Economy

HONG KONG (Reuters) -Hong Kong announced major measures on Wednesday to bolster its flagging real estate market by scrapping all tightening measures for residential properties, aimed at helping the city’s economy which is expected to grow at a tepid 2.5%-3.5% this year.The financial hub will cancel all additional stamp duties on transactions imposed in the past decade in a bid to boost the city’s depressed real estate market, Financial Secretary Paul Chan told lawmakers in his annual budget.Noting challenges including high interest rates, a complex geopolitical environment as well as ballooning recent budget deficits, Chan announced a mix of measures spanning property, tourism and financial services to lure back capital, businesses and visitors to the city, as well as restore fiscal balance.On property, long a key pillar of the economy, Chan said all demand-side management measures for residential properties would be scrapped with immediate effect.”We consider that the relevant measures are no longer necessary amidst the current economic and market conditions,” Chan said.These include cutting all additional stamp duties for foreign buyers and those for the purchase of second properties, as well as on those selling flats within two years of buying them, that had been imposed in the decade prior to the current slump to try to cool one of the world’s priciest property markets.In a parallel move, the Hong Kong’s Monetary Authority (HKMA) adjusted measures for property mortgage loans, including raising the maximum amount homebuyers and investors can borrow for some purchases. Ricky Wong, vice-chairman at developer Wheelock Properties, said the moves can “stimulate locals and overseas people to buy homes for their own use and attract investors to re-enter the property investment market.” The group would actively prepare for the launch of its new projects, he added. Hong Kong’s housing prices have plunged 20% since their 2021 peak given both economic and political headwinds, including a national security clampdown that stoked an emigration wave from the city and a slowing Chinese economy impacting potential Chinese home buyers — long a driver of the market.PROPERTY AGENCY STOCKS SURGEHong Kong’s property sub-index rose more than 2% on the news before closing down 0.6%, compared with a 1.5% drop in the benchmark index. Shares of Midland Realty, a real estate agency, surged as much as 44.6%, while smaller rival Legend Upstar jumped as much as 16.5%. “It is believed that in the short term, it will stimulate the trading volume, promote the recovery of the property market, restore market confidence, and stabilize property prices,” said Martin Wong, Greater China head of research and consultancy at Knight Frank.In a bid to curb smoking, the government increased tobacco taxes to HK$0.80 per cigarette, bringing the cost of a pack to about HK$94 ($12). On Hong Kong’s ballooning fiscal deficits, with the city running up deficits for four of the past five years, Chan pledged to “adopt a fiscal consolidation strategy to narrow our fiscal deficit progressively towards achieving the goal of restoring fiscal balance,” though he didn’t specify a timeframe.Hong Kong posted a consolidated deficit of HK$101.6 billion for fiscal 2023‑24, in line with market expectations, and a deficit of HK$48.1 billion is forecast for the coming 2024/25, Chan said. In fiscal 2022/23 Hong Kong posted a budget deficit of HK$122.3 billion ($15.63 billion) after taking into account the proceeds of HK$66 billion received from issuance of green bonds. The ratio of government debt to GDP will be in the range of 9-13% from 2024‑25 to 2028‑29, Chan said.The economy expanded by a sluggish 3.2% in 2023, hampered by geopolitical tensions between China and the United States, while capital flight turned the Hong Kong stock market into the worst performing major index last year. The government will roll out more than HK$1 billion ($127 million) in support measures for its beleaguered tourism industry, to help offset the impact from the struggling Chinese economy, which has resulted in fewer visitors from the mainland.The city will stage more than 80 “mega events” in the first half of the year to boost tourism, including a monthly fireworks and drone show at its panoramic Victoria Harbour.($1 = 7.8260 Hong Kong dollars) More

