Tuesday, June 4, 2013

20130605 Links

1. Singapore: LNG trading; 2. Hong Kong's property bubble; 3. Remembering Tiannanmen.

1. LNG futures in Japan: When? By reading this article about the market for liquefied natural gas (LNG) in Singapore, I realized that a futures market in this commodity does not exist even in Japan.

Stephanie Wilson, managing editor of Asia Power at Platts, said: "There is certainly a growing demand for them but as yet, we don't have any LNG futures traded on an exchange. It is something that will probably happen in the next couple of years. I know in Japan, they are talking about launching a futures contract as early as 2015 as they deregulate their energy industry. Whether or not it will bring down the price of LNG, certainly these guys need something to hedge against now that the market is becoming more volatile." 

In the meantime, Singaporean authorities are thinking about creating a secondary market for LNG. Right now, all Singaporean buyers get their supply from one company, the British BG Group. But:

EMA's latest proposal calls for a competitive licensing framework that would see Singapore buying LNG on demand and reduce its concentration risks of only buying from one supplier.
For the moment, LNG buyers in Singapore have to work with BG Group to get their supplies and are not allowed to re-sell it to anyone else domestically. 
A secondary market might solve this rigidity. 
Ravi Krishnaswamy, vice president of energy and environment at Frost & Sullivan, said: "In the future, what EMA is trying to do is to allow the buyers to on-sell the gas using the domestic pipeline network to other interested parties especially if they have excess supply. This also in a way tries to help the buyers who may not have a need for all that capacity in that point of time to hedge the risk with respect to the take or pay contracts."

I can see how the current market is too rigid. Buyers of LNG have to buy exactly as much of the stuff as they  think they need, or buy more of than they need and store it, but they can't hedge against the price risk, because there are no futures contracts (I don't know if there is market in forwards). My question after reading the article is: Can Singapore sell more importer licenses, or does BG's license have an exclusivity clause attached? Either way, a secondary market is surely a improvement.

2. Property bubble talk in Hong Kong.
The risk of a property bubble persists despite an easing of prices following government restraints, Financial Secretary John Tsang Chun-wah warns. 
For some apartments continue to change hands at unusually high prices. 
A 636-square-foot flat at Kingswood Villa in Tin Shui Wai sold yesterday for a similar-size high of HK$3.99 million, or HK$6,274 per sellable square foot. 
Prices of subsidized flats are also soaring. A 426-sq-ft unit at Wo Ming Court in Tseung Kwan O went for an estate record of HK$3.55 million, or HK$8,333 psf. 
Tsang, meanwhile, was telling the Legislative Council's financial affairs panel that secondary home prices continue to stay soft, though the number of transactions has picked up slightly on the back of a huge inflow of capital and a relatively low interest rate. 
And a bubble cannot be ruled out while quantitative easing by the United States continues.
3. Remembering Tiannanmen, but not on mainland China. (This will probably get EconWeekly censored in China.)
Every year, Hong Kong residents gather in droves for the annual vigil to commemorate the Tiananmen democracy protests. More than marking the brutal crackdown in Beijing 24 years ago, the event here increasingly symbolizes disaffection with rule by China. 
Tens of thousands of people gathered Tuesday evening at a large park in the former British colony. They turned the park into a sea of flickering light as they held candles aloft to remember those killed when their protests in central Beijing were crushed by the Chinese military on June 4, 1989. Commemorations of the crackdown are suppressed everywhere else in China. 
In Beijing, there was no sign of large-scale protest, but some people answered a call by activists to wear black to work in remembrance. As in previous years, many pro-democracy activists themselves were not allowed to leave their homes to mark the anniversary. On the country's lively social media, searches for words including “commemorate” and “6_4” were banned, and the candle emoticon was removed. 
When Hong Kongers poured into the streets in 1989, their sympathy with the protesters in Beijing had more to do with fears about impending Chinese rule -- then eight years away. Now it's about current problems that include corruption, a leader viewed by many as inept and tin-eared, and a yawning wealth gap that has stifled the aspirations of the city's large middle-class.
And “of course it also expresses the anger of people over the Chinese government messing with our democratic reform,” said pro-democracy legislator Lee Cheuk-yan. 
Mike Yip, a sales consultant attending the vigil, said people were dissatisfied with the lack of reform. 
“Everybody understands we can't change anything in the short term but we hope that slowly there will be changes,” he said. 
When Hong Kong was handed back to China in 1997, it was allowed to keep its own political system and Western-style civil liberties such as freedom of speech until 2047. 
Residents can vote for some of their legislators, while others are chosen by business and other special interest groups. They've never been able to choose their leader, who during British colonial rule was dispatched from London. Since China retook control, the leader, now known as chief executive, has been chosen by a committee of mostly pro-Beijing elites.

No comments: