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New Business Opportunities Prop up Business Confidence in China, Against a Darkening Macro Outlook

HONG KONG, Aug. 27, 2014 /PRNewswire/ -- Business confidence recovered in mainland China in the second quarter of 2014, returning to levels last seen a year ago, according to the largest regular economic survey of finance professionals around the world.

Thirty per cent of respondents reported confidence gains, up from 25% in the first quarter of 2014, while 43% reported a loss of confidence, down from 53%, The latest findings of the Global Economic Conditions Survey organised by ACCA (the Association of Chartered Certified Accountants) and IMA (the Institute of Management Accountants) show.

In Hong Kong, confidence also rose marginally, suggesting that the lows of late 2013 have been mostly overcome, but business performance has become much more volatile. 23% of respondents reported confidence gains, up from 10% previously, while 46% reported a loss of confidence, also up from 36%.

Manos Schizas, senior economic analyst with ACCA said: "The relative buoyance in China was mostly due to greater opportunities for organic growth. In the mainland, readings in this respect were better than at any time in 2013, and in Hong Kong they were better than they've been in at least two and a half years. Despite this, access to growth capital tightened throughout the country. The recovery in the mainland is clearly more robust."

Opportunities for non-organic growth ticked up and a second consecutive quarter of improving cashflow and demand conditions helped keep spirits high. The opposite was true in Hong Kong, where cashflow and demand deteriorated in the second quarter and opportunities for non-organic growth -- already very low by global standards -- fell sharply.

Marginal business confidence gains stand in contrast to a deteriorating macro-economic outlook throughout the country. In mainland China, this change has been mild: 61% of respondents (down from 62%) believe conditions are getting worse or stagnating, against 35% who believe they are improving or about to do so (down from 38%). But in Hong Kong, the macro outlook has darkened significantly: the share of pessimists among the GECS sample has soared from 35% in early 2014 to 62%. Only 35% (down from 52%) are optimistic.

Finally, respondents' expectations of government spending in mainland China fell once again in the second quarter of 2014, suggesting that public investment is not on the road to recovery yet. But the overall investment environment appears to be tapering out, and China's slowdown could soon bottom out into a stable 'new normal.' 

Globally, the economic recovery has once again run out of momentum, according to GECS.

Business confidence fell marginally in Q2 2014, and is becoming increasingly reliant on financial stability. The two bodies believe that this is a sign of mounting risks for the future of the recovery.

Although the change in business confidence between Q1 and Q2 2014 is statistically negligible, this apparent stability is the result of dwindling business opportunities and an improving investment environment cancelling each other out, according to the report's findings.

The survey shows that there is growing business dynamism around the world, with North America and South Asia leading the charge in terms of capital spending, new orders and headcount. Conversely, Africa and the Middle East fared worst, with all three areas either falling or stable.

Overall, most of the world's confidence boost appears to be coming from North America, as well as a temporary rebound in Central and Eastern Europe, but improvements in these regions were balanced out by receding optimism throughout Asia, Western Europe, Africa and the Middle East. Post-Taper, emerging markets are still underperforming in crucial areas such as access to growth capital, but the gap between them and the more developed markets is now narrowing.

One positive sign for the Asia Pacific region and beyond is that China's prolonged slowdown is now starting to bottom out, which should be good news for a range of suppliers and commodity producers worldwide.

On a country-by-country basis, it is clear that much of the recovery in business confidence is temporary. For instance, encouraging figures in China and Russia were boosted by the signing of a series of major long-term trade and investment deals, while fieldwork closed before the loss of flight MH17 and its aftermath, which will certainly depress confidence in Central and Eastern Europe in Q3.

Despite relatively good news from the real economy, the survey also revealed that the first half of 2014 had been a very depressing time for major Western banks, and became more so in the second quarter. GECS figures for large financials in the US and Europe suggest that confidence in the sector retreated sharply in anticipation of tougher stress tests, rising interest rates and falling property prices, geopolitical risks and the threat of tougher regulatory enforcement.

Manos Schizas said: "After a year of solid improvement in 2013, it's clear that 2014 is not going to be anywhere near as benign for the global economy. Many of the sources of good news in 2013 -- including large financials and 'austerity survivors' such as the UK and Ireland -- are turning negative again. The Chinese slowdown, which has been a constant drain on the global recovery, may be coming to an end, but the looming geopolitical risks in Eastern Europe and the Middle East are likely to prove just as damaging in the medium term."

