in to it.”
From there, he began learning how to make coffee from online videos and soon purchased his first espresso machine for HK$1,000.
The market for coffee in Hong Kong is a fiercely competitive one. Upmarket brands like Starbucks and Pacific Coffee have been fighting for dominance in the city for decades. Both originating in Seattle in the United States, Pacific Coffee opened their first store in the city in 1993, and Starbucks seven years later in 2000.
In the face of this competition, some might have wondered at the wisdom of opening a coffee shop, but Fung says he’s not trying to compete with the big name brands.
“People walk in here, we [aim] to give them an experience,” he said. “We open up the platform for people to try different coffee.”
For Fung, his core business is the beans, and the Rabbithole’s menu represents that. Notably absent of the blueberry muffins or chicken salads traditionally found in other coffee stores, the menu still manages to appear complex at the first glance. With a little education from one of the baristas milling around the store, the reality is that a simple flow chart of bean source, coffee type, and milk.
The store sources beans from local distributors, and international importers – whatever gets the best beans. While the roasting process is the most important step in the preparation of a good cup of coffee, Fung says “every single part is important.”
The store employs three full-time baristas and a sales person. Opening from 11am – 7pm, there is no need for shift work, and every staff member is dedicated to the business.
However, one thing that was clearly missing from the store, was customers. Despite its fantastic location, with a balcony that looks directly on to the Mid-levels escalator, not a single person came in to the shop over the course of an hour. Fung did not seem to be worried though, saying that the store was “making a little money”.
Starting just a few days earlier, the store had begun to morph from a store that focused on selling individual cups of coffee, to one of training and tasting. Instead, now, they are getting people to buy a tasting session with four different types of coffee as a minimum. In the first few days of this new approach, staff were seen stopping paying customers at the door without clearly communicating why.
“I hate turning people away,” he added. “We’re still fine tuning the way we communicate.”
Despite the teething troubles, Fung said that he still wants to try something new. In its past incarnation, the store’s main focus had been a retail coffee experience, much like that of the multi-national coffee chains that are so prevalent in the city. But Fung thinks that is not enough.
“We want to be a platform of experience,” he said. “We’re trying to be our own thing.”
He calls the new store a concept shop, but suggested that a replacement traditional coffee shop might be coming soon. “We’re looking in to expanding,” he added.
One of Fung’s colleagues, Taco Yung, was a barista at Starbucks before getting hired by Rabbithole. Although not really a fan of coffee himself, he said that it can still be fun.
“I really like to explain how coffee can be different, how it can be enjoyed without sugar,” he said, speaking through Fung who was interpreting for him. Tellingly, he said that his experience at Starbucks only gave him the basic skills he needed to work at Rabbithole. He was trained up soon after joining.
It remains to be seen if the Rabbithole’s gamble will pay off, but it is clear that they have a tremendous amount of goodwill in their existing customer base. They are going to need it – without advertising they are entirely dependent on walk-in and word of mouth to generate income from their new project.
Asha Phillips, a social media expert, was a regular customer of the Rabbithole before leaving Hong Kong recently. She said that the care that the staff put in to making their coffee came out in their finished product.
“It’s the only place in Hong Kong I was ever able to get real coffee.”
Hong Kong – PCCW Ltd., Hong Kong’s dominant telecommunications company, has responded to last month’s self-proclaimed “strong” 2012 results by announcing debt issuance in attempt to raise capital after recent spending.
With little fanfare, the firm put out a notice on March 5th that they would soon begin issuing United States dollar-denominated notes. Brayan Lai, a desk analyst at Jefferies & Company Inc., said he believed that the money could be put towards the group’s recent Premier League deal.
“I assume some part of it is going to go towards these types of [licensing] costs, to [enhance] their media coverage,” he said.
Despite the lack of marketing, Lai expects the group will have little difficulty attracting buyers because of its well-known brand and pricing. “If they don’t tighten [pricing] from where they’re indicating, it should be alright.”
In November last year, Now TV entered talks to negotiate to show the English Premier League for the next three seasons. They won the right to the 380 matches from i-CABLE communications Ltd., who have held the rights for six of the last nine seasons.
A final agreement was reached on Feburary 6th. Janice Lee, Managing Director of TV and New Media at PCCW said in a press release, “Football fans will be able to enjoy the most amazing BPL experience in the next three seasons.”
The Now TV service, introduced to the market 10 years ago, reported a total of 1.183 million subscribers in Hong Kong at the end of 2012. PCCW grew the subscriber base by 1.38% over the course of the year. i-CABLE Communications, PCCW’s nearest competitor in the television market, reported a loss of 12,000 subscribers over the first 6 months of 2012.
George Chan, PCCW’s group managing director, said in their 2012 Annual Results, “Going forward, Now TV is committed to strengthening its program line-up with more high quality production and premium content acquisitions, which will be complemented by its multiscreen strategy.”
For the 2012 financial year, the company posted a net profit of HK$1.66 billion, up 3.1% from last year. The board has proposed a final dividend payment of 13.55 Hong Kong cents per ordinary share.
PCCW Ltd. Shares were down 1.37% towards the end of afternoon trading on the Hong Kong Stock Exchange. i-CABLE Communications Limited were down a similar amount at 1.3%. The Hang Seng Index was performing a little better, up 0.32%.
State of the Union speeches delivered in the early 20th century paint a picture of development and growth, back-dropped against a growing threat from a European war machine.
