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Cablegate: Corrected Copy: Hong Kong Officials Join G20 Meeting As

VZCZCXRO1084
RR RUEHCHI RUEHCN RUEHDT RUEHGH RUEHHM RUEHNH RUEHVC
DE RUEHHK #2084/01 3191149
ZNR UUUUU ZZH
R 141149Z NOV 08
FM AMCONSUL HONG KONG
TO RUEHC/SECSTATE WASHDC 6237
INFO RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHOO/CHINA POSTS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 HONG KONG 002084

SIPDIS

STATE FOR EAP/CM AND EEB/OMA, TREASURY FOR OASIA

E.O. 12958: N/A
TAGS: ECON EFIN EINV ETRD HK CH
SUBJECT: CORRECTED COPY: Hong Kong Officials Join G20 Meeting As
Economy Slows

1. Summary: Hong Kong officials arrived in the U.S. to participate
in G20 meetings as part of the Chinese delegation as the local
economy continued to slow. Layoffs loom as economic difficulties in
Macau threaten Hong Kong workers as well. Hong Kong's Legco
approved a measure to investigate bank actions related to the sale
of Lehman minibonds over the government's opposition. The Hang Seng
Index fell 4.9 percent for the week but was up moderately in weak
Friday trading. Demand for Hong Kong dollars forced the HKMA to
continue to sell foreign exchange and HIBOR remained relatively low,
allowing big Hong Kong banks cut their prime lending rates by 25
basis points. End Summary.

Hong Kong Joins G20 Meeting as Economy tips into Recession

2. Financial Secretary John Tsang and Hong Kong Monetary Authority
Chief Executive Joseph Yam arrived in Washington November 13 to join
the Chinese delegation attending the G20 summit. Tsang told the
local press that the global financial crisis would prevent Hong Kong
from achieving expected 4-5 percent GDP growth in 2008. Late on
Friday afternoon, Government Economist Helen Chan announced that
Hong Kong's third quarter GDP growth slowed to 1.7 percent from a
year ago, compared with growth of 7.3 percent in the first quarter
and 4.2 percent in the second quarter. On a seasonally adjusted
basis, Hong Kong's Q3 GDP shrank 0.5%. Chan noted that the global
financial crisis had significantly impacted Hong Kong's third
quarter export trade, consumption and investment. With 4.3 percent
growth through the first three quarters, the Hong Kong government
now hopes to see 3.0-3.5 percent GDP growth for 2008.

What Happens in Macau Doesn't Stay in Macau

3. Las Vegas Sands (LVS) Corporation confirmed November 13 that at
least 4,000 Hong Kong construction workers would be among 9,000
workers laid off as the company suspends uncompleted projects in
Macau. Apple Daily (Nov. 14) said the return of these 4,000 workers
to Hong Kong would push up the unemployment rate by 0.1 percentage
point. The same report speculated that a continued slowdown in
Macau could threaten the jobs of another 20,000 Hong Kong workers in
Macau's hotel and construction industries.

4. Hong Kong Chief Secretary Henry Tang blamed LVS' problems on
"the global financial tsunami," and promised that the Hong Kong
government would look for ways to speed up its infrastructure
projects to create more jobs. This week, CE Donald Tsang and CS
Henry Tang made separate visits to Dongguan and Shenzhen to hear the
concerns of Hong Kong-owned factories in the Pearl River Delta.
Shenzhen officials reportedly promised to guarantee some payments
and reduce labor restrictions to help Hong Kong companies there.

Legco to Probe Banks on Lehman Bros' Minibonds

5. On November 12, Legco passed a resolution authorizing a select
committee to investigate bank policies, procedures and actions
related to the sale of Lehman Bros'-issued minibonds to retail
investors. The government and banks came out strongly against the
resolution in the days and weeks leading up to the vote, warning
that exercising the "Powers and Privileges" clause of the Basic Law
to subpoena bank executives and records could damage Hong Kong's
standing as an international financial center. Despite the
government's concerns, Legco passed the resolution by a sizeable
majority. The subcommittee will meet November 24 to discuss how the
investigation will proceed and is expected to probe whether the HKMA
and SFC properly supervised banks, how banks trained sales staff,
and the roles of senior government officials and banking executives
in the approval of these instruments for sale.

4 Trillion RMB Can't Stem Hang Seng Slide

6. Bank of China International Research Vice President Bai Ren told
the Hong Kong press that China's RMB 4 trillion market stimulus
package announced November 9 would have only a short-term effect on
the stock market. After trading moderately higher on November 10,
the market lost ground throughout the week. The Hang Seng Index
gained 321 points on Friday or 2.4 percent to close at 13542.66.
Daily trade was a meager HKD 45 billion. For the week, the Hang
Seng Index was down 4.9 percent or 700.77 points.

7. The Hong Kong dollar remained strong this week, standing at the
higher end of HKD 7.75/USD. HKMA continued to sell Hong Kong
dollars in the interbank market to meet the demand. HKMA Chief
Executive Joseph Yam said in his weekly column on November 13 that
"strong demand for Hong Kong dollars was probably due to
repatriation of funds and unwinding of interest carry trades as
global financial jitters led market participants to de-leverage and
reduce their exposure to risk". Yam predicted that interest rate
volatility would continue.


HONG KONG 00002084 002 OF 002


Banks Lower Rates, Any Takers?

8. HIBOR quoted by Hang Seng Bank today was 0.3 percent for
overnight, 0.4 percent for 1-W, 1.10 percent for 1-M, 2.2 percent
for 3-M and 2.5 percent for 6-M. Local banking giants HSBC and
Standard Chartered announced they would cut their prime lending rate
by 25 basis points to 5 percent; the lowest level since 2004. They
were followed by Bank of East Asia and Hang Seng Bank. Analysts
predicted the cuts would do little to stimulate mortgage lending in
Hong Kong as property prices continue to slide.

© Scoop Media

 
 
 
 
 
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