Tag Archives: Hong Kong

As Hong Kong ATMs Run Out Of Cash, Central Bank Steps In To Prevent “Panic Among The Public”

As the violence in Hong Kong escalates with every passing week, culminating on Friday with what was effectively the passage of martial law when the local government banned the wearing of masks at public assemblies, a colonial-era law that is meant to give the authorities a green light to finally crack down on protesters at will, one aspect of Hong Kong life seemed to be surprisingly stable: no, not the local economy, as HK retail sales just suffered their biggest drop on record as the continuing violent protests halt most if not all commerce:

We are talking about the local banks, which have been remarkably resilient in the face of the continued mass protests and the ever rising threat of violent Chinese retaliation which could destroy Hong Kong’s status as the financial capital of the Pacific Rim in a heart beat, and crush the local banking system. In short: despite the perfect conditions for a bank run, the locals continued to behave as if they had not a care in the world.

Only that is now changing, because one day after a junior JPMorgan banker was beaten in broad daylight by the protest mob, a SCMP report confirms that the social upheaval has finally spilled over into the financial world: according to the HK publication, the local central bank, the Hong Kong Monetary Authority, was forced to issue a statement warning against a “malicious attempt to cause panic among the public” after rumors were spread online about the possibility of the government using emergency powers to impose foreign-exchange controls.

And while the de facto central bank stressed that the banking system remained robust and well positioned to withstand any market volatility, some of the statistics it provided gave a rather troubling impression: the monetary authority said that not only were more than 10% of 3,300 ATMs damaged and could not function, but that banks were negotiating with logistics firms to refill cash machines as 5% of them had run out of money, adding that banknote delivery was affected by the closure of shopping malls and MTR stations.

Will this be enough to prevent a bank run on the remaining ATMs? The answer will largely depend on what happens in the next 24-48 hours in Hong Kong, although the signs are grim.

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Hong Kong Condos Begin Underwater Journey As 20% Drop Results In Negative Equity

https://pix6.agoda.net/city/16808/16808-7x3.jpg?s=1920x

Hong Kong homeowners who bought flats in the last several months have seen their value decline as much as 20% in a matter of recent weeks, according to HSBC, sending values into negative equity which had only left the region from the prior downturn that ended in early 2017, reports the South China Morning Post.

https://www.zerohedge.com/sites/default/files/inline-images/hong%20kong%20housing.jpg?itok=PCFgNQk5Hong Kong’s famously expensive property market has started to feel the strain lately from a fall in demand caused by rising interest rates, a struggling stock market and fears about the impact of the US-China trade war. Negative equity occurs when a home loan exceeds the market value of the property, and has not been seen in Hong Kong since early 2017. –SCMP

“Theoretically, buyers who obtained a mortgage of 90 per cent of the flat’s value will fall into negative equity once home prices have dropped more than 10 per cent,” said Chief Vice-President at mReferral Mortgage Brokerage Services, Sharmaine Lau.

The largest losses are likely to be flat owners who paid sky-high prices for tiny apartments in older tenements, according to industry watchers, who add that banks tend to become very conservative in valuing such properties when the real estate market takes a turn for the worse.

https://assets.bwbx.io/images/users/iqjWHBFdfxIU/ibCYKiHZaaG4/v0/1200x-1.jpgPhotographer: Justin Chin/Bloomberg

“Lower valuations will first apply to flats that have less marketability. Banks’ valuations, which are supported by surveyors, are made in line with market conditions,” said Cushman and Wakefield head of valuation and advisory services for the Asia-Pacific region, Chiu Kam-kuen. 

Meanwhile, SCMP was able to find apartments at older housing developments which are now valued at HSBC far below their recent selling prices. 

A 234 square foot unit at 36-year-old Lee Bo Building in Tuen Mun, which was sold for HK$3.82 million on October 8, is now valued 20 per cent lower at HK$3.08 million. In North Point, a 128 square foot unit at 41-year-old Yalford Building, sold on August 29 for HK$3.1 million, is also valued a fifth lower now by the bank, at HK$2.48 million.

In Kowloon, a 210 square foot unit at 34-year-old Hong Fai Building in Cheung Sha Wan sold for HK$3.87 million on June 20 is already down about 13 per cent, according to HSBC, at HK$3.38 million.