View the full report here:
http://www.accaglobal.com/gb/en/technical-activities/technical-resources-search/2014/august/gecsr-2014-q2.html

Notes to Editors

  1. ACCA (the Association of Chartered Certified Accountants) is the global body for professional accountants. We aim to offer business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management.
  2. We support our 170,000 members and 436,000 students in 180 countries, helping them to develop successful careers in accounting and business, with the skills required by employers. We work through a network of 91 offices and centres and more than 8,500 Approved Employers worldwide, who provide high standards of employee learning and development. Through our public interest remit, we promote appropriate regulation of accounting and conduct relevant research to ensure accountancy continues to grow in reputation and influence.  
  3. As the first global accountancy body entering into China, ACCA now has over 23,000 members and 48,000 students, with 8 offices in Beijing, Shanghai, Chengdu, Guangzhou, Shenzhen, Shenyang, Hong Kong SAR, and Macau SAR.
  4. Founded in 1904, ACCA has consistently held unique core values: opportunity, diversity, innovation, integrity and accountability. We believe that accounting professionals bring value to economies in all stages of development and seek to develop capacity in the profession and encourage the adoption of global standards. Our values are aligned to the needs of employers in all sectors and we ensure that through our qualifications, we prepare accountants for business. We seek to open up the profession to people of all backgrounds and remove artificial barriers, innovating our qualifications and delivery to meet the diverse needs of trainee professionals and their employers.
  5. For more information, please visit:
    www.accaglobal.com | www.facebook.com/ACCA.HongKong

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Government Ministers, Business Leaders and Economists Confirmed for Cambodian Investment Conference

PHNOM PENH, Cambodia, Aug. 27, 2014 /PRNewswire/ -- Agriculture, manufacturing, banking and real estate will be among the key business sectors to be discussed at the upcoming International Business Chamber of Cambodia (IBC) Investment Conference.

The conference will bring together senior government ministers, top economists and business leaders in Phnom Penh on October 6th and 7th.

Cambodia's Prime Minister H.E. Samdech Akka Moha Sena Padei Techo Hun Sen will deliver the conference's opening address on the morning of October 6th.

The keynote speech will be delivered by Donald Kanak, the chairman of Prudential Corporation Asia -- which is a leading sponsor of the conference.

Two major panels will follow the opening address and the keynote speech, both moderated by the renowned Wall Street Journal columnist Andrew Browne.

The first panel will look at Cambodia's Economic Outlook and will feature Eric Sidgwick, senior country officer at the Asian Development bank (ADB), the International Monetary Fund's (IMF) Cambodia representative Ahmed Faisal and Dr. In Channy, CEO of ACLEDA Bank who is also the Vice Chairman of the IBC and the chairman of the conference's organising committee.

Another panel at the conference will discuss Cambodia's Economic Advantage.

"The speakers and moderators list for the conference is looking very exciting and I am delighted to see the calibre of those who will be present for these important discussions," says Dr. Channy.

"There are a number of government ministers already in attendance and we are expecting more to confirm in the coming days and weeks," says Dr. Channy.

Government ministers attending the event will include Cambodia's Minister of Commerce H.E Sun Chanthol, Education Minister H.E. Hang Chuon Naron and Minister
 of Posts & Telecommunication (MPTC)  H.E. Prak Sokhonn.

IBC Chairman Bretton Sciaroni, senior partner at Sciaroni and Associates, will chair a break-out discussion on Cambodia's Legal Landscape for Investors which will feature Senior Minister H.E. Mr. Om Yentieng, Chairman of Cambodia's Anti-Corruption Unit.

"This will be one of the most important discussions at the conference -- with investors constantly monitoring the political and legal situation in Cambodia as they make their investment decisions. The recent political breakthrough will be a big boost for investors who want to see similar breakthroughs in the legal landscape," Mr. Sciaroni says.

Platinum sponsors for the IBC conference are Prudential Cambodia, Jardine Matheson Limited, Sciaroni and Associates, ACLEDA Bank and ANZ Royal. Gold sponsors include DFDL and Ezecom.

The South East Asia Globe and its sister publication Focus ASEAN are media partners of the event.

Those wishing to register for the IBC Investment conference should visit the IBC's website at www.ibccambodia.com.

Media Contact:

Julian Rake
+855-12324283
julian@quantumpublicity.com

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Singapore Investor Sentiment Hits a New High — Manulife Survey

- Sentiment boosted by improved outlook on property, fixed income and mutual funds - Domestic economy ranked top 3 for growth by Singapore investors SINGAPORE, Aug. 26, 2014 /PRNewswire/ -- Singapore investor sentiment rose in the second...

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APAC Hospitality Investments in 2013 Highest in 5 Years

1H 2014 continues to see healthy level

HONG KONG, Aug. 21, 2014 /PRNewswire/ -- Cushman & Wakefield, Global Real Estate Consultancy, in their latest report on the hotel markets across 17 gateway cities and prime destinations in Asia and Australia, reported that hospitality investment market in the Asia Pacific reached a record high transaction volume of US$12.83 billion in 2013, the highest in the last 5 years and over 30% higher than 2012.

There had been a substantial weight of capital invested in the core markets with mainland China accounting for US$2.636 billion or 20.5% of the total investment volume, Singapore the second largest market at US$2.634 billion, followed by Japan at US$2.610 billion and Australia at US$2.271 billion. Hotel investments were also more widespread across the region in 2013, where emerging and non-core markets like Cambodia, Macau, Maldives saw some assets changing hands.

Akshay Kulkarni, Regional Director of Cushman & Wakefield's Hospitality Services for South Asia and Southeast Asia said: "Hospitality investment volume in 2013 more than doubled since 2008 and can be attributed to the excess liquidity, the low borrowing costs and the region's favourable tourism growth and outlook."

