1. About Chinese, Hong Kong, Macau Markets during Recent Financial Turmoil Rose Neng LAI University of Macau Cambridge University ERES 2010, June 25, 2010

2. Hong Kong

3. Market demand is always strong Market segmented Not much done till May 2010: the “nine ways” More for market transparency, particularly in presale market Note currency pegged to USD, thus can’t change interest rate by much

4. Macau

5. Huge economic development since 2004 due to the hospitality industry (higher GDP per capital than Hong Kong, higher gaming income than Las Vegas) Dropped since April 2008 because of slow down in expansion, and Chinese government policy to reduce tourist Boom again, surprisingly Not much done except –The promise of 19,000 units of public housing by 2012 –More transparent information releases –More guidelines on LTV ratios and rationing

6. China

8. Always high demand for housing Government encouraged private housing Coupled with better economy Bubbles in first tier cities that have not burst

9. Government Intervention Capital Reserve –↑ in Jan, Mar, Apr, May 2008 –↓ in Sep 2008 LTV Ratio –Explicit restriction in Aug 2008 Interest Rates –↓in Sep, early and late Oct, late Nov 2008 Related Tax –↓in Oct 2008 (deposit tax, property sales tax, property tax) –↓in Oct 2008 Other Policies such as First Home Program, Measures to enhance housing

10. Government Intervention in 2010 Dec 2009: measures to control speculative activities, and land bank January: (1) down-payment of second home no less than 40%; (2) Increase Capital reserve March: Land control April (gradually): (1) prohibition of mortgages for speculative purpose, (2) initial payment of 2 nd home no less than 50%, (3) no mortgage for 3 rd home, (4) new definition of second home (counted towards households versus individuals) May: Increase Capital reserve

11. What has happened? Hot money….. for better investments Spillover from China to Hong Kong and Macau