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Worried Hong Kong Residents Are Moving Money Out as Protests Escalate

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Cash is leaking out of Hong Kong as months of protests elevate issues concerning the metropolis’s future.

The native foreign money has weakened quickly since early July, a transfer analysts attribute partly to outflows. Some companies say they’re seeing cash transfer overseas, and several other people who spoke to The Wall Road Journal mentioned they’ve both swapped cash into different currencies or are contemplating doing so.

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How secure do you assume cash and investments in Hong Kong are in the intervening time? Is it value transferring capital elsewhere? Be a part of the dialog under.

Sarah Fairhurst, a 52-year-old accomplice on the Lantau Group, an financial consulting agency, mentioned she transferred 200,000 Hong Kong {dollars} (about $25,500) into British kilos final week due to issues concerning the protests.

“It’s very unsettling right here,” mentioned Ms. Fairhurst, who has lived in Hong Kong for 12 years. She mentioned seeing movies of police utilizing tear fuel close to her workplace have made her notably nervous. “I don’t know what’s going to occur, however I do know that I don’t need my cash trapped right here.”

Retail, tourism and enterprise confidence have all suffered, and town’s inventory and property markets are below stress. The extradition invoice that sparked the unrest, and the months of clashes which have adopted, have collectively raised questions concerning the metropolis’s future as one of many world’s largest worldwide monetary hubs, and the way a lot autonomy it may well preserve in its dealings with Beijing.

Ken Cheung, chief Asian foreign-exchange strategist at Mizuho Financial institution, mentioned the weakening of the Hong Kong greenback towards the U.S. foreign money, regardless of their respective rates of interest, was a worrying signal of capital outflows. He mentioned a falling inventory market might point out some folks have been shifting cash overseas.

The Hong Kong greenback has been pegged to its U.S. equal since 1983. The de facto central financial institution, the Hong Kong Financial Authority, lets the U.S. greenback commerce between 7.75 and seven.85 Hong Kong {dollars}, and buys or sells bucks to maintain the foreign money pair inside these bounds.

The Hong Kong greenback traded at 7.8399 Friday, close to the weak finish of the band, although interbank borrowing charges in Hong Kong are increased than their U.S. counterparts, which might normally assist buoy the foreign money.

The financial authority mentioned there was no noticeable outflow of funds from the Hong Kong greenback or from the banking system, based mostly on their newest statistics and the financial-market scenario.

Complete official knowledge on capital flows is on the market solely with a delay of a number of months. And any outflows would observe a few years of funds transferring the opposite manner. In March 2018 the financial authority mentioned town had seen some $130 billion in inflows for the reason that U.S. started quantitative easing, or loosening financial coverage by shopping for property, in 2009.

For now, these transferring cash may very well be the minority. At the least a dozen professionals who spoke to the Journal mentioned they hadn’t transferred any funds. A number of expatriate employees mentioned they already maintained financial institution accounts of their house currencies, which means their place was already considerably diversified.

Likewise, two Hong Kong hedge-fund managers mentioned they don’t assume there was a rush of cash leaving town, based mostly on discussions with their friends.

Others are much less relaxed.

Ming Chung,

a 42-year-old who runs a enterprise exporting constructing supplies, mentioned he dropped plans to purchase a property in Hong Kong and as a substitute invested HK$four million, or about $510,000, right into a U.S.-dollar insurance coverage product.

“It’s a safer funding versus shopping for property in Hong Kong,” Mr. Chung mentioned. “Due to the protests, I don’t belief the market.” He mentioned he was anxious concerning the Hong Kong greenback’s longstanding hyperlink to the U.S. greenback breaking and thought of the latter a safer foreign money.

The financial authority mentioned the foreign money system had served Hong Kong nicely via many financial cycles. “We see no want and haven’t any intention to vary the system,” it mentioned.

TransferWise—a London-based firm that facilitates worldwide financial institution transfers, primarily for people and small companies—mentioned it has seen a big pickup in outbound flows from Hong Kong for the reason that protests started.

The ratio of cash transferring into and out of Hong Kong was pretty constant till a couple of months in the past however has climbed as protests within the metropolis intensified. TransferWise mentioned that for each $1 that clients moved into Hong Kong in August, about $2.64 left town.

A TransferWise spokesman declined to reveal exact quantities however mentioned a lot of the cash that left Hong Kong went to financial institution accounts within the U.Okay., U.S., Singapore, Australia and nations within the eurozone.