The cities included in the report are Singapore, Hong Kong, Tokyo, Bali, Seoul, Mumbai, National Capital Region (India), Bangkok, Shanghai, Jakarta, Kuala Lumpur, Beijing, Ho Chi Minh City, Sydney, Melbourne, Perth and Brisbane. 

In the first half of 2014, total investment volume of hospitality assets reached US$5.203 billion, which is 9.5% higher compared to the same period last year. While the core markets of Japan, Singapore, mainland China and Australia are still the most traded ones and constitute about 68.8% of the investment volume, other emerging markets such as Philippines, Malaysia, Sri Lanka and Indonesia have experienced higher investment quantum compared to the same period last year.  For 2014, Cushman & Wakefield expects the hospitality investment market to moderate, and likely to close at US$9.0 to US$10.5 billion.

Table 1 : Asia Pacific Hospitality Investment Volume in US$ (million)

Countries/regions

2013

2012

2013 H1

2014 H1

Australia

2,271.06

2,699.10

592.42

654.27

Cambodia

6.40

-

-

8.71

Mainland China

2,636.26

1,558.60

787.56

1,678.62

Hong Kong

1,155.03

1,022.10

400.53

246.77

India

141.28

89.70

89.37

84.31

Indonesia

14.00

31.61

-

55.91

Japan

2,609.65

2,337.51

1,234.71

881.74

Korea

40.12

241.39

31.47

91.53

Macau

419.05

-

-

115.97

Malaysia

137.29

123.15

57.41

309.18

Philippines

35.85

96.34

35.85

204.16

Singapore

2,634.34

742.80

974.08

364.65

Sri Lanka

42.33

8.67

7.73

30.24

Taiwan

55.80

288.38

40.03

6.82

Thailand

205.11

350.67

176.22

166.76

Vietnam

246,04

184.28

246.04

44.66

Others (incl. Maldives)

181.94*

-

77.34

249.57

Total

12,831.55

9,774.29

4,750.76

5,202.58

Source: RCA Analytics, Cushman & Wakefield Hospitality

In 1H 2014, some notable transactions include the 5-star Park Hyatt in Melbourne sold by the GIC Pte Ltd to Hongkong-based Fu Wah Group for US$120.5 million (or US$502,000 / key), Hilton Hua Hin Hotel sold to Thai-listed Saha-Union PLC for US$98.9 million (or US$334,000 / key) and Sutera Harbour Resort at Kota Kinabalu grsold to SGX-listed GSH Corporation for US$275.7 million (or US$288,000 / key).

Kulkarni added, "We expect the balance of 2014 to equal or come close last year's level in terms of transactional activity. Japan has already seen significant investment volume and will undoubtedly improve further and lead the pack, due to strong corporate demand and greater investor optimism arising from Abe's economic reforms. Lower hotel transaction volume is expected for Singapore this year compared to last year, at least in the organized institutional side. However with the change in norms on the shop houses those that have approved hotel licenses will see high guest demand.

Mainland China in the first half of this year has seen investments of over US$1.5 billion. This obviously shows significant confidence in the markets and their potential, and also indicative of the fact that assets may be trading at below par and there is an eventual upside. However given the current trading performances in the key Chinese markets and also the relative slowdown of the economy the forecast in terms of investments is that these volumes will taper.

Some of those that gain would be India as it will see a significant rise due to the change in approach to debt service and banking norms forcing asset restructuring companies to offload some of their stocks. This in addition with the positive way in terms of the political climate provides India with a significant opportunity to attract a significant share of the regional investments."

"Thailand, Indonesia, and to some extent, Philippines, Sri Lanka could see more exciting times ahead with some major transactions to be closed. Emerging countries such as Myanmar and Cambodia have seen some renewed interest and could become viable investment destinations."

There were a few hotel portfolio transactions in 1H 2014, especially in Japan. Anabuki Kosan acquired 9 three-star and budget Comfort Hotels for US$58.4 million from Taisei Yuraku Real Estate Company, while Hoshino REIT acquired 21 Chisun Inn hotels from Lone Star for US$136.9 million. India-based DLF Global Hospitality had sold its Amanresort chain of 27 luxury hotels to Adrian Zecha and Peak Hotels for US$358 million

Cushman & Wakefield studied the hotel investment transactions in the past 18 months, covering gateway cities in Asia Pacific. The most expensive hotel investment market in terms of value per key in US$ is Hong Kong. The Chinese territory saw the Mercer by Kosmopolitan transacted at US$1.36 million. Singapore is ranked second at US$1.24 million, having seen the sale of the 305-room Westin Marina Bay to Daisho Group at US$369 million last December.  Third on the list is Tokyo at US$846,000 arising from the Yaesu Fujiya Hotel which would be redeveloped into an office building.

Kulkarni added, "Hotel assets in Singapore and Hong Kong have high selling price per room due to the high earnings multiples and the potential for capital appreciation ahead. Buyer competition for prime institutional quality assets in these two cities remain intense, and there is a shortage of such assets for sale. For Singapore market, it would be ideal to hold if your assets are of prime quality as there is some room for additional asset appreciation. In Hong Kong, smaller sized assets are highly sought after, and can be repositioned with higher upside in rates and value."

