Saturday, February 28, 2009

HSBC plans £12bn-plus share issue
From Financial Times:HSBC is planning to
raise more than £12bn through a share issue as the banking group seeks to shore
up its capital buffers in order to cope with the global economic downturn.The
bank was on Friday night finalising the issue, which is likely to be unveiled
alongside its full-year 2008 results on Monday. However, people involved in the
discussions warned that details such as the exact price of the offering had not
been set and it could still be postponed. HSBC is also expected to announce a
cut in its dividend.
HSBC plans £12bn-plus share issue

I am rather interested on the way FT wrote. While it had stated in the previous paragraphs about the strength of HSBC, the following paragraph turned sharply to the adverseries HSBC have been facing. Can a "well-managed bank" worsen by 45% in only 6 months? Can a risk-management focused bank have its Basel II ratio deteroiated from a very secured level to an insufficient level? Can a bonus-and-power-focused senior management team be willing to dilute their own shares by issuance of new ones? Without changing the management and divesting the losing units in North America, I cannot see in any way its strength be underscored.

Lets also read in parallel to other two news:
1. The New CEO of HSBC Hong Kong. Pay attention to her background: starting as a trainee, once upon a time be in administration area, later on swapping to corporate banking, in local and in Australia, then global corporate banking, next general manager of HK, eventually to CEO of HK. She is a very typical HSBC-made employee, and her corporate banking background may mean a return to the "original" business of HSBC. Her involvement in public affairs, particularly in HR related area, may also mean her understanding on recruitment, remuneration, and layoff (!!) areas. Thus, it may mean a further cost-cutting scheme on "unrelated non-core" business. Both of these can be positive news to HSBC Hong Kong. Hopefully, it also means a change of direction of HSBC group as a whole.

2. HSBC will still pay bonus more than 1 billion pound despite the call on bonus cut by Gorden Brown. It may be the last action the existing management take to protect themselves before they take the golden parachute.Combining the 3 news together, can it mean a big change on both the management team and the direction is coming? Can it also mean that HSBC price may first subject to a further drop and then rally and in the longer run at least recover to a more reasonable level? Can it also mean that the issuance of new shares may not take place if neither the existing board nor the existing management likes to dilute their own stakes?

[the possibility of China invests on HSBC]
......the Social Security Fund [of China] also recorded a loss as well as a write-off of assets at a substantial amount (which I forgot).Nevertheless, despite my personal believe of no further offering of shares, it is possible that China Investment will buy the shares of HSBC for political reason.I still tend to suspect that the current HSBC management has no gut to make a really huge write-off; instead, it may attempt to emphasize its profitability, deduct the dividend, continue to pay the bonus, and announce perhaps another cost-cutting scheme.

[responses to the "logical movement: provide as much provisions first, then report about profitability and adjust the write-off asset when market improves]
......what you said is logical as a general movement. Nevertheless, if the management had followed such moves, they would have taken a deep bath long time ago. Their reluctance to take such action is the signal that HSBC has screwed up more than we have imagined. In many previous posts I have already shared my observations on HSBC problems on cash-flow, potential cash obligation, and capital insufficiency. Obviously HSBC cannot suffer any further huge drops on share price while a massive write-off will absolutely lead to this result. The issuance of new shares will also signal the potential deficiency of HSBC capital. Although the discount price of the new offerings can be seen as the "bottom price", it will completely damage the confidence of the existing shareholders, big or small, and initiate a REAL wave of divestment. Please remember that HK citizens are not the only shareholders, and not every HK citizen will invest on emotion. Now if unfortunately such case happens, HSBC share prices will be further lowered by the excercising of the existing short position. HSBC management will also be forced to resign at once.From the way they deal with their own matters so far, I reckon they would have believed that they had passed the point of no return and must continue the bluffing till the market improves. Therefore, the more benefital move is to report the positive side, the profitability, particularly after averaging the worst period to the less worse one, and emphasize their coming action on further cutting down cash outflow and a return to traditional bank business not only to keep the clients but also to please the big shareholders, particularly on USA side. In return they may look for a buy-back of time to sit through the fluctuation and avoid a drastic change on management level.

Such move may stablize the HSBC price on Monday, especially by the small HK investors who have fallen in love with HSBC for so many years. Yet, from the big investor's point of view, it will actually add more uncertainties about the future, and will also encourage the speculators on short positions to rebuild the positions and take actions on the forecoming crisis.