The spectre of negative equity is only going to get worse, according to Louis Chan, Asia-Pacific vice-chairman and chief executive for residential sales at Centaline Property.

“More homeowners will fall into negative equity next year as flat prices may decline by 10 per cent,” he said. –SCMP

The precipitous drop may force companies such as the Hong Kong Mortgage Corporation (HKMC) to adjust their mortgage insurance program in light of market developments. 

Under the program, buyers of flats worth less than HK$4.5 million can get mortgage loans of up to 90 per cent of the unit’s value, capped at HK$3.6 million, while for flats priced between HK$4.5 million and HK$6 million the maximum loan-to-value ratio is 80 per cent, capped at HK$4.8 million.

In the first quarter of 2018, HKMC said 6,955 applicants secured HK$26.86 billion in home loans under the mortgage insurance program. In 2017, a total of HK$32.3 billion in mortgages were granted to 8,829 applicants, up from HK$24.6 billion of 7,145 successful in 2016. –SCMP

Negative equity reached its peak in Hong Kong in 2003 following an outbreak of Severe Acute Respiratory Syndrome (SARS) which sent already-teetering home values plummeting. According to the HKMA, over 105,000 households found themselves in negative equity at the time – all of which were above water as of the first quarter of last year.

Source: ZeroHedge

BofA Banker Arrested In Hong Kong For Double Murder Of Two Prostitutes

Rurick Jutting, a Cambridge University graduate, has been named as the suspect of the double murder

by Tyler Durden

The excesses of 1980s New York investment banking as captured best (and with just a dose of hyperbole) by Bret Easton Ellis’s American Psycho may be long gone in the US, but they certainly are alive and well in other banking meccas, such as the one place where every financier wants to work these days (thanks to the Chinese government making it rain credit): Hong Kong. It is here that yesterday a 29-year-old British banker, Rurik Jutting, a Cambridge University grad and current Bank of America Merrill Lynch, former Barclays employee, was arrested in connection with the grisly murder of two prostitutes. One of the two victims had been hidden in a suitcase on a balcony, while the other, a foreign woman of between 25 and 30, was found lying inside the apartment with wounds to her neck and buttocks, the police said in a statement.
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A spokesman for Bank of America Merrill Lynch told Reuters on Sunday that the U.S. bank had, until recently, an employee bearing the same name as a man Hong Kong media have described as the chief suspect in the double murder case. Bank of America Merrill Lynch would not give more details nor clarify when the person had left the bank.

Britain’s Foreign Office in London said on Saturday a British national had been arrested in Hong Kong, without specifying the nature of any suspected crime.

The details of the crime are straight out of American Psycho 2: the Hong Kong Sequel. One of the murdered women was aged between 25 and 30 and had cut wounds to her neck and buttock, according to a police statement. The second woman’s body, also with neck injuries, was discovered in a suitcase on the apartment’s balcony, the police said. A knife was seized at the scene.

According to the WSJ, the arrested suspect, who called police to the apartment in the early hours of Nov. 1, was until recently a Hong Kong-based employee of Bank of America Merrill Lynch.

 
 

Filings with Hong Kong’s securities regulator show that the suspect was an employee with the bank as recently as Oct. 31.The man had called police in the early hours of Saturday and asked them to investigate the case, police said.

Hong Kong’s Apple Daily newspaper said the suspect had taken about 2,000 photographs and some video footage of the victims after the killings including close-ups of their wounds. Local media said the two women were prostitutes.

The apartment where the bodies were found is on the 31st floor in a building popular with financial professionals, where average rents are about HK$30,000 (nearly $4,000) a month.

According to the Telegraph the suspect, who had previously worked at Barclays from 2008 until 2010 before moving to BofA, and specifically its Hong Kong office in July last year, had apparently vanished from his workplace a week ago. It has also been reported that he resigned from his post days before news of the murders emerged.

And as usual in situations like these, the UK’s Daily Mail has the granular details. It reports that the British banker arrested on suspicion of a double murder in Hong Kong has been identified as 29-year-old Rurik Jutting. 

 
 

Mr Jutting, who attended Cambridge University, is being held by police after the bodies of two prostitutes were discovered in his up-market apartment in the early hours of yesterday morning.