To see the full version of this release, click here: http://photos.prnasia.com/prnk/20140821/8521404706-a

About Cushman & Wakefield
Cushman & Wakefield is the world's largest privately-held commercial real estate services firm. The company advises and represents clients on all aspects of property occupancy and investment, and has established a preeminent position in the world's major markets, as evidenced by its frequent involvement in many of the most significant property leases, sales and assignments. Founded in 1917, it has 250 offices in 60 countries, employing more than 16,000 professionals. It offers a complete range of services for all property types, including leasing, sales and acquisitions, equity, debt and structured finance, corporate finance and investment banking, corporate services, property management, facilities management, project management, consulting and appraisal. The firm has more than $4 billion in assets under management globally. A recognized leader in local and global real estate research, the firm publishes its market information and studies online at www.cushmanwakefield.com/knowledge. In Greater China, Cushman & Wakefield maintains seven market-leading offices in Beijing, Shanghai, Chengdu, Guangzhou, Shenzhen, Hong Kong and Taipei. More information is available at www.cushmanwakefield.com.

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Policymakers Warned of Persistent Risks as Accountancy Bodies Publish Five-year ‘Health Check’ of the Global Economic Recovery

HONG KONG, Aug. 21, 2014 /PRNewswire/ -- Threats to long term economic stability remain as countries recover from the global economic crisis, according to a five year review of finance professionals' economic insights.

Any recovery may also be limited to just a few "islands of financial stability", report author Manos Schizas, Senior Economic Analyst at ACCA (the Association of Chartered Certified Accountants), has warned.

This is one of a number of worrying conclusions, based on a five year review of the ACCA/IMA (Institute of Management Accountants) Global Economic Conditions Survey, the largest economic survey of accounting professionals in the world.

The two bodies claim that the financial crisis and global recession have now fragmented into multiple unresolved issues - including damaged bank and government balance sheets, unconventional economic policies, political polarisation and geopolitical tensions. These are, by and, large, still present five years on, despite a growing 'recovery consensus.'

In particular, the review highlights how, since mid-2012, business confidence gains have been much stronger in the financial sector than among the world's SMEs and large corporates. While conceding the benefits of stronger banks on business investment, it warns of a growing imbalance fuelled primarily by central banks.

Manos Schizas said, "A recovery which is confined to the financial sector is not sustainable and policymakers need to start asking hard questions about what's really underlying this in terms of consumer spending, business investment and leverage."

The two bodies have also called on policymakers to take stock of the impact of unconventional monetary policy by OECD countries - particularly the unintended spill-overs into emerging markets.

"Emerging markets in Asia and Africa have had to contend with damaging flows of 'hot money' as a result of polices over which they had no choice. Institutionally, they are also much worse equipped to deal with the fallout than the countries that set the flows in motion," said Raef Lawson, Ph.D., CMA, CPA, IMA vice president of research and policy.

The report, compiled from data created by 40,000 responses over five years, also raises questions about whether inflation really is dead at the global level, noting that it never really fell in Africa and the Middle East, while in Asia-Pacific input prices have rebounded since late 2012. Even the Chinese mainland, which has driven much of the global fall in inflation, saw a rebound from mid-2013 onwards.

Two of the world's major economies - the EU and China - have driven much of the uncertainty over the past four years, but the ACCA/IMA heath-check is cautiously optimistic.

In the EU, the report finds that, despite mounting government debt, financial contagion has been contained, much of the missing institutional framework in the Eurozone is being built and the banking sector is on the mend. In China, despite repeated 'doomsday' warnings, slowing growth has so far remained manageable. However, the country is slowing down and shifting from an investment-driven to a consumption-driven economy, which will present a significant longer-term challenge for Chinese policymakers, and for countries which have tied their economic growth to commodity exports or direct Chinese demand.

The 'health check' of the recovery has shown that businesses around the world have been holding back on long-overdue investment for years, while austerity-hit public sectors have also often sacrificed public investment in order to maintain government consumption levels. The result has been a significant loss of productivity which will take years to reverse. ACCA and IMA believe, however, that a rebound in investment has already begun in 2013 and will be the biggest economic story of the next year, shaping industries for years to come. Access to finance has recovered consistently in most regions, businesses are increasingly seeking growth capital and it is mostly structural, rather than cyclical, factor that are holding up business financing.

Manos Schizas said, "Finance professionals are at the heart of business globally and have front-row seats to the recovery. Over the last five years they have given us accurate and timely indications of its direction of travel."

"Our five year review demonstrates that policy makers and business leaders around the world must overcome numerous challenges if they are to secure a sustained economic recovery. Fortunately, both businesses and the public sector can continue to rely on finance professionals to help steer them through these challenges."