Wednesday, February 25, 2009

(轉載自信報論壇) "十大產業振興規劃出齊 能源和房地產落空"

十大產業振興規劃出齊 能源和房地產落空

Chan David 其實需要振興的行業,換一句說法就是現時或短期內將會"唔係好掂"的行業。汽車業儘管現在的業務聽來不差,但是其實買家是已經有基礎而尚有糧出的一批,可是在可見將來可供擴張的市場將會收縮。船舶業本身就算沒有金融海嘯都已經會在2009-2010飽和,更惶論現在。再加上物流業和地產業皆不振的情況下,則鋼鐵和有色金屬行業均會大受影響。紡織和輕工本來就是主力出口,其市場早因金融海嘯而崩潰,現在的振興或能止咳一時,但是事關個人消費的事,則政府可做的亦有限。裝備製造和電子資訊,要是特別指3G網絡,又或者廠房在政策幫助下升級,則或有可為,但是受惠的人數卻不算多。我或許太悲觀,不過真的不能太過自我感覺良好。 2月25日 23:16

USA and China...


Demand on consumption: Low. Supply of consumable: Low in local market; huge from overseas.

Demand on USA products: except possibly very high technology products, Low. Supply of USA products: ditto.

Demand on Government projects: essential for upgrading the already obsolete roads, railways, pipes, wires, cables and the health care system. Supply of Government projects: coming.

Demand on Investment: a "necessary-evil" for the retired people; a privilege to the middle-class who has a lot of capital evaporated and tied up; a dream to the young people. Supply of investment: the sectors love quality customers but most customers are unclassified now.

Demand on jobs: always. Supplies of jobs: rare.

Demand on fuels and raw materials: huge though stop increasing. Supplies of raw materials: theoretically huge as USA directly and indirectly controls various resources.

Demand on information: huge. Supplies of information: huge but many misleading.


Demand on Consumption: from 2006-2008 increases, 2009 starts to plateau. Supplies of Consumables: huge even from local markets, also huge from overseas.

Demand on Government projects: huge. Supplies of Government projects: 2007-2008 cools down; 2009 reboots, 2010 may recover and surge.

Demand on Investment: huge; from individuals to private enterprises they look for opportunities and capital; large corporates and state-owned-enterprises look for protections by policies. Supplies on Investment: leaning towards the latter ones and minimial on the previous ones.

Demand on Jobs: huge. Supplies of jobs: decreasing since 2009.

Demand on fuels and raw materials: huge and still increasing. Supplies of fuels and raw materials: very insufficient comparing to the demand. Minimial controls on world-wide resources.

Demand on information: huge. Supplies of information: very constrained and censored and homogenous despite large in amount.

Any inspirations on such comparison?

Saturday, February 21, 2009

Things Not Right

VIX = 49.6, increases from something close to 40 at the earlier of this week.
CDS = 173 (in USA), 154 (in Europe), 187.75 (UK), also increasees from the beginning of this week.
Gold Futures, for april and june, all hit over 1000, with most call options betting on 1000 or above.
Bond yield rate of all treasuries drop.
Mortgage market risk premium remains high, a spread of 500-700 points.

All these point to the direction of another melt-down in USA market, despite the LIBOR and other loan rates are stable.

In China, the re-tightening of loan to avoid speculations is launched.

Now in Hong Kong, under the influence of both markets, cannot walk away. For the heavily local related business, the problems with USA and Europe may not hit that hard but the conquences must have influence. Prepare for the big thing.

Sunday, February 15, 2009

(轉載自信報論壇) "G7呼籲人民幣升值"

轉載自信報論壇,2009-2-15, 題目:"G7呼籲人民幣升值", by 信報網站編輯



Chan David 莫非潛台詞是要中國多多消費,尤其各國負債乎?一笑。 2月15日 10:07
paul_ng 共產黨會聽嗎?一笑
Chan David

1. 豁免中國受任何保護主義的條文的約束,狂買中國貨,尤其是歐日;沒有歐羅日円點幫你們買債?

