Finance
Issuing bonds to tackle Hong Kong deficit not ‘monstrous’: ex-minister Henry Tang
Hong Kong’s plan to issue bonds to tackle a dire deficit is not “monstrous” but rather a legitimate short- to medium-term solution to improve capital flow, former finance minister Henry Tang Ying-yen has said.
Tang on Tuesday defended the government’s plan, which Financial Secretary Paul Chan Mo-po announced in his budget blueprint, after his successor, John Tsang Chun-wah, warned the measure could affect the city’s credit ratings.
According to Chan’s budget speech last week, Hong Kong planned to issue HK$120 billion (US$15.3 billion) in silver, green and infrastructure bonds to cover the government’s recurring expenses. He remained confident that the city would balance the books within three years.
Tsang, the longest-serving financial secretary from 2007 to 2017, earlier said in a social media post that the city needed to look beyond bond issuances to cover government spending. He also argued the government had “undeniably fallen into an era of structural deficit”.
Speaking in Beijing as a member of the Standing Committee of the Chinese People’s Political Consultative Conference (CPPCC), Tang, who was the financial secretary before Tsang, called the plan “completely legitimate” as long as there was market demand.
“Bond issuance for the purpose of maintaining government operations is not monstrous,” Tang said.
“It is acceptable if it is used to strengthen capital flow, and raise funds in the short and medium term when the capital chain is broken.”
Hong Kong’s West Kowloon arts hub funding crisis ‘threatens to halt event deals’
Hong Kong’s West Kowloon arts hub funding crisis ‘threatens to halt event deals’
Hong Kong’s budget deficit is expected to balloon to HK$101.6 billion for the current financial year ending in March, almost double last year’s forecast given by the government. Chan said more borrowing would enable the government to maintain cash flow to finance major projects, such as the Northern Metropolis.
Tang, who served as finance chief from 2003 to 2007, ducked a question on whether Hong Kong had already plunged into a structural deficit as Tsang argued.
But he stressed that Chan had a duty to follow the principle stipulated in the Basic Law, the city’s mini-constitution, that the government needed to avoid deficits and keep expenditure within the limits of revenues.
“If you can be candid to citizens [about the dire financial situation], they can feel your respect and understand the rationale of the measures amid the challenges,” he said, referring to the city’s property downturn and soaring recurring expenditure.
Tang said that back in 2004 when he proposed issuing HK$20 billion in bonds, bankers described it as “a museum piece” as it was a rarely used tool then to solve the deficit problem.
Following measures to lure mainland Chinese tourists and launch renminbi business that year, he posted the city’s first budget surplus in five years in 2005.
Tang argued that Hong Kong was on the right track to revive its economy by finding new engines in technology and deepening cross-border integration.
Tsang’s remarks on the budget measures triggered heated debate on social media. He said that amid the high-interest rate environment, government bonds might not be as attractive to buyers as depositing their money in banks to secure higher rates of return.
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He also worried that the city would eventually need to pay the debt’s interest expenses, which could affect its credit ratings, as well as saddle future generations with higher taxes and fewer public services.
On Monday, Tang also expressed support for the city’s coming national security legislation, a requirement under Article 23 of the city’s mini-constitution.
“Without stability, it’s hard to talk about economic development and livelihood improvements,” he said.
He added that countries, including Singapore, had been strengthening their own security legislation, urging the proposed law should be utilised effectively to gain investors’ confidence.
SHEPHERDSTOWN, W. Va., November 15, 2024–(BUSINESS WIRE)–JSB Financial Inc. (OTCPink: JFWV) reported net income of $2.0 million for the quarter ended September 30, 2024, representing an increase of $1.3 million when compared to $643 thousand for the quarter ended September 30, 2023. Basic and diluted earnings per common share were $7.64 and $2.33 for the third quarter of 2024 and 2023, respectively. The third quarter results include the recognition of an interest recovery totaling $1.3 million, a recovery to the allowance for credit losses on loans totaling $252 thousand and a recovery of legal fees totaling $17 thousand on prior nonperforming loans. Excluding the impact of these notable items, pre-tax income of $959 thousand for the third quarter of 2024 was $187 thousand more than the same period in 2023.
Net income for the nine months ended September 30, 2024 totaled $3.4 million, representing an increase of $1.1 million when compared to $2.3 million for the same period in 2023. Basic and diluted earnings per common share were $13.33 and $8.46 for the nine months ended September 30, 2024 and 2023, respectively. Annualized return on average assets and average equity for September 30, 2024 was 0.87% and 17.65%, respectively, and 0.66% and 13.17%, respectively, for September 30, 2023. Excluding the impact of the notable items in the third quarter of 2024, pre-tax income of $2.7 million for the nine months ended September 30, 2024 was $96 thousand lower than the same period in 2023.
“We are pleased with our performance for the third quarter, which includes one-time recoveries on nonperforming loans totaling $1.5 million. Additionally, our team continued to create, deepen and expand our customer relationships which resulted in an increase in total deposits of 10% when compared to the second quarter and 17% year-over-year,” said President and Chief Executive Officer, Cindy Kitner. “During the third quarter, we saw stable loan growth, which was funded through loan maturities and deposit growth, and we continue to have strong credit quality metrics including past dues, nonaccruals, charge offs and nonperforming loans, all of which remained at historically low levels.”
Finance
Interested In Manulife Financial’s (TSE:MFC) Upcoming CA$0.40 Dividend? You Have Four Days Left
Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see Manulife Financial Corporation (TSE:MFC) is about to trade ex-dividend in the next 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company’s books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Manulife Financial investors that purchase the stock on or after the 20th of November will not receive the dividend, which will be paid on the 19th of December.