Notes to Editors

  1. ACCA (the Association of Chartered Certified Accountants) is the global body for professional accountants. We aim to offer business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management.
  2. We support our 170,000 members and 436,000 students in 180 countries, helping them to develop successful careers in accounting and business, with the skills required by employers. We work through a network of 91 offices and centres and more than 8,500 Approved Employers worldwide, who provide high standards of employee learning and development. Through our public interest remit, we promote appropriate regulation of accounting and conduct relevant research to ensure accountancy continues to grow in reputation and influence.  
  3. As the first global accountancy body entering into China, ACCA now has over 23,000 members and 48,000 students, with 8 offices in Beijing, Shanghai, Chengdu, Guangzhou, Shenzhen, Shenyang, Hong Kong SAR, and Macau SAR.
  4. Founded in 1904, ACCA has consistently held unique core values: opportunity, diversity, innovation, integrity and accountability. We believe that accounting professionals bring value to economies in all stages of development and seek to develop capacity in the profession and encourage the adoption of global standards. Our values are aligned to the needs of employers in all sectors and we ensure that through our qualifications, we prepare accountants for business. We seek to open up the profession to people of all backgrounds and remove artificial barriers, innovating our qualifications and delivery to meet the diverse needs of trainee professionals and their employers.
  5. For more information, please visit:
    www.accaglobal.com | www.facebook.com/ACCA.HongKong

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Frost & Sullivan: Modernization Programs Buoy Defence Industries across the World

- Collaborative initiatives relating to technology transfers to aid both defence and civil industries

LONDON, Aug. 20, 2014 /PRNewswire/ -- Rapidly evolving markets will continually invest in their military spending and only due to challenging implementation of ambitious modernisation and indigenization programmes the expenditures will increase at a low pace and volume. Despite varying agendas, there will be a sharp increase in their military spending over the next 10 years. The financial slowdown and transitioning markets notwithstanding, the defence budgets will continue to be high due to armed forced reorganization, rising threat perceptions, territorial disputes, and porous borders.

Recent analysis from Frost & Sullivan of the defence budgets of 10 selected countries -- Algeria, Brazil, Chile, India, Indonesia, Japan, Oman, Poland, Russia and the United Arab Emirates (UAE), Rapidly Evolving Defence Markets: 10-country Budget Assessment, finds that the 10 countries are expected to spend more than $3.41 trillion on defence between 2013 and 2022.

"Fleet renewal and modernisation programmes will be among the biggest drivers stimulating defence expenditures among the countries considered," said Frost & Sullivan Aerospace and Defence Research Analyst Alix Leboulanger. "Another significant trend is the strong push to boost the nascent or developing domestic defence industry through strong initiatives such as high-end technology procurement."

Although there is much interest in modernization and indigenization programs, the challenges involved in implementation will mean that budgets will increase only at a slow pace. Yet, a closer look at the defence sector dynamics of each country reveals that the political intent to strengthen their defence sector is stronger than actual financial capabilities.

The countries most affected by the financial slowdown, such as Brazil or Poland, are forecast to increase their defence expenditures at a compound annual growth rate (CAGR) of 1.30 percent and 1.08 percent respectively.

On the other hand, Japan is expected to account for at least 20.0 percent of the total spending between 2013 and 2014. Algeria represented almost 4.30 percent of the total spending in 2013 and is expected to increase that share to 7.21 percent by 2022.

Owing to numerous domestic and international trends that are constricting defence budgets, governments are resorting to acquiring high-end foreign technology to fulfil three objectives: complete modernisation programs, consolidate domestic industrial base, and provide employment to locals.

"These acquisitions explain the close link between procurements and transfers of technology (ToT) in defence, in line with offset policies, as demonstrated in Brazil, India and Poland," noted Leboulanger. "While most offset policies encourage ToTs across the defence segments, governments are also looking to use these policies to reinforce the local civil industry, as in the case of the UAE."

If you are interested in more information on this study, please send an email to Edyta Grabowska, Corporate Communications, at edyta.grabowska@frost.com.

Rapidly Evolving Defence Markets: 10-country Budget Assessment is part of the Defence (http://www.defense.frost.com) Growth Partnership Service program. Frost & Sullivan's related studies include: Global Helicopter & Systems Market: Capturing Growth Opportunities across the Rotorcraft Industry, Emerging Applications for Unmanned Aerial Systems (UAS) Across Global Government and Commercial Sectors, Global Commercial UAS Market Assessment and US Air Traffic Management and Automatic Dependent Surveillance-broadcast (ADS-B) Technology. All studies included in subscriptions provide detailed market opportunities and industry trends evaluated following extensive interviews with market participants.

About Frost & Sullivan

Frost & Sullivan, the Growth Partnership Company, works in collaboration with clients to leverage visionary innovation that addresses the global challenges and related growth opportunities that will make or break today's market participants.

Our "Growth Partnership" supports clients by addressing these opportunities and incorporating two key elements driving visionary innovation: The Integrated Value Proposition and The Partnership Infrastructure.