2. 向中國輸出高科技,讓中國的公司完全買斷其專利,加速其本土標準和中國標準接軌,為中國商人投資其本土企業提供特別優惠,

3. 不得過問中國支援其他各國的事,更不得(直接或通過其他組織如IMF, WB, etc.)阻撓中國採購當地任何的資產,

4. 須成立國際金融監察組織,中國必須為起草國,創始會員,常任理事國,有否決權,並容許香港,澳門和統一後的台灣能夠成為非主權常任理事並擁有投票權(卻沒有否決權),

5. 不得單方面改變任何上述相關的政策。

(轉載自信報論壇) "釣魚群島爭議之解决方法?!"

轉載自信報論壇, 2009-2-14, 貼者為 yeong nero






















(三)釜底抽薪,存弱国,继绝世  日本当然不会轻易允许琉球独立,不然,它也不会战后如此处心积虑地再次占领。并且看看历史上日本的如何残暴霸道地侵略扩张,以及军国主义及其武士道的欺软怕硬的民族性。日本于侵占琉球时,对当地居民疯狂屠杀,吾人可想象,当地人奉大清正朔,心向中国,必然反抗激烈。  









"日本這種動作,無非因為美國"復寵"而蹺尾巴而已。尤其在早陣子幾被美國"拋棄","焗住"要跟中國多點"交往"而很可能被敲竹竿時"頂住頂住",現在一看美國重新寵幸,於是又重新調高姿態,希望既在國際談判上多點籌碼,又為政府已經"深潛"的民望打打氣而已。老實說,就算希拉莉的高調,也不過是和前陣子奧巴馬的低姿態唱雙簧而已。現實是現在美中日英,以致韓國東南亞,甚至搭上澳洲,全部都唇齒相依;美國和中國隨便一方先倒下,美元區資金鏈就難以運作,勢必令其他地區震盪。在此大前題下,各國頂多利用各種柔盾去互敲竹竿或預先防衛則有,大打出手則難矣。 "

"甚至惡意點想,中國在達賴公開承認中國的主權後中國還是繼續拿他來開擦,未始不和製造假想敵及保留和歐美的摩擦點有關。狂想一下:法國或許本來希望在奧運和達賴事件上捧了中國場後可以在G20換取中國能支持一下歐洲的方案,可是中國卻是嘴上慷慨門檻精,在大格局上明顯支持"維持現狀"。歐盟,特別是法國不依了;中國則對歐洲常常一面"談友好"一面在中國貨入口歐洲上多多動作亦不滿,但雙方苦於不願亦不能在這種直接利益問題上互相直接攻擊,只好拿達賴做文章,待講好數,自然又把他放在一旁了。 "

Friday, February 13, 2009








Tuesday, February 10, 2009

A Review

As I have done some review on your posts and my previous posts, I will not stand as firm as before about the USD and UST positions.

Yet how will the future trend is going is still subject to various "parallel futures".
Instead of doing simple projection, I guess we had better first review what had happened so far and what the government measures are attempting to do. Then maybe we can work out some possible scenarios on how people will respond.

Property cycle was the final straw on the camel's back; nevertheless, property cycle has appeared over decades and never has it be as destructive as the current time. The key issues, I persume, are as follows:
1. Fiat Money system;
2. The incomplete mobility of labour, money, information, and material;
3. Book value accounting system;
4. Risk spreading tools;
5. Prolonged loose interest rate.

All these combined together allows a country to print money without risking inflation as well as substantial depreciation of asset. As long as there are buyers, and as long as
the "lies" can continue, then there will be no problems.

But the realistic world will always tell the final truth eventually. Re-settlement occurs.

Once the accounting principle changes to mark-to-market, people will find that the lies cannot continue. It will trigger the distrust on various tools, including the risk spreading ones. Hence, it will trigger another cycle of depreciation. Cost of capital, despite the government efforts on manipulation, will be in fact risen in accordance with the new risk evaluation. Without further money as fuel, economy will slow down and even recess. Without free flow of labour, money, information and material, equilibrium cannot be reached. The cost paid for maintaining the imbalance will reflect eventually on the fiat money.

Now most of the government measures attempt to
1. Lower the cost of capital,
2. Re-installinig the risk spreading model,
3. Continuing the as to continue the old system. In other words, none of them are trying to create new value (and hence bring "real" increase on GDP).

However, the trick is hard to continue because risk spreading tools are no longer be trusted. Risk evaluation re-settled at the reasonable level. As a result:
1. Banks are unwilling to loan to both individuals and business;
2. Individuals are unwilling to purchase and particularly purchase on loans;
3. Companies are unwilling to expand and face difficulties on maintaining cash flow.