In the first decade of the 20th century, the priorities of the United States President are centred on development of the country - corporations, the development of interstate commerce topped the list. The construction of a canal in Panama, and war treaties signed in The Hague indicated what was to come in later years.
With unrest in Europe precipitating a world war in the 1910s, the tools of conflict began creeping up in importance in presidential speeches. While battleships, and submarines were mentioned, the priority of the United States was development such as interstate commerce and the railways. Because of events like the Mexican Revolution, specific years during the decade were also mentioned frequently. President William H. Taft delivered all the speeches in 1910, 1911 and 1912, so this could be his speech writing style. In 1920 the country introduced a prohibition on alcohol, which stayed in place in to the next decade.
In the 1930s that followed, expansion came to a halt with the Great Depression - unemployment hit new highs. Speeches included statistics related to the economic situation, skewing results for the decade. The world was heading to war: autocracy and mobilized were both listed.
The 1940s, coloured by another world war, represented a general change in the tone of speeches – representing a perceived threat to the United States. The attack on Pearl Harbour by the Japanese in 1941 drew the country in to the war itself. Along with them, the Nazis and Hitler were mentioned frequently.
With the end of the war, the conflict gave way to a cold war. From 1945 through to the 1960s, the talking points were communists – the danger from the Soviets and a race for atomic weapons. The country remained engaged in wars in Korea and Vietnam.
While the 1970s and 1980s continued to focus on the threat from the Soviet Union, they also set the scene for the rest of the century, with priorities beginning to change towards the economy, with jobs, spending, inflation and most importantly oil representing the President’s priorities.
The speeches of the President in the 1990s are distinct since they return the discussion to that of the modern United States. With no discussion of conflict overseas, they speak about the challenge of the 21st century, finding jobs and college for kids.
Unsurprisingly, with the event of 9/11, speeches in the 2000s almost exclusively focus on terrorism, and the wars that followed in Iraq and Afghanistan. Saddam Hussein earned two mentions, as did Al Qaeda. It is possible to see the ideas of a new President beginning to creep in though, with Medicare featuring highly.
Finally, with an incomplete decade, the 2010s concentrate backs on the United States in the years following the 2008 financial crisis including jobs, innovation, and trillion dollar holes in the economy.
United States authorities have arrested 26 people, six of which are lawyers, for aiding Chinese immigrants in their attempts to claim asylum. All face charges of conspiring to commit immigration fraud.
Inventing stories of forced abortion and political persecution, clients were tutored using Chinese soap operas to develop back stories in support of their claims. According to the New York Times:
Some paralegals were called “story writers” for their knack for inventing detailed tales of persecution.
The U.S. attorney for the Southern District of New York said the false claims drowned out legitimate cases:
"Asylum fraud imposes a tremendous burden on the system and it also makes it more difficult for those who are legitimately seeking refuge in this country."
The indictments covered 10 different legal firms, from which 1,900 claims were submitted. It’s not clear how many of these officials believed were fraudulent. The Justice Department said that multiple, individual schemes were in play.
Chinese claimants form a large proportion of all asylum seekers. In 2011, 8,600 Chinese immigrants were successful in claiming asylum, representing over a third of all successful cases.
An iPhone 5 nano-SIM DOES work in a Samsung Galaxy S3 micro-SIM slot.
BRW, an Australian weekly business magazine (similar to Fortune magazine), has rated Hong Kong the best city for business opportunities in Asia.
As a gateway to the cheap materials and labour in mainland China, Hong Kong has acted as a buffer between the tricky politics of China and the rest of the world. Despite its strong Cantonese flavour, the impact of British colonialism has left a legacy of ‘East meets West’ that still lingers within Hong Kong’s culture.
China, coming in fifth, is rated highly because of it’s “never ending need for mineral exports” - of which Australia has plenty.
The Business Review is not the only publication knocking out “best of 2012” lists (ours are coming soon!). Just last week, Forbes rated Shanghai as the best Chinese city for business.
However, outside of China, New Zealand topped their world rankings:
"Thanks to a transparent and stable business climate that encourages entrepreneurship. New Zealand is the smallest economy in our top 10 at $US162 billion, but it ranks first in four of the 11 metrics we examined, including personal freedom and investor protection, as well as a lack of red tape and corruption."
In that list, Hong Kong came third, and China missed out completely.
Despite concerns last week about low interest in the iPhone 5 in China, Apple seems to have turned that frown around and delivered a resounding hit in the first weekend of sales in China.
Apple said yesterday that over the three days of the launch (Friday, Saturday and Sunday) they sold over two million iPhones.
The company’s CEO said:
“Customer response to iPhone 5 in China has been incredible, setting a new record with the best first weekend sales ever in China. China is a very important market for us and customers there cannot wait to get their hands on Apple products.”
When considered against the five million that Apple sold during the original launch in September, the number seems positive. Then, the phone was launched simultaneously in the US, Australia, the UK, Canada, France and Hong Kong (a combined population of around 1/2 a billion people).
Lisa Soh, an analyst with Macquarie Capital Securities, was quoted in the South China Morning Post as last week saying that total sales would be no more than 1 million by the end of the year. She seems to been proven wrong by quite a margin.
Apple’s stock (NASDAQ:AAPL) has returned to Friday open levels, and was up almost 2% over the day during trading on Monday.