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Rapidly Evolving Defence Markets: 10-country Budget Assessment
M9C4-16

Contact:
Edyta Grabowska
Corporate Communications - Europe
P: +48 22 481 62 03
E: edyta.grabowska@frost.com

http://www.frost.com

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Sluggish Demand Leads to Higher Vacancy and a Slight Drop in Both Office and Retail Rents

HONG KONG, July 22, 2014 /PRNewswire/ --

  • Office leasing activities remained sluggish in the first half of 2014, leading to a 1.8% drop in overall grade A office rent.
  • Landlords will continue to show flexibility in their efforts to attract and retain tenants. As a result, rents are likely to drop by an additional 1% to 2% in the second half of 2014. Greater Central rents will be stable.
  • The retail sector continued to face headwinds with retail sales growth slowing markedly. Moderating sales performance and more cautious sentiment impeded retailers' expansion in the first half of 2014.
  • Prime street shop rents eased by an average of 2.0% over the past six months; rents are likely to be stable or decrease slightly in 2H 2014. Local consumption is intact and the outlook remains generally positive.

Cushman & Wakefield, the world's largest privately owned real estate services firm, today released a mid-year update on the Hong Kong office and retail leasing markets and the outlook for the second half of 2014.

Office leasing demand stays soft causing overall grade A office rent to ease slightly

Office leasing demand remained sluggish in the first half of 2014, whereas Grade A office net absorption totaled a modest 123,000 sq ft and only crossed into positive territory due to take-up in Kowloon East, primarily within new stratified buildings completed since late 2013. By submarket, leasing activities continued to gain momentum in Greater Central, as evidenced by positive net absorption of 120,500 sq ft, but remained subdued in other locations. Greater Central continued to see leasing demand being supported by mainland Chinese financials and tenants with smaller-sized requirements. For example, China Securities International recently expanded by a floor of 13,000 sq ft in Two Exchange Square earlier this year, while China United Credit Finance took a whole floor of 22,000 sq ft in Two Pacific Place. Foreign financials situated in the district are still tending to downsize (RBS in AIA Central) or relocate for cost savings (Wells Fargo moving from AIA Central to Three Pacific Place), but there were several instances of space upgrades (Banco Santander and Wellington Global Investment. moving from One Exchange Square to Two IFC; UOB consolidating from Landmark and Cosco Tower to Citibank Plaza). Tenants on 3-year leases expiring this year are facing market rents which are, on average, 20% lower than those under their current lease.

Wan Chai/Causeway Bay, Hong Kong East and Tsim Sha Tsui all recorded slight negative absorption of between 50,000 to 60,000 sq ft over the past six months due to higher availability and tempered demand as more occupiers have shelved their expansions or seek to consolidate their office space. These trends are becoming more prevalent in fringe-core and non-core office districts, where office rents are still at or near peak-levels. After dipping slightly to 5.0% in 1Q 2014, office availability rate climbed back to 5.4% in 2Q 2014. Both Wan Chai/Causeway Bay and Tsim Sha Tsui's availability rates climbed to approximately 5.0% by mid-year, while availability in Hong Kong East, still the lowest at 3.2%, climbed to its highest level in two years due to some large tenants, such as Time Warner, Nokia, and Western Union releasing space into the market. In Tsim Sha Tsui, Deutsche Bank and Morgan Stanley in ICC consolidated operations which caused the district to experience the largest upswing in availability in recent months. Greater Central availability, which has stood at roughly 7.0% since 2Q 2012, remains the highest by district.

Overall grade A office rents dropped by 1.8% in the first half of 2014, led by a 5.5% drop in rents in Kowloon East. Kowloon East landlords are facing added pressure from new strata units put up for lease and also several new industrial revitalization projects to be completed this year whose low pre-commitment rates are indicative of slower overall demand. Rents inched upward by 0.7% in the first half in Wan Chai/Causeway Bay, but dropped mildly in other districts. Greater Central rents continued to hover around HK$96-97 per sq ft, on average. Gary Fok, Executive Director, Commercial - Hong Kong, said, "We anticipate that the Greater Central leasing market will continue to exhibit a stabilizing trend owing to a gradual improvement in demand. Availability will slightly ease and rents will remain stable over the next six months. Outside of Greater Central, demand has been sluggish with few tenants willing to expand or absorb relocation costs. Landlords will continue to show flexibility in their efforts to attract and retain tenants, most notably in Kowloon East where availability is higher. As a result, rents will drop by an additional 1% to 2%, but not more than this because availability is still at a healthy level, and there is a lack of new supply especially in core and fringe-core locations."  

Sales slowdown urging caution, leading to slower brand expansion and a drop in rents

The retail sector continued to face headwinds associated with slower tourism growth and changes in visitor profile and spending in the first half of 2014. These factors, as well as a high base for comparison last year, caused the slowdown of retail sales to deepen. Total retail sales decreased by 0.2% year-on-year from January to May. The slight drop was led by the downturn in sales of watches and jewelry, which dropped by 14.3% after robust sales in mid-2013. Apparel and department stores sales and restaurant receipts all grew stably owing to intact local consumption.