Officers found the women, thought to be a 25-year-old from Indonesia and a 30-year-old from the Philippines, after Mr Jutting allegedly called police to the address, which is located near the city’s red light district. The naked body of the Filipina victim, who had suffered a series of knife wounds, was found inside the 31st-floor apartment in J Residence – a development of exclusive properties in the city’s Wan Chai district that are popular with young expatriate executives.

The second woman was reportedly discovered naked and partially decapitated in a suitcase on the balcony of the apartment. She is believed to have been tied up and to have been left there for around a week. 

Sex toys and cocaine were also reportedly found, along with a knife which was seized by officers.

Mr Jutting’s phone is today being examined by police in a bid to identify possible further victims, according to the South China Morning Post. 

It is understood that photos of the woman who was found in the suitcase, apparently taken after she died, were among roughly 2,000 that officers found on the device.

Mr Jutting attended Winchester College, an independent boys school in Hampshire, before continuing his studies in history and law at Pembroke College, Cambridge, where he became secretary of the history society.  

He appears to have worked at Barclays in London between 2008 and 2010, when he took a job with Bank of America Merrill Lynch. He was moved to the bank’s Hong Kong office in July last year. 

A spokesman for Bank of America Merrill Lynch confirmed that it had previously employed a man by the same name but would not give more details nor clarify when the person had left the bank.

CCTV footage from the apartment block, located near Hong Kong’s red light district, showed the banker and the Filipina woman returning to the 31st floor shortly after midnight local time yesterday.

He allegedly called police to his home at 3.42am, shortly after the woman he was seen with is believed to have been killed.

She was found with two wounds to her neck and her throat had been slashed. She was pronounced dead at the scene.

The body on the balcony, wrapped in a carpet and inside a black suitcase, which measured about three feet by 18 inches, was not found by police until eight hours later. 

A police source quoted by the South China Morning Post said: ‘She was nearly decapitated and her hands and legs were bound with ropes. ‘She was naked and wrapped in a towel before being stuffed into the suitcase. Her passport was found at the scene.’

Wan Chai, the district where the apartment is located, is known for its bustling nightclub scene of ‘girly bars,’ popular with expatriate men and staffed by sex workers from South East Asia.  Police have today been contacting nearby bars in an attempt to find out more about the background of the two murdered women.  

One resident in the 40-storey block, where most of the residents are expatriates, said he had noticed an unusual smell in recent days. He told the South China Morning Post that there had been ‘a stink in the building like a dead animal’.

And just like that, the worst excesses of the “peak banking” days from 1980, when sad scenes like these were a frequent occurrence, are back.


Government workers remove the body of a woman who was found dead at a flat in Hong Kong’s Wan chai district in the early hours of this morning. A British man was been arrested in connection with the murders.

A second victim was found stuffed inside a suitcase on the balcony of the residential flat in Hong Kong

The 40-storey J Residence is reportedly a high-end development favored by junior expatriate bankers

Update

Bank Of America Psycho Killer Was Busy Helping Hedge Funds Avoid Taxes During His Business Hours

The most bizarre story of the weekend was that of Bank of America’s 29-year-old banker Rurik Jutting, who shortly after allegedly killing two prostitutes (and stuffing one in a suitcase), called the cops on himself and effectively admitted to the crime having left a quite clear autoreply email message, namely “For urgent inquiries, or indeed any inquiries, please contact someone who is not an insane psychopath. For escalation please contact God, though suspect the devil will have custody. [Last line only really worked if I had followed through..]”

But while his attempt to imitate Patrick Bateman did not go unnoticed, even if it will be promptly forgotten until the next grotesquely insane banker shocks the world for another 15 minutes, the question that has remained unanswered is what did young Master Jutting do when not chopping women up.

The answer, as the WSJ has revealed, is just as unsavory: “he had been part of a Bank of America team that specialized in tax-minimization trades that are under scrutiny from prosecutors, regulators, tax collectors and the bank’s own compliance department, according to people familiar with the matter and documents reviewed by The Wall Street Journal.”

Basically, when not acting as a homicidal psychopath, Jutting was facilitating full-blown tax evasion, just the activity that every developed, and thus broke, government around the globe is desperately cracking down on, and why every single Swiss bank is non-grata in the US and may be arrested immediately upon arrival on US soil.

More from the WSJ:

Mr. Jutting, a U.K. native and a competitive poker player, worked in Bank of America Merrill Lynch’s Structured Equity Finance and Trading group, first in London and then in Hong Kong, according to these people and regulatory filings. Mr. Jutting resigned from the bank sometime before Oct. 27, which police say was the date of the first murder, according to a person familiar with the matter.

