Dispatch (Asia version)
| by Peta Tomlinson, Majella Gomes, Sonia Kolesnikov-Jessop 05 Nov 2007 Topic: News |
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Like just about every aspect of doing business in China, the mainland property market offers fresh fields for foreign investment. The National Bureau of Statistics reports a 69% surge of foreign capital in the property sector in the first half of 2007, and with handsome returns on offer, investors from the US, Europe and the Middle East are emerging as keen buyers for real estate that was once largely the domain of Asia-based investors. According to global real estate adviser DTZ, major events such as the 2010 Shanghai World Expo and 2008 Beijing Olympics are helping to boost mainland property values and luring foreign buyers. In its latest (August) report, DTZ says Shanghai house prices have soared 280% since 2000. In Shenzhen, the city adjoining Hong Kong, residential prices have risen by over 30% so far this year, a 230% increase since 2000. DTZ predicts the upward trend will continue, adding that in addition to the first-tier cities of Shanghai and Shenzhen, Chengdu and Chongqing are poised to be the new market focus. 'Both enjoy robust economic fundamentals, with their GDP expanding by an average of more than 10% in recent years,' said Alan Chiang, DTZ's head of residential, China. He added that the increasing number of foreign developers acquiring land in both cities reflects their optimistic outlook in these markets. DTZ also believes that compared to the subprime mortgage market in the US, China's real estate market remains relatively healthy. 'Only 33% of real estate development funds come from bank lending, with the remaining comprising developers and buyers' self-financing and foreign capital,' said Edward Cheung, DTZ's CEO for mainland China. 'With this relatively balanced structure of capital source, we believe the mainland property market can continue to develop steadily.' Deloitte cautions that along with 'significant opportunity' in the China property market come many issues investors must consider and plan for, as they can negatively impact on the bottom line. The special characteristics governing the accounting and taxation of China's real estate market are outlined in Deloitte China's Real Estate Investment Handbook. In 2006, a total of RM56.854bn was collected in taxes from individuals and companies in Malaysia. This year, authorities say that collection is expected to exceed the RM69bn target. As of 17 July, the amount collected stood at RM41.1bn. This is an increase of 11.5% from the same period in 2006. According to government sources, Malaysia has barely one million taxpaying individuals, out of a working population of almost 12 million people. The Government collects more from the corporate sector, but corporate tax has been reduced gradually from 40% over the years to 27%. Despite this, corporate sector tax revenues increased. For instance, National oil company Petroliam Nasional Berhad (Petronas)'s tax bill alone contributed almost RM20bn to Inland Revenue Board (IRB) coffers. Second Finance Minister, Nor Mohamed Yakcop, attributed this to overall national progress and an efficient tax collection system. He also confirmed that corporate tax will be reduced to 26% for year of assessment 2008. Taxpayers have already started receiving refunds, especially those who used the electronic filing system. The IRB has declared that all refunds will be settled by December 2007. Task forces which will concentrate exclusively on handling the refunds have been set up in all 14 Malaysian states. Up to 20 August, refunds totalling RM2.963bn have been issued to 218,823 taxpayers. In 2006, 8,600 refund cheques went uncashed to the tune of RM15m. This year, however, only 2,300 refund cheques totalling RM8.7m have not been cashed or were returned. SIA, Temasek take stake in China Eastern Singapore Airlines and its parent Temasek, the investment arm of the Singaporean Government, agreed to purchase 15.7% and 8.3% stakes respectively in China Eastern Airlines, giving them a combined holding valued at HK7.15bn (US$923m). The Chinese Government retains a controlling 51% stake. According to the agreement, Singapore has promised not to pursue any other PRC-based airlines, with the exception of Great Wall Airlines, in which SIA already has an existing stake. However, the new alliance could potentially allow SIA more access into the Chinese market, industry analysts said. Currently, the Singaporean carrier operates 69 weekly flights to Chinese cities. SIA's chairman, Stephen Lee, told Singaporean media that there was not much overlap into the networks of the two airlines; therefore there were good opportunities for each airline to dovetail into the other's flight schedules, helping improve overall connectivity. China Eastern Airlines' chairman, Li Fenghua, said the company hopes to take advantage of SIA's experience in airline management to upgrade service levels and raise profitability. China Eastern, the country's third-biggest carrier, reported net losses in 2005 and 2006, and also posted a net lost of CNY384m in the first half of this year, but Li expressed confidence the airline will manage to return to profitability for the full-year 2007. Industry analysts believe the deal heralds a new era of possible international partnership for Chinese airlines. One possible tie-up target is China Southern Airlines, analysts said. Air China, the other top domestic carrier, already has a strong relationship with Cathay Pacific Airways. Meanwhile, merger and acquisition into the Chinese airlines sector could also develop with one of the three large airlines acquiring one of the many small or medium-sized airlines in an expansion bid. SIA has had disappointing experiences with previous strategic investments. It held a 25% stake in Air New Zealand and lost millions of dollars when that carrier nearly collapsed in 2001. SIA has since sold off that stake. Recently, the airline's chief executive, Chew Choon Seng, said returns on the company's investment in Virgin Atlantic Airways had been disappointing. Australian accountants could unwittingly be roped into joining the defence in their nation's 'war against terror', a money laundering specialist has warned. James Beaton, a partner at law firm Minter Ellison, says that the proposed second stage of reform to Australia's anti-money laundering and counter-terrorism financing legislation would impact on a range of services provided by accountants. The CPA Australia website explains that, under the draft amendment, accountants would become a 'reporting entity' required to provide a risk profile on clients who engage them for certain services, such as creating a trust or partnership, establishing a registered office for a company or advising on property management. In most cases, the website says, 'this will mean having to test