Moderating sales performance and more cautious sentiment impeded retailers' expansion in the first half of 2014. Luxury brands have stayed conservative, while watch and jewellery retailers notably cut back on new stores. Several leading local retailers announced lower sales during recent holidays and are also taking more cautious approaches. Despite the hurdles, Hong Kong has not lost a step as a leading retail destination in Asia, and, therefore, in its ability to attract new brands and support expansion of existing ones. As evidenced by recent activity, including Topshop's and Esprit's planned expansions and the entrance of J.Crew, renowned international brands are showing a long-term commitment to the market, which is also seeing a shift toward a more diverse offering of middle to high-end brands.

Vacancies in main streets have remained low, but have risen in 2nd and 3rd tier streets over the past six months. Prime street shop rents eased slightly in the first half of 2014, having dropped by an average of 2.0%. During the first half of 2014, average rental increment on renewals and new leases stood at approximately 40%, which is down from 60% to 70% growth during the same period last year. In the second half of 2014, we expect that prime shop rents will be relatively stable, potentially falling by 2% to 3%, while more secondary locations will see a slightly steeper adjustment of 5% to 8% due to higher vacancy and slower demand. Michele Woo, Executive Director, Retail - Hong Kong, said, "Luxury brands have turned more cautious as sales growth has slowed amid the shift toward more affordable luxury and mid-priced goods. Their slower expansion has opened some doors for more mid-tier brands, but they also operate under tighter margins, therefore, their real estate affordability is comparatively lower and this will have an impact on rents. Nonetheless, the outlook for the sector is still positive. The local consumer base remains strong and tourism is still growing at a high rate. Hong Kong will maintain its position as the premier shopping destination in Asia and this will continue to bring new brands to the city."

APPENDICES

I.     GRADE A OFFICE LEASING TRANSACTIONS

Date

Tenant

Building

District

Area (sq ft)

Reason for Lease

Existing Address

2Q

United Overseas Bank

Citibank Plaza

Greater Central

33,500 (L)

Relocation & Consolidation

COSCO Tower & Landmark

2Q

China UCF Group

Two Pacific Place

Greater Central

22,100 (L)

Relocation & Expansion

Hutchison House

2Q

Nissan

Hopewell Centre

Wan Chai/ Causeway Bay

46,000 (L)

Relocation & Expansion

Citibank Tower

2Q

Wells Fargo

Three Pacific Place

Wan Chai/ Causeway Bay

32,000 (L)

Relocation

AIA Central

2Q

Societe Generale

Three Pacific Place

Wan Chai/ Causeway Bay

16,300 (L)

Expansion

Three Pacific Place

2Q

FWD

Devon House

Hong Kong East

27,000 (L)

Expansion

Devon House

2Q

Compass Office

Silvercord Tower 2

Tsim Sha Tsui

11,500 (G)

Expansion

N/A

2Q

E. Sun Commercial Bank

The Gateway Tower 6

Tsim Sha Tsui

7,400 (G)

Expansion

The Gateway Tower 6

2Q

National Investment Fund

Octa Tower

Kowloon East

23,800 (G)

Expansion

Great Eagle Centre

2Q

Sainsbury's Asia

Millennium City 1

Kowloon East

21,400 (G)

Relocation

The Gateway Tower 1

1Q

Wellington Global Investment

Two IFC

Greater Central

23,000 (L)

Relocation

One Exchange Square

1Q

Banco Santander, S.A.

Two IFC

Greater Central

18,400 (L)

Relocation

One Exchange Square

1Q

HK Sanatorium & Hospital

One Pacific Place

Greater Central

39,000 (L)

New Set Up

N/A

1Q

Principle Insurance

Hopewell Centre

Wan Chai/ Causeway Bay

16,400 (L)

Expansion

Hopewell Centre

1Q

Facebook

One Island East

Hong Kong East

11,000 (L)

New Set Up

N/A

1Q

Medisun Co.

Octa Tower

Kowloon East

46,200 (G)

Expansion

Great Eagle Centre

1Q

Compass Office

Langham Place Office Tower

Kowloon West

17,400 (G)

Expansion

N/A

1Q

Sun Life Financial

Two Harbourfront

Kowloon Others

22,000 (G)

Expansion

Two Harbourfront

II.  MAJOR OFFICE SUPPLY

Completion

Project Name

District

Developer

NFA (sq ft)

Single Owner / Strata-Title

2014

33 Des Voeux Road Central

Greater Central

Bank of East Asia

53,500

Single Owner

Billion Plaza II

Kowloon West

Billion

166,200

Strata-Title

Pioneer Place (revitalized ind bldg)

Kowloon East

Pioneer Global

184,300

Single Owner

KOHO (revitalized ind bldg)

Kowloon East

Pamfleet

157,500

Single Owner

KC100 (revitalized ind bldg)

Kowloon West

Campell Group

157,500

Single Owner

Octagon

Kowloon West

K Wah

296,700

Single Owner




Sub-total:

1,015,700


2015

50 Wong Chuk Hang Road

Hong Kong South

SHK

68,000

Strata-Title

41 Heung Yip Road

Hong Kong South

Cheung Kong

186,800

Single Owner

2-12 Observatory Road

Tsim Sha Tsui

Lai Sun & Henderson

139,700

Single Owner

10 Shing Yip Street 

Kowloon East

Billion

198,300

Strata-Title

15-17 Chong Yip Street

Kowloon East

Billion

201,500

Strata-Title

52-56 Tsun Yip Street 

Kowloon East

Billion

297,700

Strata-Title

Manulife Tower (One Bay East - West Tower)

