Business Forum DEC 2016: International Market Securitisation

On the 9th of December 2016, GreenPro Capital had hosted a forum session in St Giles The Garden Hotel Kuala Lumpur, Malaysia. The event represented the Company’s second forum session with the objective to educate entrepreneurs about international market securitisation and strategies to embrace the upcoming challenges.

The forum began with Vincent Tan, Senior V.P. of GreenPro Capital, shared some of his insights about equity financing and market securitisation. Vincent mentioned SME’s should utilise the surrounding platform to even up their playing field with their competitor. Vincent continued to emphasise SME’s entrepreneurs need to change and adapt to the fast pace changing industry.

“In this day and age, business life cycle has shortened and business innovation is accelerating. Disruptive businesses would affect you one way or another. You either sink or swim. Businesses would need to learn and adapt to the new global environment by re-engineering their business model that seem fit and capitalise the opportunities presence within them,” said Vincent.

The session was later followed by Steven Yiap, Managing Director of GreenPro Wealthon, one of the subsidiaries of the GreenPro Capital. Steven began by sharing some current overview of banking industry such as loan application procedures for SMEs and the criteria to obtain debt financing for your business.

In his presentation, Steven also explained why some businesses were unable to acquire loans from banks despite having a solid financial record.

The third speaker of the event was Lee Chong Kuang (“CK”), Chief Executive Officer (“CEO”) of GreenPro Capital. During the session, CK shared some of his global insights and key trends, primarily about One Belt One Road (“OBOR”) initiative and how companies are taking advantage of the China’s government initiative. Lee continued by highlighting the importance of business entrepreneurs to re-strategise their business plan appropriately to capitalise on this opportunity.

“OBOR initiative is a key driver of Malaysia’s economic as it will create tremendous opportunities through industrial development that in return will create more employment opportunities not only for Malaysia but also for the Belt Road countries,” CK said.

Last but not least, the host invited a surprise guest speaker, Dato’ Sri How, President of Agape ATP Corporations to share his testimonial about GreenPro Capital. During the session, Dato’ had opened the floor for questions from curious participants. Among the question were “How GreenPro assisted you in elevating your business?” and “How long did you take to get listed on OTC Market with GreenPro assistance?”

The forum had brought together a number of intrigued entrepreneurs, business owners and investors from various business sectors.

Moving forward, the Company is targeting to host additional forum sessions for entrepreneurs on a monthly basis.

How the Wealthy Avoid Paying Hong Kong Property Tax to Save Millions

Here’s how billionaire Edwin Leong, one of Hong Kong’s largest retail landlords, got around Hong Kong’s new property curbs and saved almost $17 million on his tax bill.

He managed to qualify as a first-time homebuyer, purchasing three luxury apartments on the Peak for HK$1.2 billion ($155 million) on the same day last month. Previously, Leong had held no real estate in his name — despite owning more than 300 other properties, including apartments, hotels and shopping malls, through his company, Tai Hung Fai Enterprises Co., and having an estimated net worth of $4 billion.

Wealthy buyers are finding legal ways around restrictions designed to cool home prices in the world’s least affordable city, where leaders are grappling to shrink a yawning wealth gap. Hong Kong property prices have risen to near-record highs and sales volumes have surged since Chief Executive Leung Chun-ying announced the latest round of curbs on Nov. 4, underscoring the challenges in taming the market.

“Since the policies of C.Y. Leung were introduced, most of the tycoons have been finding ways around them,” said Alan Wong, director of the Hong Kong market at Landscope Christie’s International Real Estate.

About 70 percent of new apartments sold since last month’s measures in Hong Kong have involved first-time buyers who qualified for the lower rate, compared with about 30 percent before the new tax was imposed, said Henry Mok, regional director of markets at Jones Lang LaSalle Inc. The government doesn’t publish figures on buyers who purchase multiple homes.

Leung, who announced last week that he would not seek a second term, has been trying to quell discontent over high housing costs, a factor that led to student protests in 2014. The government has tried to increase supply by releasing more land for sale, although prices have continued to climb because of the influx of mainland Chinese developers seeking a toehold in Hong Kong.

Prices in the secondary housing market have risen 0.8 percent since early November to just 1.4 percent below a September 2015 record, according to Centaline Property Agency Ltd. Adrian Cheng, executive vice chairman of New World Development Co., said the company was seeing a higher percentage of first-time buyers than before the new tax.

Apart from the first-time exemption, another method employed by the wealthy involves buying a shell company that owns a property, which is treated as a share transfer and only incurs a stamp duty of 0.2 percent. If the company is registered offshore, the tax is zero.