 The trading group, known as SEFT, employs about three dozen people globally, one of these people said. It helps hedge funds and other clients manage their stock portfolios, often through the use of derivatives, according to the people and internal bank documents.

Mr. Jutting joined Bank of America in 2010 and worked three years in its London office, the bank’s hub for dividend-arbitrage trades, the people familiar with the matter say. He moved to Bank of America’s Hong Kong office in July 2013.

Ironic, because it was just this summer that a Congressional panel headed by Carl Levin was tearing foreign banks Deutsche Bank and Barclays a new one for providing structures such as MAPS and COLT, which did precisely this: give clients a derivative-based means of avoiding taxation (as described in “How Rentec Made More Than 34 Billion In Profits Since 1998 “Fictional Derivatives“).

As it turns out not only did a US-based bank – Bank of America – have an entire group dedicated to precisely the same type of hedge fund, and other Ultra High Net Worth, clients tax evasion advice, but it also housed a homicidal psychopath.

Perhaps if instead Levin had been grandstanding and seeking to punish foreign banks, he had cracked down on everyone who was providing this service, Jutting’s group would have been disbanded long ago, and two innocent lives could have been saved, instead allowing the alleged cocaine-snorting murderer to engage in far more wholesome, banker-approrpriate activities:

During his time in Asia, Mr. Jutting’s pastimes apparently included gambling. In a Sept. 14 Facebook post, he boasted of winning thousands of dollars playing poker at a tournament in the Philippines. He signed off the post: “God I love Manila.” The comment drew eight “likes.”

Alas one will never know “what if.”

But we are certain that with none other than America’s most prominent bank, the one carrying its name, has now been busted for aiding and abetting hedge fund tax evasion around the globe, it will get the same treatment as evil foreign banks Barclays and Deutsche Bank, right Carl Levin?

The Music Just Ended: “Wealthy” Chinese Are Liquidating Offshore Luxury Homes In Scramble For Cash

Source: Zero Hedge

One of the primary drivers of the real estate bubble in the past several years, particularly in the ultra-luxury segment, were mega wealthy Chinese buyers, seeking to park their cash into the safety of offshore real estate where it was deemed inaccessible to mainland regulators and overseers, tracking just where the Chinese record credit bubble would end up. Some, such as us, called it “hot money laundering”, and together with foreclosure stuffing and institutional flipping (of rental units and otherwise), we said this was the third leg of the recent US housing bubble. However, while the impact of Chinese buying in the US has been tangible, it has paled in comparison with the epic Chinese buying frenzy in other offshore metropolitan centers like London and Hong Kong. This is understandable: after all as Chuck Prince famously said in 2007, just before the first US mega-bubble burst, “as long as the music is playing, you’ve got to get up and dance.” In China, the music just ended.

But more so than mere analyses which speculate on the true state of the Chinese record credit-fueled economy, such as the one we posted earlier today in which Morgan Stanley noted that China’s “Minsky Moment” has finally arrived, we now can judge them by their actions.

And sure enough, it didn’t take long before the debris from China’s sharp, sudden attempt to “realign” its runaway credit bubble, including the first ever corporate bond default earlier this month, floated right back to the surface.

Presenting Exhibit A:

Cash-strapped Chinese are scrambling to sell their luxury homes in Hong Kong, and some are knocking up to a fifth off the price for a quick sale, as a liquidity crunch looms on the mainland.

Said otherwise, what goes up is now rapidly coming down.

Wealthy Chinese were blamed for pushing up property prices in the former British territory, where they accounted for 43 percent of new luxury home sales in the third quarter of 2012, before a tax hike on foreign buyers was announced.

The rush to sell coincides with a forecast 10 percent drop in property prices this year as the tax increase and rising borrowing costs cool demand. At the same time, credit conditions in China have tightened. Earlier this week, the looming bankruptcy of a Chinese property developer owing 3.5 billion yuan ($565.25 million) heightened concerns that financial risk was spreading.

Some of the mainland sellers have liquidity issues – say, their companies in China have some difficulties – so they sold the houses to get cash,” said Norton Ng, account manager at a Centaline Property real estate office close to the China border, where luxury houses costing up to HK$30 million ($3.9 million) have been popular with mainland buyers.

Alas, as the recent events in China, chronicled in minute detail here have revealed, the “liquidity issues” of the mainland sellers are about to go from bad to much worse. As for Hong Kong, it may have been last said so long ago nobody even remembers the origins of the word but, suddenly, it is now a seller’s market:

Property agents said mainland Chinese own close to a third of the existing homes that are now for sale in Hong Kong – up 20 percent from a year ago. Many are offering discounts of 5-10 percent below the market average – and in some cases as much as 20 percent – to make a quick sale, property agents and analysts said.

Also known as a liquidation. And like every game theoretical outcome, he who defects first, or in this case sells, first, sells best. In fact, since panicked selling will only beget more selling, watch as prices suddenly plunge in what was until recently one of the most overvalued property markets in the world. And with prices still at nosebleed levels, not even BlackRock would be able to be a large enough bid to absorb all the slamming offers as suddenly everyone rushes to cash out.

The biggest irony: after creating ghost towns at home, the Chinese “uber wealthy” army is doing so abroad.

In a Hong Kong housing development called Valais, about 10 minutes drive from the Chinese border, real estate agents said that between a quarter and a half of the 330 houses are now on sale. At the development’s frenzied debut in 2010, a third of the HK$30-HK$66 million units were sold on the first day, with nearly half going to mainland China buyers.

Dubbed a “ghost town” by local media, the development built by the city’s largest developer, Sun Hung Kai Properties Ltd (0016.HK), is one of many estates in Hong Kong where agents are seeing an increasing number of Chinese eager to sell.

“Many mainland buyers bought lots of properties in Hong Kong when the market was red-hot three years ago,” said Joseph Tsang, managing director at Jones Lang LaSalle. “But now they want to cash in as liquidity is quite tight in the mainland.”

Perhaps our post from yesterday chronicling the crash of the Chinese property developer market was on to something. And of course, as also described in detail, should China’s Zhejiang Xingrun not be bailed out, as the PBOC sternly refuted it would do on Weibo, watch as the intermediary firms themselves shutter all credit, and bring the Chinese property market, both domestic and foreign, to a grinding halt (something he highlighted in our chart of the day).

Meanwhile, the selling rush is on.

In a nearby development called The Green – developed by China Overseas Land & Investment (0688.HK) – about one-fifth of the houses delivered at the start of this year are up for sale. More than half of the units, bought for between HK$18 million and HK$60 million, were snapped up by mainland Chinese in 2012.

Because so much changes in just over a year.

“Some banks were chasing them (Chinese landlords) for money, so they need to move some cash back to the mainland,” said Ricky Poon, executive director of residential sales at Colliers International. “They’re under greater pressure from banks, so they’re cutting prices.”

In West Kowloon district, an area where mainland Chinese bought up close to a quarter of the apartments in many newly-developed estates, some Chinese landlords are offering discounts on the higher-end, three- to four-bedroom apartments they bought just a few years ago.

This month, a Chinese landlord sold a 1,300 square foot (121 square meter) apartment at the Imperial Cullinan – a high-end estate developed by Sun Hung Kai in 2012 – for HK$19.3 million, 17 percent less than the original price. The landlord told agents to sell the flat “as soon as possible,” said Richard Chan, branch manager at Centaline Property in West Kowloon.

In the same area, a 645 square foot, 2-bedroom flat in the Central Park development was sold in just two days after the Chinese owner put it on the market at HK$6.5 million in what agents called the year’s best bargain – the cheapest price for a unit of its kind over the past year.

Don’t worry there will be many more bargains. Why? Because what was once a buying panic – as recently as months ago – has finally shifted to its logical conclusion. Selling.

“The most important thing for them is to sell as soon as possible,” Centaline’s Chan said. “In the past two weeks, those who were willing to cut prices were mainland Chinese. It is going to have some impact on the local property market, that’s for sure.”

Indeed. And once the Hong Kong liquidation frenzy is over, and leaves the city in a state of shock, watch as the great Chinese selling horde stampedes from Los Angeles, to New York, to London, Zurich and Geneva, and leave not a single 50% off sign in its wake.

The good news? All those inaccessibly priced houses that were solely the stratospheric domain of the ultra-high net worth oligarch and criminal jet set, will soon be available to the general public. Especially once the global housing bubble pops, which may have just happened.