Devadas Krishnadas, the chief govt of Singapore consulting agency Future-Strikes, mentioned some purchasers, together with wealthy people and enormous enterprises, have been transferring each private and funding capital out of Hong Kong. He mentioned the driving force was longer-term issues concerning the monetary hub, not the fast unrest.

“What’s transferring the quickest is capital,” he mentioned, whereas it might take longer to maneuver workers and places of work.

Hoi Tak Leung, a 37-year-old tech lawyer in Hong Kong who beforehand lived in Australia, periodically sends cash there to his mother and father and for his property investments. He mentioned he’s contemplating transferring extra funds again due to the protests and the favorable trade charge. “When there’s decreased confidence, you consider options,” he mentioned.

Ms. Fairhust, the financial marketing consultant, mentioned her firm’s administration workforce rejected her advice to maneuver some cash to Singapore. “My two enterprise companions assume I’m being a bit too paranoid,” she mentioned.

Write to Steven Russolillo at steven.russolillo@wsj.com and Joanne Chiu at joanne.chiu@wsj.com

Copyright ©2019 Dow Jones & Firm, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Business/Markets

Property Giant Adds to Deluge of Chinese Bond Deals

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China Evergrande Group

EGRNF 3.85%

grew to become the nation’s newest property developer to faucet worldwide bond markets, providing double-digit yields on as much as $2 billion of latest greenback debt.

The Hong Kong-listed group offered $1 billion apiece of three- and four-year bonds, priced at par with rates of interest of 11.5% and 12% respectively, in keeping with a time period sheet on Friday.

Chinese language property firms have kicked off the 12 months by promoting billions of {dollars} of longer-dated bonds, capitalizing on a scorching market to scale back their heavy reliance on short-term funding.

Nonetheless, Evergrande caught to comparatively short-dated bonds and provided greater yields than some friends. This week,

Kaisa Group Holdings

1638 -1.23%

offered a $300 million bond with a 5.5-year maturity at 9.95%. Each units of bonds have been rated B2 by Moody’s Traders Service Inc., or 5 notches beneath investment-grade.

“The sheer quantity of bonds excellent from Evergrande could result in market indigestion, which can clarify why buyers demand a better yield than different Chinese language builders with related rankings,” mentioned Luther Chai, an analyst and credit score strategist at CreditSights in Singapore.

Excluding bonds offered by means of personal placements, Evergrande has 12 greenback bonds with a mixed face worth of practically $18 billion excellent, in keeping with CreditSights. Moody’s estimates the corporate’s whole debt was $132.5 billion as of June 2019.

Mr. Chai mentioned Evergrande hadn’t caught to commitments to chop debt within the final monetary 12 months, presumably due to its capital-intensive electrical-vehicle enterprise. That meant restricted visibility on its credit score profile greater than three years out, he mentioned. “Lots hinges on the March outcomes, the place we’ll see in the event that they preserve deleveraging guarantees made final 12 months,” he mentioned.

A Hong Kong-based hedge-fund supervisor, who positioned orders for the bonds, mentioned the yields have been enticing and different buyers frightened an excessive amount of about its leverage. Nonetheless, a second hedge-fund investor disagreed, saying it was exhausting to get comfy with investing in its debt.

In a submitting, the corporate mentioned Chairman

Hui Ka Yan

and Chief Govt Xia Haijun every purchased $50 million of the bonds “to suggest their help to and confidence in” Evergrande. Unusually, in 2018 Mr. Hui purchased greater than half of a earlier $1.eight billion bond deal.

Final month Evergrande mentioned it might pay a $2.7 billion dividend. Most of that will go to Mr. Hui as the corporate’s majority proprietor.

Write to Frances Yoon at frances.yoon@wsj.com

Copyright ©2019 Dow Jones & Firm, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Norwegian polysilicon maker rallies 56 per cent on US-China trade deal

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Shares within the Norwegian polysilicon producer REC Silicon jumped by 56 per cent on Thursday after China agreed to purchase extra US provides of the photo voltaic panel materials as a part of a phase-one commerce deal.

China agreed to purchase an extra $77.7bn of manufactured items from the US over the following two years as a part of the deal signed on the White Home on Wednesday. That features purchases of US polysilicon, the settlement mentioned.

“It’s actually constructive that the US authorities has recognised the significance of the US polysilicon trade. Being locked out of the worldwide marketplace for polysilicon for the final a number of years has price the US high-paying jobs and billions of {dollars} in funding,” Tore Torvund, chief govt of REC Silicon mentioned.

Polysilicon is a vital materials for photo voltaic panels and semiconductors. China accounts for over 92 per cent of world polysilicon demand as a result of its dominance in photo voltaic panel manufacturing.