That’s the tactic used in the Nov. 28 sale of a free-standing home with a yard and swimming pool in the Kowloon district that was appraised at HK$410 million, according to a filing with the Hong Kong stock exchange. If it had been sold as a home rather than through the British Virgin Islands-registered company that holds the property, the sale would have triggered 45 percent in taxes, including a flip tax because it was purchased earlier this year — a total of more than HK$180 million. Instead, the tax bill will be $0.

Mainland Requests

The buyer, China Soft Power Technology Holdings Ltd. whose chairwoman is mainland property developer Lin Yuehe, didn’t respond to e-mail and phone requests for comment.

In 2011, more than half of Hong Kong’s homes worth more than HK$20 million were sold via companies, according to government data. Although the practice was virtually halted after the government in 2013 began taxing companies buying properties at higher rates than individuals, thousands of properties are still held in this way and can offer significant tax savings when they are resold.

Wong from Landscope said he gets many requests from foreigners, mostly rich mainland Chinese, looking to buy one of these companies, as they would otherwise face the new 15 percent tax plus an extra 15 percent tax on non-permanent residents. In fact, the property agency’s website promotes the practice.

“Beat the stamp duty hike,” the site says. “Intimidated by the 15 percent stamp duty? No worries! Our keypersons have sourced an array of properties that can be sold via share transfer (of course you will need a lawyer to handle the process).”

Due-Diligence

Still, because due diligence on the companies can be costly and complicated, only about 5 percent of luxury homes are bought in this way, Landscope’s Wong said.

Leong’s purchase at the Mount Nicholson development, a mountain-nestled enclave where his units have four marble bathrooms, his and hers walk-in closets, and private elevator lobbies, set a record for the most ever paid per square foot for a property in Asia, according to Jones Lang LaSalle. By being able to pay a lower stamp duty for first-time buyers, Leong saved 10.75 percent in taxes. Leong, though his company, said he liked the “prestigious” address, while declining to comment on the tax savings.

Two of the new apartments are adjacent units on the 16th floor and could be combined into more than 8,700 square feet of living space for Leong as his principal residence, more than 10 times the average size of a Hong Kong apartment. The third apartment, measuring 4,566 square feet, is nine floors below and belongs to Leong and his family, his company said.

Clear Loophole

Last month’s new tax is the latest in a series of measures since 2011 aimed at making it easier for low-income families to get onto the property ladder while increasing the costs for investors and foreign buyers. These include a tax that penalizes people who resell within three years and an extra stamp duty of 15 percent for non-permanent residents.

The government’s new 15 percent stamp duty replaced taxes ranging from 3 percent on homes worth less than HK$3 million to a maximum of 8.5 percent on those worth more than HK$21.7 million. The rates are half that for first-time buyers, which includes people who may have owned homes in the past but currently do not.

“This is clearly a loophole,” said Raymond Yeung, chief economist at Australia & New Zealand Banking Group Ltd. in Hong Kong. “The government hadn’t thought about this before they launched the measure.”

Singapore, which has been successful in driving down home prices since rolling out curbs in 2009, also levies a 15 percent tax on foreigners and companies, while first-time homebuyers face lower stamp duties. Singapore and Hong Kong both define a first-time buyer as someone who currently does not own property in their name, regardless of whether they previously owned a home. Unlike Hong Kong, however, Singapore doesn’t allow first-time, multiple property purchases at lower rates.

‘Misguided Measures’

“The government is trying to cool the market, but there is no evidence that previous measures have done that,” David Webb, a Hong Kong-based shareholder activist who bought his own home 10 years ago through a company registered in the Seychelles. “There has been a whole series of misguided measures that have not had their intended effect.”

A spokesman for the government’s Transport and Housing Bureau said the measures are beginning to have an effect.

“More time is required before we can have a better assessment of the impact of the new stamp duty measure on the market,” the spokesman, Leo Law, said in a e-mail. “Nevertheless, market intelligence suggested that after the government announced the latest round of measures, the property market has shown signs of cooling down. Trading activities quietened down, and the uptrend in prices also slowed.”

Still, nobody’s talking about making getting around tax measures more difficult, said Denis Ma, head of Hong Kong research at Jones Lang LaSalle.

“These are loopholes that haven’t been closed, and I don’t think they can be,” he said. “Hong Kong prides itself on being a very free market, and government intervention is not very high.”

Source: Bloomberg

China’s Central Bank Is Facing a Major New Headache

People’s Bank of China Governor Zhou Xiaochuan already has one policy headache with the currency falling to near an eight-year low. He could have an even bigger one next month.

That’s when a $50,000 cap on how much foreign currency individuals are allowed to convert each year resets, potentially aggravating capital outflow pressures that are already on the rise. If just 1 percent of China’s almost 1.4 billion people max out those limits, that’s an outflow of about $700 billion — more than the estimated $620 billion that Bloomberg Intelligence estimates indicate has already flowed out in the first 10 months of this year.

Middle class and wealthy Chinese have been converting money into other currencies to protect themselves from devaluation, exacerbating downward pressure on the yuan. Outflows could intensify if Federal Reserve interest-rate hikes fuel further dollar appreciation.

That leaves Zhou in a bind identified by Nobel-prize winning economist Robert Mundell as the “impossible trinity” — a principle that dictates nations can’t sustain a fixed exchange rate, independent monetary policy, and open capital borders all at the same time.

“At a moment like this, you have to compare two evils and pick the less-worse one,” said George Wu, who worked as a PBOC monetary policy official for 12 years. “Capital free flow may have to be abandoned in order to maintain a relatively stable currency rate.”

China is moving further away from balance among trinity variables, at least temporarily, and “it may take a while before the situation stabilizes” for the yuan and capital outflows, said Wu, who’s now chief economist at Huarong Securities Co. in Beijing.

The global landscape complicates policy. Japan and Europe remain fragile, with negative policy rates. And in addition to a likely Fed hike in two weeks, U.S. President-elect Donald Trump, who has criticized China’s trade and currency policy, takes office Jan 20.

“How the Chinese government responds to this and how the new U.S. administration responds to the Chinese government’s responding to this is the kind of stuff to watch,” Paul Gruenwald, chief Asia-Pacific economist at S&P Global. “China’s authorities have to figure out what the best combination is.”

Gruenwald identified three options to counter the outflows: capital controls, burn their international reserves or let the currency weaken.

A mix of all three has already been occurring as policy makers opt to preserve monetary policy independence above all else. With economic growth stabilizing — a report Thursday showed the official factory gauge matched a post-2012 high — the PBOC has kept its main policy benchmarks on hold for more than a year and has been using new open market liquidity tools to effectively tighten monetary conditions.

So rather than raise borrowing costs to try to make domestic returns more attractive — China has added new restrictions on the flow of money across its borders. They include a pause on some foreign acquisitions and bigger administrative hurdles to taking yuan overseas, people familiar with the steps have told Bloomberg News.

The offshore yuan headed for its biggest weekly advance in more than 10 months late Friday after money-market rates climbed, policy makers tightened curbs on capital outflows and the dollar’s three-week rally faltered.

China should cut intervention in foreign exchange markets while stepping up capital control, Yu Yongding, a former academic member of the PBOC’s monetary policy committee, said Friday at a conference in Beijing. Yuan internationalization shouldn’t be promoted too aggressively, said Yu, a senior research fellow at the Chinese Academy of Social Sciences.

PBOC Deputy Governor Yi Gang said Sunday that foreign reserves are “very ample” and the yuan will remain stable, while Guan Tao, a former official with the State Administration of Foreign Exchange, wrote in a commentary on Thursday that yuan bears were being stubborn.

SAFE, which executes currency policy, and PBOC didn’t reply to faxed requests for comment.

About $1.5 trillion has exited the country since the beginning of 2015, Bloomberg Intelligence estimates show. While China still has the world’s largest foreign exchange stockpile, the hoard shrank in October to a five-year low of $3.12 trillion, PBOC data show. That means there’s less in the armory to battle depreciation if China’s famously frugal savers park more cash abroad.

The outflow pressure rose in January as individuals socked away a record amount in domestic bank accounts denominated in other currencies. Household foreign deposits surged 8.1 percent to $97.4 billion, according to the central bank, for the biggest jump since it began tracking the data in 2011. Those holdings stood at $113.1 billion in October.

The start of next year is likely to bring an even bigger jump in such transactions because many Chinese expect the dollar to strengthen, according to Ding Shuang, head of China economic research at Standard Chartered Plc in Hong Kong.

That means policy makers are likely to draw more on reserves to protect the yuan because they prioritize keeping it stable, Ding said. Capital controls also are likely, especially those to curtail outbound foreign direct investment that’s being used solely as a vehicle to move capital out, he said. Ministry of Commerce data show January to October ODI jumped 53.3 percent from a year earlier.

If the country stays committed to capital account liberalization, it should strengthen the use of interest-rate instruments to influence the yuan exchange rate indirectly so as not to frighten away global investors, according to Raymond Yeung, chief greater China economist at Australia & New Zealand Banking Group Ltd. in Hong Kong.

“Further delay in interest-rate reform will make Chinese assets less attractive,” Yeung wrote in a recent note. “The free flow of capital is critical to China’s financial sector development, which will benefit from higher involvement of foreign institutional investors.”

For now, the entry door is still opening, with new trading links and increased access to its capital markets. It’s the exit door that is going the other way as the impossible trinity bites.

Source: Bloomberg