1. Futures edge lowerStock futures on Wall Street pointed lower, as investors awaited a raft of incoming U.S. economic data that could impact the timing of potential Federal Reserve interest rate cuts this year.By 03:12 ET (08:12 GMT), the Dow futures contract had shed 60 points or 0.2%, S&P 500 futures had dipped by 7 points or 0.1%, and Nasdaq 100 futures had lost 47 points or 0.3%.The main averages were mixed in the prior session, with attention turning in particular to the publication on Thursday of the January personal consumption expenditures price index (PCE), a key inflation gauge.Traders have been monitoring on a stock market rally powered by soaring enthusiasm for the applications of artificial intelligence that has pushed the S&P 500 and Dow Jones Industrial Average up to record levels. But with a stream of corporate earnings ebbing, the focus is returning to economic figures and the possible path ahead for U.S. borrowing costs.While the overall economy has remained resilient in the face of elevated interest rates, a cooldown in price pressures has showed signs of stalling — a trend that has led several Fed officials to indicate that there is no rush to cut rates down from more than two-decade highs.2. Salesforce aheadAfter a series of blockbuster reports from some of the biggest names in corporate America in recent weeks, the quarterly earnings season is gradually slowing.Wednesday’s releases will be highlighted by software group Salesforce, who is set to unveil its latest returns after the closing bell. Revenue is expected to have jumped by 10% to $9.22 billion in the fourth quarter, helping lift the California-based company back into profit after it posted a loss due to restructuring charges in the year-ago period.Salesforce’s data cloud unit could also be in the spotlight, with analysts keen to find out if a push to increasingly incorporate AI into its products and services has supported customer demand.Elsewhere, low-cost department store chain TJX Companies (NYSE:TJX) and pharmaceutical group Viatris are due to report prior to the market open.3. Next-generation Tesla Roadster to ship in 2025 – MuskTesla (NASDAQ:TSLA) Chief Executive Elon Musk said on Wednesday that the firm had completed production design on a long-planned update to its Roadster electric sportscar, adding that it was likely to ship starting next year. In a series of posts on the social media site X, which Musk also owns, he said that Tesla was aiming to unveil the Roadster by end-2024. Musk said that Tesla had “radically increased the design goals” for the upcoming model, which was originally due to be launched in 2020. He also said the new vehicle was being developed in collaboration with SpaceX. 4. Country Garden faces liquidation petitionHong Kong-listed Chinese property stocks fell on Wednesday, coming under pressure from renewed concerns over a real estate meltdown after Country Garden (HK:2007) was slapped with a liquidation petition.The embattled developer was the worst performer among its peers, sliding 6.7% and further into penny stock territory after Ever Credit Ltd filed a liquidation petition against the firm over its non-payment of a HK$1.6 billion loan.Other property developers also fell, with Sunac China Holdings (HK:1918), Longfor Properties Co (HK:0960) and Logan Property Holdings (HK:3380) falling between 3% and 9%. The broader Hang Seng index fell 1.4%, dragged lower largely by losses in the real estate sector. Country Garden Services Holdings (HK:6098) — a unit of the embattled developer — was the worst performer on the Hang Seng with a 4.6% loss.5. Oil slipsOil prices fell slightly in European trade on Wednesday, with traders eyeing a massive weekly build in U.S. inventories and a potential ceasefire between Israel and Hamas.Prices were sitting on strong gains from the prior session after media reports suggested that the Organization of the Petroleum Exporting Countries and its allies — a group known as OPEC+ — could maintain its current pace of supply cuts until the end of 2024, keeping global supplies limited.But crude prices still remained within a $75 to $85 trading range established so far in 2024, as optimism over the OPEC+ reports was countered by industry data showing a massive build in U.S. oil inventories.Brent oil futures expiring in April fell 0.5% to $83.20 a barrel, while West Texas Intermediate crude futures dropped 0.6% to $78.44 per barrel by 03:15 ET.Crude was also pressured by strength in the dollar, as markets positioned for the PCE price index data this week. More