In 2014, China imposed tariffs on US solar-grade polysilicon. That pressured REC to shut its $1.7bn polysilicon plant in Moses Lake, Washington state final July and lay off 450 staff, it mentioned.

REC and two different US polysilicon producers Hemlock Semiconductor and Wacker Polysilicon welcomed the settlement in an announcement on Wednesday.

“We hope this settlement will end in a extra degree enjoying discipline for this essential constructing block to the photo voltaic and electronics industries,” Mark Bassett, chief govt of Hemlock Semiconductor Operations, which is predicated in Michigan, mentioned.

“Sustaining and increasing US manufacturing capability is significant to supporting high-wage American manufacturing jobs based mostly on high-tech innovation.”

Shares in REC Silicon rose by 56 per cent to commerce at NKr4.812.

Shares in Germany’s Wacker Chemie, which owns Wacker Polysilicon, rose by three per cent to commerce at €65.68.

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Barclays, FactSet Offer New Tool to Navigate Opaque Bond Market

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The 325-year-old U.Ok. financial institution, run by Chief Government

Jes Staley,

stated Wednesday it’s making a proprietary instrument it makes use of to measure liquidity in additional than 22,000 bonds obtainable to subscribers of FactSet, leveraging its personal inner knowledge on $50 trillion of fixed-income securities.

Knowledge is the subsequent frontier for big funding banks, which sit between transactions executed as hedge funds, asset managers, pension funds and insurers transfer cash across the globe in monetary markets.

Rival funding banks on Wall Avenue—together with

Goldman Sachs Group Inc.

and

JPMorgan Chase

& Co.—have employed troves of information scientists and technologists to construct new platforms and programs that may harness giant quantities of data to glean insights into buying and selling habits or how monetary devices transfer.

“New knowledge and know-how are driving change throughout the funding business at an unprecedented tempo, and we’re more and more seeing this impression in fastened earnings,” stated

Wealthy Newman,

international head of content material and know-how options at FactSet.

The Barclays instrument, often called the Liquidity Value Scores (LCS), is an enormous enterprise utilizing laptop packages to compile and analyze two-way costs made by human merchants throughout a broad vary of securities, from U.S. investment-grade bonds to emerging-market bonds.


‘Market liquidity is an ever-present concern for fixed-income portfolio managers.’

—Vadim Konstantinovsky of Barclays

Barclays created LCS in 2009, and it’s supposed to mirror the price of an instantaneous, institutional-size, round-trip transaction. It’s expressed as a share of the bond’s value.

“Asset managers are likely to desire liquidity analytics which can be intuitive” stated

Amy Mignosi,

a member of the Barclays Reside gross sales crew, in an interview with The Wall Avenue Journal. “LCS is predicated off precise two-way quotes from our buying and selling desks. Its calculation doesn’t contain complicated mathematical fashions.”

Barclays was a primary mover in constructing electronic-trading programs for foreign money markets within the early 2000s, alongside Deutsche Financial institution AG. Now it sees the profit in monetizing its knowledge round liquidity—a problem that grew to become a larger focus for buyers after a sequence of hiccups in markets together with the spike in repo charges in September 2019 and volatility in oil in August 2019.

Liquidity is a measure of how straightforward it’s to purchase or promote completely different investments. When it dries up, it has the ability to dislocate costs, and at its most excessive it will probably bankrupt monetary establishments or asset managers.

“Market liquidity is an ever-present concern for fixed-income portfolio managers,” stated

Vadim Konstantinovsky,

a senior Barclays quantitative analysis analyst, in an interview with the Journal. “Transaction-costs issues at all times issue into their determination making. Many a method promising robust efficiency seems unprofitable when the price of execution is taken into consideration.”

For FactSet, the deal underscores a development in fixed-income markets: the search for transparency.

Whereas equities and currencies are largely traded through digital platforms, the bond markets have been slower to modernize. Nearly all of transactions stay “over-the-counter”—that means that they aren’t cleared, trades aren’t publicly listed, they usually happen between two events, normally over the cellphone or through digital chats.

However that’s beginning to change. Digital buying and selling surged to 34% of investment-grade company bonds in November, in line with a current examine by analytics agency Greenwich Associates.

The yield on the benchmark 10-year Treasury observe, which helps set company borrowing prices, closed Wednesday at 1.788%, down from 1.817% Tuesday. The WSJ Greenback Index, which measures the U.S. foreign money in opposition to a basket of 16 others, declined 0.1% to 90.20.

Copyright ©2019 Dow Jones & Firm, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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