The company’s next dividend payment will be CA$0.40 per share. Last year, in total, the company distributed CA$1.60 to shareholders. Looking at the last 12 months of distributions, Manulife Financial has a trailing yield of approximately 3.5% on its current stock price of CA$46.23. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Manulife Financial can afford its dividend, and if the dividend could grow.
View our latest analysis for Manulife Financial
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Manulife Financial paid out more than half (55%) of its earnings last year, which is a regular payout ratio for most companies.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we’re encouraged by the steady growth at Manulife Financial, with earnings per share up 4.5% on average over the last five years.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Manulife Financial has increased its dividend at approximately 12% a year on average. It’s encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Finance
Solving the Adaptation Finance Gap: Plans are in Place, but Funding Falls Short – Climate 411
The UN climate talks, COP29, is well underway, and countries have entered final negotiations on the New Collective Quantified Goal (NCQG), a new climate finance goal to boost funding for climate action in developing countries. Reaching agreement on the goal may be difficult in the face of the U.S election results, but it remains an urgent priority.
One glaring finance gap that we need to address in the new goal is finance for climate adaptation. Adaptation is how governments and communities prepare for and adjust to the impacts of climate change. It’s about making changes to reduce or prevent the harm caused by climate impacts like rising sea levels, more frequent storms, and hotter temperatures.
According to a new report from the United Nations Environment Programme (UNEP), adaptation needs are not being met worldwide. Developing countries will need $215 billion per year over the next decade for their adaptation priorities, from building climate resilient infrastructure to restoring ecosystems. Yet international finance flows for adaptation were just $28 billion in 2022 – an increase over prior years, but nowhere near enough.
Transformational adaptation requires closing the finance gap and maximizing the impact of every dollar.
Where is the world falling behind on adaptation?
Many developing countries are particularly vulnerable to climate change impacts, and the good news is that they are prioritizing efforts to build resilience. UNEP’s Adaptation Gap Report found that 87% of countries have at least one national adaptation planning instrument in place, compared to around just 50% a decade ago. These instruments include National Adaptation Plans (NAPs) and other strategies or policies that guide adaptation.
Now time for the bad news: although planning has improved, there is a growing gap in implementation as countries lack the necessary finance to meet their objectives. Adaptation has consistently been underfunded compared to mitigation, and while developed countries are working to double adaptation finance, the current $28 billion in annual flows represents just 13% of the $215 billion needed annually.
[Source: UNEP Adaptation Gap Report 2024]
The lack of finance for adaptation has serious implications for many developing countries, especially small island states which urgently need international support to strengthen resilience. For example, the Caribbean nation of Dominica is installing early warning systems to improve preparedness and reduce the impact of future hurricanes, but by 2023 they had only installed three systems and need 50 more to adequately cover the island. Without sufficient adaptation finance, the country will remain highly exposed to sudden climate shocks.
This finance gap is further complicated by limited private sector engagement in adaptation. UNEP finds that many transformational adaptation projects are seen as risky by private investors, due to their longer time frame for benefits and less clear return on investment. Private finance does flow to projects in infrastructure and commercial agriculture, but often not without efforts by the public sector to de-risk investments.
It is not surprising that two-thirds of adaptation financing needs are anticipated to be financed by the public sector. But the quality of public finance for adaptation has room for improvement as well. 62% of public finance for adaptation is delivered through loans, of which 25% are non-concessional, or at market rate with no favorable terms. And the use of non-concessional loans for adaptation in most vulnerable countries has actually increased in recent years. These tools have the potential to drive up the debt burden in developing nations which are already struggling to pay the bills. Expanding grant and concessional finance will be important to mitigate these challenges.
How do we unlock quality adaptation finance?
The Adaptation Gap Report suggests that filling the finance gap will require several enabling factors that can unlock new finance flows. Notably, in EDF’s new report ‘Quality Matters: Strengthening Climate Finance to Drive Climate Action,’ we identify similar strategies as we call for structural reforms within the international climate finance system. Three key recommendations overlap in both reports.
First, countries need to mainstream their climate objectives and adaptation goals within national planning and budgeting processes. This integration should be paired with robust stakeholder engagement that systematically includes subnational authorities, marginalized groups and potential implementing entities in the planning process. Doing so will better align adaptation activities with other national priorities and create more fundable projects. Moreover, planning processes should emphasize project evaluation and evidence gathering to better understand what interventions are most impactful and maximize the potential of climate resources.
Second, countries should adopt investment planning approaches to climate action. Specifically, they should work to develop a pipeline of bankable projects that can meet the objectives within their NAPs and other planning instruments. This can help attract investors to projects and ensure successful implementation of adaptation plans.
Third, multilateral financial institutions including multilateral development banks (MDBs) and climate funds need to undergo structural reform to improve the quality of finance. The MDBs are currently pursuing reforms to become better fit-for-purpose for addressing the climate crisis, and at COP29 they jointly announced that their collective climate finance will reach $120 billion by 2030 – though only $42 billion will be dedicated for adaptation. Improving the balance between mitigation and adaptation finance will be important to ensure that developing countries’ priorities don’t go unfunded. Additional actions these institutions can take include strengthening the concessionality of terms for adaptation projects to alleviate debt burdens and spark new blended finance opportunities, and leveraging innovative instruments like adaptation swaps which can foster positive adaptation outcomes in exchange for forgiving debt.
The NCQG is an important milestone which has the potential to advance action on these reforms and strengthen adaptation finance flows. Alongside supporting a strong quantitative goal, countries should call for improvements in the quality of finance, to ensure that finance for adaptation projects is available, accessible, concessional, and impactful.
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