WELLINGTON (Reuters) -New Zealand’s central bank held the cash rate steady at 5.5% on Wednesday and trimmed the forecast peak for rates, catching markets by surprise as policymakers said the risks to the inflation outlook have become more balanced.The Reserve Bank of New Zealand’s decision was in line with forecasts but defied some outlying market bets for a rate rise and kept the central bank more in line with global peers, most of whom have called an end to their aggressive hike cycles.The RBNZ’s rate forecast track and commentary were also slightly more dovish than some traders had anticipated, triggering a selloff in the New Zealand dollar and a rally in bonds.The bank lowered its forecast cash rate peak to 5.6% from a previous projection of 5.7% – toning down its hawkish stance and effectively reducing the risk of further tightening. “Core inflation and most measures of inflation expectations have declined, and the risks to the inflation outlook have become more balanced,” the RBNZ statement said.The market had priced in around a 23% chance of a hike this week. The probability of a move by May more than halved to just 6%, from 47% before the announcement. while two-year swap rates dived to 4.995%, from 5.195% and the kiwi dollar was down almost 0.9% at $0.6112, breaking support around $0.6152.ASB chief economist Nick Tuffley said that the tone of the statement was not as hawkish as could have been, with the risks now seen as more balanced as opposed to the upward skew noted in November’s statement.“We think over coming months the hurdle for an OCR move in either direction remains high,” he said.RBNZ Governor Adrian Orr told a press conference that while the committee had discussed a hike, “there was very strong consensus that the official cash rate right now is sufficient”. In a Reuters poll of 28 economists all but one had forecast the RBNZ would leave the cash rate at a 15-year high for the fourth consecutive meeting.GLOBAL POLICY IMPULSEA front-runner in withdrawing pandemic-era stimulus among its peers, the RBNZ has battled to curb inflation, lifting rates by 525 basis points since October 2021 in the most aggressive tightening since the official cash rate was introduced in 1999. The rate hikes have sharply slowed the economy with recent data showing that it was tracking below previous central bank expectations.Global central banks, led by the Federal Reserve, have recently pushed back against market expectations for an early start to rate cuts given persistent inflationary pressures.The RBNZ’s statement was broadly in tune with global concerns about prices, reiterating that it needs to keep policy restrictive for a while in order to bring inflation below the top-end of its 1% to 3% target band.The central bank noted a global impulse towards holding policy tighter for longer.”A more general risk to global growth is that central banks may need to keep policy interest rates at restrictive levels for longer than currently reflected by financial market pricing, to ensure that inflation targets are met,” the RBNZ statement said.The central bank also flagged geopolitical risks and a slowdown in China’s economy as challenges for policy. New Zealand’s annual inflation has come off in recent months and is currently running at 4.7% with expectations that it will return to its target band in the second half of this year.ANZ, which was alone in predicting a hike this week, said in a note the overall tone of the statement was not nearly as hawkish as they had anticipated.”The evidence threshold for the RBNZ committee is clearly much higher than we appreciated, so we have reluctantly parked further hikes back in the risk basket, pushing cuts out to mid-2025,” ANZ chief economist Sharon Zollner said. More

Stay informed with free updatesSimply sign up to the More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.A landmark global tax deal targeting the world’s largest companies is struggling to come into force as political support in the US and other key jurisdictions falters.The enactment of the first “pillar” of the OECD-brokered reforms, which would make big tech groups and multinationals pay more tax in the place they do business, has stalled in the US amid opposition from Republicans. Developing countries have meanwhile attempted to shift international tax negotiations from the OECD to the UN, where they would wield more influence, further complicating the talks over implementation. These factors, plus difficulties finalising the treaty text, are imperilling efforts to meet a June deadline for its signing and have spurred a European push to find a way to revive the agreement when G20 finance ministers meet in São Paulo in Brazil this week. “It’s something like a perfect storm. The OECD is stuck in a project with no real chance of success,” said one person with knowledge of the negotiations. “Pillar one is in a dead end because the US is not likely to ratify . . . and therefore you have an agreement which cannot be implemented.”In 2021 over 135 countries signed up to a two-legged political agreement that represented the biggest corporate tax reform in more than a century. The second pillar introduces a global minimum 15 per cent corporate tax rate and started to take effect this year. However the first leg of the deal has proved harder to implement.While US President Joe Biden’s administration has backed the reform, international tax treaties require a two-thirds majority — 67 votes — in the US Senate for ratification. Biden’s Democratic caucus, which holds a razor-thin lead in the chamber with its 51 seats, does not have the votes to overcome bitter opposition from rival Republicans. Without US ratification, the required minimum tax base for the deal to enter into force would not be met.Janet Yellen, US Treasury secretary, speaks ahead of the G20 finance ministers meeting on range of issues including tax More

BENGALURU (Reuters) – Property analysts continue to forecast a 5.0% rise in Australian home prices in 2024, a Reuters poll showed, brushing off central bank comments since the last poll three months ago that leave open the possibility of an interest rate hike before year-end.After a 25% surge during the pandemic, average house prices tumbled 9% from their peak but clawed back almost all of that last year even though the Reserve Bank of Australia hiked the cash rate to a 12-year high of 4.35%. The bank is widely expected to hold there well into the second half of this year. The average price of a home is too expensive for many first-time buyers. A low jobless rate, high wage growth and spike in immigration are likely to continue driving prices up, though by less than in recent years.Since the 2008 financial crisis, home prices have nearly doubled.Average home prices are likely to rise 5.0% this year, showed the median forecast of a Feb. 16-28 Reuters survey of 14 property analysts, unchanged from a December poll. Prices are forecast to increase 5.0% in 2025, versus 3.9% in the previous poll.”The housing market in Australia seems to be cooling. There was a very strong year in 2023 with 9.1% price growth in capital cities, but we don’t expect that to be repeated. The interest rate staying at 4.35% for most of the year … will put a limit on housing price growth in 2024,” said ANZ senior economist Adelaide Timbrell.”Housing prices will still grow because people will have more borrowing capacity through the year due to tax cuts and rate cuts. And there’s still strong population growth and a backlog of building homes that needs to be filled.”Under an amendment effective July 1, high-income earners will have to pay more tax while low-income households battling a rising cost of living will pay less.Rock-bottom interest rates during the pandemic and a scarcity of housing supply fuelled already-expensive housing prices and compelled aspiring first-time home buyers to surrender to the rental market.When asked about affordability for first-time homebuyers over the coming year, six of 10 analysts said it will worsen. The remaining four said affordability will improve.”Housing has increasingly become a luxury good, with household affordability around record low levels. This will put a downward force on homeownership rates,” said Barrenjoey senior economist Johnathan McMenamin.”Prior to the pandemic, you had a situation where you still had to earn more than the median income to enter the housing market. But now it’s shifted further up that income distribution. The pool of potential buyers has narrowed in the current cycle and that narrowing will likely lead the pool of rentals increasing as well.”Five of eight respondents said the proportion of home ownership to renters would decrease over the coming year, while three predicted an increase.Analysts who said the gap between demand and supply of affordable homes would widen over the coming 2-3 years outnumbered by two to one those saying it would stay the same or narrow modestly.”Every time housing prices go up more than wages and salaries, the share of homes that are affordable goes down. And we will continue to see that unless there is a huge increase in social housing,” ANZ’s Timbrell added.(For other stories from the Reuters quarterly housing market polls, click here.) More

There has been limited market reaction as the January release is heavily weighted toward goods prices that have been falling faster than services, and thus suggest some scope for a downside surprise.Data from the Australian Bureau of Statistics on Wednesday showed its monthly consumer price index (CPI) rose at an annual pace of 3.4% in January, unchanged from December and under market forecasts of 3.6%.A closely watched measure of core inflation, the trimmed mean, rose an annual 3.8%, down from 4.0% in December. Inflation excluding volatile items and holiday travel slowed to 4.1% from 4.2%.For January alone, CPI fell 0.3% from the previous month, driven by declines in holiday travel, clothes and garments and petrol. Holiday travel slumped 5.2% from a month earlier. The Reserve Bank of Australia has raised interest rates by 425 basis points since May 2022 to a 12-year top of 4.35%, and has not ruled out the risk of another hike if necessary to bring inflation back to the bank’s target band of 2-3%. Financial markets are confident the RBA is done tightening. Swaps imply about a 60% chance of a first rate cut in August and a total easing of 38 basis points by the end of the year, little changed from before.The Australian dollar was little changed at $0.6547, and three year bond futures held at 96.26. More

The RBNZ kept the official cash rate at 5.5%- its fifth straight meeting of keeping interest rates steady. While the bank had warned of a potential increase in rates over the near-term, markets widely expected no changes in its February meeting. While the bank noted that overall risks to the outlook for inflation had turned more positive in recent months, it still saw little chances of inflation coming within its 1% to 3% annual target range in the near-term.This notion is expected to keep rates higher for longer in New Zealand. The RBNZ said it expects annual consumer price index inflation to fall within its annual target range by the third quarter of 2024. “These ongoing restrictive monetary policy settings are necessary to guard against the risk of a rise in inflation expectations, while avoiding unnecessary instability in output, employment, interest rates and the exchange rate,” the RBNZ said in a statement. The central bank also noted that high interest rates, sticky inflation and weak offshore demand were exerting continued pressure on the New Zealand economy, which was also factoring into cooler inflationary conditions. The New Zealand dollar slid 0.8% after the RBNZ’s decision, given that it struck a less hawkish chord than markets were expecting. The RBNZ did not flag any further increases in interest rates on Wednesday. The RBNZ had hiked its official cash rate by a cumulative 525 basis points between August 2021 and May 2023, being one of the first major central banks to act against a post-COVID spike in inflation.But a series of major cyclones in early-2023 somewhat disrupted its plans to curb inflation, as price pressures shot up in the wake of rebuilding efforts after the disasters. More