Under such situation, in order to complete the goal, government can only
1. Force the banks to do loans (by taking over, by providing incentives like guarantee and free money),
2. Force people to consume (by punishing deposit, by providing coupons, by providing more social welfare, by providing coverage on mortgages, and by providing jobs through infra-structural projects).

But each of those can lead to the following possibilities:
1. For the bank parts, it can either lead to
a. no actual increase on loans to direct customers but use the cheap money for buying back some on-the-book safe assets like treasuries and bonds. But the actual rsk is not as low as those tools persume. It will not benefit individuals and enterprises, and in the long term it will put the bank assets at risk.
b. increases on loans due to orders. But meanwhile bad debt will also increase because of loosen standards. Due to unclear vision on the future, the borrowed money will be used on maintaining current business, paying off debts, and short-term speculation. None of them will benefit the economy, and will initiate another wave of first inflation and then bubble burst.

2. For the individual parts, it can
a. save the money for themselves and use the benefit. Consumption cannot be enhanced.
b. use the money for short-term speculation due to unclear vision.

From both situations, the most important part is the vision to the future. Without a clear expectation on the future, any financial stimuli will not result in enhancement on both productions and consumptions. It will further worsen the already unfair wealth distribution as well as the lack of circulating money. Or, it will circulate to short-term projects or government designated projects: both of them will result in first inflation (or even hyper-inflation) and then burst of bubble.

Wednesday, February 4, 2009


匯豐動向最精彩,尤其UBS亦為匯豐之債主及盟友。另外,高盛為匯豐之corporate broker,卻又加入踩匯豐行列,甚有意思。銀行大戰,合縱連橫,非常好玩。黃金和債券如此動向,似有貼股市死蹺蹺之嫌也。另外歐羅如此匯價,再加上匯豐冀求組B20和希望取消mark-to-market之議,看來歐洲各大寶號均為醜婦是也。


1. 估計小陽春然在此時至業績公佈期前1個月至2星期左右。
2. 到達水尾前的一個期指交易日有可能先挾死淡倉,然後等到多人捕長倉時或許淡倉開始有異動。
3. 黃金期貨四月高水,並且積壓大量未平倉合約(232834張)。同期期貨合約期權,其中call option有9446張未平倉合約睇1000USD,其次為900USD有9152張。
4. 10年期T-Note期貨三月高水,亦有積壓大量未平倉合約。
5. 三月Euro期貨現報1.286;英鎊報1.4417;美元兌人仔報6.84;兌日円報89.16;加紙報0.8053;澳幣報0.6508;
6. 三至四月為醜婦期和逼宮期。


1. 基本需求:
a. 平中價飲食/衣服:老麥、大家樂、zara、H&M,etc.重點在於其價值鏈和物業管理:整個供求程序效率如何?貨物輪轉週期若何?樓面每平方回報如如何?
b. 電力/煤氣:香港的電力股因利潤保障協議的關係,變成資產管理公司。在ROA作為基準下,重點就看財務槓桿的風險回報。槓桿大風險高,市場對風險溢價的要求也高,自然會影響收益。煤氣沒有如此保障,然而在香港也佔了不少市場,再加上內地市場亦有一定可為。
c. 交通:港鐵在港是獨市,而且由於經營範圍由交通、物業發展和管理、市內鐵路的顧問、建造、營運、零件和訓練的供應者,和多媒體廣告,所以縱使現在於新發展物業上停滯,尚有鐵路支撐。況且,市道不好,坐的士或開車的人或會改坐鐵路。人流增多,令現有物業和廣告都可以間接受惠。
d. 藥物:這是一個資產組合管理的項目。藥物的代差、專利權的順利代接,以及和其他合作者的分成模式主宰其利潤,雖然現時的環境或許令到一些新項目因莫財而減緩,但是管理得當的藥物公司能夠預備好上述情況。
e. 教育:當此季勢,不少人再進修,品牌管理重要。具體來看是老師個人淨產值和教室每平方支出對比。(待續)

Tuesday, February 3, 2009

Interesting Spreads

The followings are the spreads over 3 different periods: current, 3 months ago, and 1 year ago.

1. 3-month TED:
95pts, 268pts, 77pts;
2. 1-Month LIBOR-CD (certificate of deposit):
-46pts, 49pts, 118pts;
3. 1-Month LIBOR-CD JUMBO grade
-47pts, 48pts, 110pts;
4. 5/1year ARM-5 year CD
271pts, 222pts, 154pts;
5. 5/1year ARM-5 year CD JUMNBO grade
298pts, 219pts, 198pts;
6. 5year AAA banking and finance - 5year CD
211pts, 322pts, 61pts;
7. 5year AAA banking and finance - 5year JUMDO grade
194pts, 305pts, and 46pts.

Several observations:
1. liquidity of bank has been improved from 3 months ago.
2. borrowing from inter-banks/central banks is even more cost-effective than borrowing from clients.
3. lending money becomes a sarcity as under the banks charges a "mark-to-market" risk premium.
4. 3 months ago lending money to corporate is estimated as riskier than lending money for property. Now it is the reverse.
5. For corporate, bigger amount of loan is considered as less risky; for property, bigger amount of loan is considered as more risky.
6. From point 4 and 5, property market is walking on the edge. Any single event can be the last straw.
7. From the spreads shown, it seems like banks have not lowered the risk premiums and instead increase them. It shows that banks have not recovered and are reluctant to loan. So, in a sense, the previous stimuli plans have failed.

Sunday, February 1, 2009

The Criticisms on Potential Trade Protectionism by Chinese Premier

The criticisms on the amendments on the US Reinvention Bill H.R.1 by Chinese Premier Mr. Wen Jia-bao based on a free-riding on the European protests than on solid ground.

Three amendments regarding the proposed purchases of US manufactured goods for the projects funded by the H.R.1 Bill, in summary, are as follows:

1. would provide that funds appropriated are used to purchase iron, steel, and goods manufactured in the United States;
2. would expand the Berry Amendment Extension Act to include DHS to require the government to purchase uniforms for more than one hundred thousand uniformed employees from U.S. textile and apparel manufacturers, and
3. would require that any money spent under the bill be used to buy American-made products whenever possible.

H.R.1 Bill mainly focuses on the provision of infra-structural, rehabilitation, education, energy and green projects in which most components are iron ores, steel, copper, cement, optical fibers, tool machinery, construction machinery, heavy machinery, steel fabricated products, bearings, shafts, pipes, communication hardware, and some specific parts. They are provided by USA based overseas ventures, European, Japanese, South Korea, Australia, and some South American countries (for raw materials).

On the other hand, China mainly exports daily consumer goods like home appliances, apparels, toys, electronic products, furniture, and household consumables to USA. Steel, copper, coal, and other raw materials produced in China are for domestic consumptions or as parts of the above mentioned exported goods. Chinese made vehicles, tools and machineries have not yet complied with the USA codes and standards. Also, Chinese made production facilities, which quality and adaptability are the main concerns, have not reached necessary competiveness for sales in USA market.

In brief, China will not be as directly affected as pretended.

It is undeniable that clauses on “purchased goods manufactured by USA whenever possible” may impose a threat to certain Chinese products. Nevertheless, the term “manufactured by USA” is vague: be it 100%, including even a button, or only certain percentage, is more likely “subjected to actual situation”, considering the fact that USA manufacturing industry is impossible to re-build their production facilities and fulfill the order placement on the tight schedule.

The criticism, therefore, is more a negotiation tactic. By free-riding on the pressure from European and Japanese counterparts that are truly affected by the H.R.1 Bill Amendments, Chinese can find a moral ground and bargaining chip on the bilateral trade and US bond purchases, the two sides of the same token.

The real risk with this strategy is the fact that there is no free lunch. The free-riders may be asked to pay during a nice ride. The European countries, under the huge pressure by far stronger labour unions than their counterparts in USA, are looking for excuses to impose trade embargo/restrictions inside WTO framework. While Chinese made products are not really directly related to USA stimuli plans, they are direct competitors to many European local small businesses. China has been the scapegoat for layoffs in European countries. By using USA as the decoy and the precedence, Europe can accuse China of unfair competition through China’s import taxes, subsidizes, manipulation of currency exchange rate, and even the labor working conditions and propose punishments. By that moment, China may lean towards and bind tighter to USA, which means that China’s walk-away from purchasing USA bonds will be more an attitude than an action.