Hong Kong’s Nan Fung Development has purchased a commercial site in the Kai Tak district at the price of HK$12,864 per square foot. Last November, Lifestyle International Holdings Ltd (1212.HK) had purchased another Kai Tak site at HK$7.39 billion (only HK$6,733 per square foot).
Hence, we can see that the land price of Kai Tak’s commercial site has risen by 91 percent within half a year.
Currently, Kai Tak’s land, regardless of whether it’s for residential or commercial use, cost above HK$12,000 per square foot. Real estate developers who have purchased land there at a price lower than HK$12,000 per square foot are all considered lucky, and their shares have all increased in value.
At the end of last year, the exchange rate of the renminbi to USD fell to the level where US$1 ≈ RMB7. The market was in jitters then, and news about China limiting the outflow of the renminbi could be seen every day. However, till recently, the renminbi has strengthened by two percent. As at 1st June, US$1 was only worth about RMB6.82.
When it comes to currency strength, an increase of two percent is no small matter. The impact is also quite significant. Firstly, it eases the problem of capital outflow. China’s capital outflow can be attributed to two main reasons—
- The renminbi has depreciated.
- People are unwilling to put all their eggs in one basket, and especially so for corrupt officials, who try to transfer their assets overseas by all means possible.
But now, as the renminbi has appreciated in value, the first reason for capital outflow is gone.
The biggest beneficiaries of renminbi’s appreciation are bank stocks and insurance stocks in mainland China, as their assets are all in renminbi, and they are thus able to benefit directly as the currency strengthens. Besides, they do not hold foreign debt.
Three Oil Players, Varying Performances
The price of oil has been hovering around the current level for some time, despite ups and downs. But three oil companies, namely PetroChina Co Ltd (857.HK), CNOOC Ltd (883.HK) and China Petroleum & Chemical Corp (386.HK) registered different performances, with China Petroleum & Chemical Corp far outperforming the other two.
Apparently, apart from the influence of oil prices, the nature of the business is another important factor (that will impact oil companies’ stock prices). Now is when the Chinese government plans to fully restructure large state-owned enterprises.
China Petroleum & Chemical Corp, having a diversified business, has unlimited opportunities of forming collaborations, joint ventures, and stock exchange arrangements with other state-owned or even private enterprises.