Kowloon East

Wheelock

409,600

Self-Use

Citibank Tower (One Bay East - East Tower)

Kowloon East

Wheelock

409,600

Self-Use

33 Tseuk Luk Street

Kowloon East

SHK

196,000

Strata-Title




Sub-total:

2,107,200


2016

Joyce Centre

Hong Kong South

Kwong Hing Investment

130,800

Single Owner

34 Wong Chuk Hang Road

Hong Kong South

K Wah

132,800

Single Owner

22 Des Voeux Road

Greater Central

Chinachem

65,400

Single Owner

10-12 Queen's Road Central

Greater Central

SH Comm. Bank

106,200

Single Owner

Wing On Central Building

Greater Central

Chinachem

72,100

Single Owner

8 Cannon Street

Wan Chai/Causeway Bay

Phoenix

142,600

Single Owner

14-30 King Wah Road

Hong Kong East

Henderson

230,800

Single Owner

Goldin Financial Global Centre

Kowloon East

Goldin

681,900

Single Owner

2 Ng Fong Street

Kowloon East

Billion

251,200

Strata-Title

Hung Luen Rd. & Kin Wan St. (Two Towers)    

Kowloon Others

Wheelock

477,600

Strata-Title

On Kwan Street & On Muk Street 

Kowloon Others

Billion

281,600

Strata-Title




Sub-total:

2,573,000


2017

4 Yip Fat Street & 8 Heung Yip Road

Hong Kong South

SHK

117,600

Strata-Title

Asian House Redevelopment

Wan Chai/Causeway Bay

Chinachem

236,000

Single Owner

Somerset House Redevelopment

Hong Kong East

Swire

928,200

Single Owner

New World Centre Redevelopment

Tsim Sha Tsui

New World

637,100

Single Owner

Sheung Yuet Road & Wang Tai Road

Kowloon East

Pacific Investment

233,100

Single Owner

Wang Chiu Road & Lam Lee Street

Kowloon East

Swire

499,300

Single Owner

180 Wai Yip Street

Kowloon East

SHK & Wong's

383,400

Strata-Title

On Yiu & On Kwan Street 

Kowloon Others

Billion

344,300

Strata-Title




Sub-total:

3,379,000


2018

Sunning Plaza Redevelopment

Wan Chai/Causeway Bay

Hysan

317,200

Single Owner

15 Middle Road Carpark Redevelopment

Tsim Sha Tsui

TBC

254,800

Single Owner

Wharf T&T Square Redevelopment

Kowloon East

Wheelock

447,000

Strata-Title

Hang Yip St. ,Yan Yip St. & Kwun Tong Rd.

Kowloon East

Mapletree

528,200

Single Owner

CSW Post Office Redevelopment

Kowloon West

First Group

135,500

Single Owner




Sub-total:

1,682,700





Grand Total:

10,757,600








*Note: The expected timeline is subject to changes

III.   MAIN STREETS RETAIL LEASING TRANSACTIONS

Date

Tenant

Location

District

Area (sq ft)

Retailer Type

2Q

Currency Exchange

Cannon Street

Causeway Bay

50

Currency Exchange

2Q

Prince Jewellery & Watch

Kai Chiu Road

Causeway Bay

400

Watch & Jewellery

2Q

Esprit

Leighton Road

Causeway Bay

7,000

Fashion

2Q

Pandora

Queen's Road Central

Central

2,400

Accessories

2Q

Esprit

Queen's Road Central

Central

17,900

Fashion

2Q

Chow Tai Fook

Haiphong Road

Tsim Sha Tsui

1,600

Watch & Jewellery

2Q

Sulwahsoo

Canton Road

Tsim Sha Tsui

700

Cosmetics

2Q

Chain Pharmacy

Park Lane

Tsim Sha Tsui

700

FMCG

2Q

Swatch

Sai Yeung Choi Street South

Mongkok

300

Watch

2Q

City Chain

Sai Yeung Choi Street South

Mongkok

1,400

Watch

1Q

Standard Chartered Bank

Russell Street

Causeway Bay

5,700

Banking

1Q

Tsui Wah

Lockhart Road

Causeway Bay

8,000

Catering

1Q

Samsung

Des Voeux Road Central

Central

6,000

Electronics

1Q

Marks & Spencer Food

Hollywood Road

Central

4,600

Grocery

1Q

Luk Fook

Canton Road

Tsim Sha Tsui

1,900

Watch & Jewellery

1Q

ISA

Carnarvon Road

Tsim Sha Tsui

10,800

Fashion

1Q

Innisfree

Granville Road

Tsim Sha Tsui

1,000

Cosmetics

1Q

Chow Tai Fook

Sai Yeung Choi Street South

Mongkok

4,800

Watch & Jewellery

1Q

Chain Pharmacy

Soy Street

Mongkok

900

FMCG

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