whether your client is who they say they are'. Certain triggers would flag a higher risk - such as a client wanting to create an offshore trust without a plausible reason. The changes would also affect real estate agents engaged in property transactions, jewellers trading expensive gems, as well as professionals involved in certain transactions such as lawyers, notaries, trust and company service providers. But Beaton points out that while the amendment is in the early stages of discussion, it could be accountants who, by the nature of their work, face the greatest burden. In relation to professional services, he says, the services proposed to be regulated cover many of the roles an accountant would provide. These include giving tailored advice and providing management services, or the conduct of day-to-day operations for a company, partnership or trust. Specifically captured are advising on or making arrangements for fundraising by debt or equity, the creation of trusts or partnerships, and acting in connection with the sale or purchase of a business - again, common functions for accountants. 'If adopted, the changes would certainly involve the implementation of new systems and “know your customer” obligations, especially when dealing with international clients,' Beaton said. 'Better off would be larger firms with experience in international jurisdictions and, often, in-house AML [anti-money laundering] expertise. For smaller practices then, yes, it would mean another compliance burden.' Free education for all, reduction of corporate tax, better public transport, and improved health services, medical supplies and equipment. These were some of the items mentioned by Malaysian Prime Minister, Abdullah Ahmad Badawi, on 7 September, in his presentation of the 2008 Budget. The RM176.9m Budget will be divided between development and operating expenditure, with operating expenditure taking RM128.8bn of the allocation. RM48.1bn is slated for development. Primary and secondary school fees will be abolished in 2008, and students will be provided with free school textbooks. It has also been proposed that special education teachers, graduate substitute teachers and teachers of the Mandarin and Tamil languages receive increases in their allowances. From 2009, corporate tax will be reduced to 25%. Last year, it was decreased from 27% to 26%. RM12bn will be spent on developing more efficient public transportation systems, especially in major cities like Kuala Lumpur and Penang. The East Malaysian states of Sabah and Sarawak can look forward to road and rail improvements. For the 11th year running, the nation's current account registered a surplus, which is expected to expand to 13% of the GDP in 2008. Unemployment in Malaysia is currently at 3.3%, with overall strengthening in all industrial sectors. The construction-related industry, for instance, recorded a 30.8% growth, compared to just 4.3% for the period January-June 2006. Exports are projected to rise in the second half of 2007, chalking up an increase of 4.8% in earnings primarily from manufactured goods, which comprise 79.3% of total exports. In the first half of 2007, manufactured goods registered only a 0.5% increase. The Government is also stepping up efforts to turn Malaysia into an international Islamic finance centre. So far, eight financial institutions - three takaful (Islamic insurance) operators and five Islamic banks - have been issued licences to set up international currency business units. Budget 2008 takes this further by allowing RM7bn held under the Employees Provident Fund (EPF) to be managed by Islamic fund management companies. When Hong Kong newspaper the South China Morning Post reported in August that worsening pollution was forcing hedge fund operators and investment specialists out of Hong Kong and into rival Singapore, the story was widely repeated. Yet Hong Kong Securities and Futures Commission (SFC) figures show the city's combined fund management business is booming, jumping 36% in 2006 to US$786.4bn. Asset management, which accounted for the largest share, recorded growth of 27.5%. Advisory business and other private banking activities grew 67.1% and 54.5%, indicating a broadening in the range of fund management activities conducted in Hong Kong. Broker Stephen Gollop, CEO of Tyche Group (formerly Bridgwater), agrees Hong Kong has recently lost business to Singapore, but believes it is the product, not pollution, at work. 'The SFC made it virtually impossible to launch hedge funds here, whereas Singapore has probably made it too easy,' he said. 'We may well have missed out on [hedge fund] business but that is not necessarily a bad thing, [as] hedge funds are notoriously difficult to carry out due diligence on. This increases the potential for investors to have exposure to strategies which do not perform.' Kirby Daley of Fimat Alternative Investment Solutions - Asia, says Hong Kong is still the best gateway for China-focused hedge fund managers. 'Since the bulk of Asian hedge fund management focus is on equities, having a base in Hong Kong makes a lot of sense if you are going to be researching and investing in Chinese companies.' Hong Kong's people power also gives its fund management business an unbeatable edge, says Elisabeth Scott of Schroder Investment Management (Hong Kong). 'Asia's strongest fund management teams are based in Hong Kong. They are people with the knowledge and experience to invest in markets, especially in north Asia, and are also able to take money from China to the world.' The SFC has pledged to work with mainland regulators to provide the best wealth management platform for China, and with a growing army of Chinese investors reportedly opening hundreds of thousands of new broker accounts every day, it points to a promising future for fund management business in Hong Kong. number of high taxpayers swelling The million-dollar club in Singapore continues to grow, with a recent report by the Inland Revenue Authority of Singapore showing that 2,121 taxpayers earned more than S$1m in the year of assessment 2006 (which assesses income earned in 2005). This number was up 22% from the previous year. The total combined income declared by this taxpayer bracket grew to S$4.2bn, up 23.5%. Compared with the previous year, total tax revenues rose 15% to S$22.9bn in financial year 2006/07, the report stated, which represents 73% of total government operating revenues. Corporate tax continued to be the largest source, contributing S$8.5bn, followed by personal income tax at S$4.7bn, Goods and Services Tax at S$4bn and stamp duty and property tax at about S$2bn each. Betting activities brought in S$1.3bn to the government coffers, which was a slight increase on the previous year. in brief...
China trade booming
Set for mega-fairs
New act protects investors
Fewer jobs in Malaysia
Bourses move closer
Listing fee discounts
Luxury for sail | |