Evening Wrap: Sleepy Market -- PCCW Hits Sub $2, More on Cathay
Jul 23, 2001 - 19:34:41 HKT
QuamResearch
Turnover dropped to a very slim HK$4.37 billion for this quietest of Mondays while the HSI lost 65.23 points to 12,236.45.
There were few key stories, but the biggest were of course the PCCW disappointment as well as perhaps some political worries or interest spilling out of Indonesia as President Wahid approaches getting kicked out. The government also released some figures today, not too good but not too bad, and one reader's question to our weekly wrap has us look at a few more pilot numbers.
Government Figures -- Economy Looks Flat
The government released some inflation figures, though in HK's case, it's still deflation. The CPI fell 1.1% YoY in June, better than the 1.5% YoY decrease in May. This marks the 32nd straight month of deflation, according to Reuters. The June figures may look like an improvement, but the expectation is for deflation to continue throughout the rest of the year.
Durable goods have continued to see the largest pricing pressure. Clothing and footwear were in second place followed by housing. Meanwhile, alcohol, tobacco, utilities, and food all saw price increases.
Thus investors can probably expect to continue to see across-the-board weakness, especially in property and retail.
Properties
Properties were mixed. Cheung Kong (1) was flat at $79.50. Henderson (12) rose $0.90 to $37.80. SHK (16) fell $1.50 to $68.50. NW Development (17) fell 5 cents to $8.25.
Banks / Financials
HSBC (5) fell 25 cents to $87.50, Hang Seng Bank (11) fell the same to $85, and BEA (23) rose 30 cents to $18.40.
Comm. & Industrial
China Mobile (941) dropped 70 cents to $34.60 while Unicom (762) gained 5 cents to $12.60.
PCCW (8) declined 10 cents or 4.7% to $2.025 but dropped below the crucial $2 mark for the first time in more than two years. The counter hit $1.97 during the day. Turnover was $170 million. The share was affected by yet another market rejection, this time of the young management team's ambitious US$3.8 billion long bond issue -- officially they were initially shooting for US$2.5 billion, but there was talk of extending it if demand was strong enough. It now turns out there wasn't even enough demand for half the amount, with only US$1.2 billion subscribed, and even then the pricing was much higher than what PCCW wanted to pay at 350 basis points above treasuries -- with 10-year treasuries at 5.12%, PCCW would have traded the pressure of immediate repayment (over the next few years) for an extra interest burden.
Though the company blamed the low demand on Argentina (convenient, being on the other side of the world and all), one can't help wondering if it was perhaps the potential borrowers were less kind than the debt rating agencies in view of the company's financial challenges exacerbated by what we consider less than gifted management.
Cathay (283) fell 5 cents to $10.55. Morgan Stanley said it reduced its 2001 full-year earnings forecast by 33% percent to reflect lower traffic and an estimated HK$500 million exceptional charge on the pilots dispute. It seems clear that nobody has a clue how much this thing is going to cost the airline. The last dispute back in 1998 was said to have cost half a billion dollars, so punters are gravitating towards that number. On the other hand, at the beginning of the conflict, some were saying the conflict could cost as much as $40 million per day -- in that case, we passed half a billion last week.
One reader asked a good question as to how in our weekly review we defined a "cushy salary" and "comfortable lifestyle" in reference to the Cathay pilots. There are a few considerations: how much the pilots make, how much pilots outside of HK make, and how much the average HKer makes.
At the end of June, we quoted an iMail article that said second officers earn between $31,275 and $43,941 a month while the salaries for first officers who joined Cathay before the pay scale changed in 1993 range from $75,470 to $112,628 a month. Those joining after that date get between $47,982 and $77,020. Also, though local and exp pilots get the same basic salary, expats also get flights back home, a contribution to their rent or mortgage, and a children's education allowance. In early July, Cathay said new pilots get pay and benefits of US$67,000 per year with senior captains going up to US$463,000 per year.
The iMail bottom number of HK$31,275 per month is equal to US$48,115 per year.
In the U.S., the average starting salary for piloting at a "small turboprop airline" is US$15,000 per year. For a major airline, the figure is US$26,290. The average pay for senior captains is US$200,000. Finally, the general salary range for a major airline is US$23,000 to US$140,000. The figures are a few years old and out of the U.S. Labor Dept.'s Occupational Outlook Handbook. Hong Kong pilots are undisputedly paid quite nicely.
One may say that HK's cost of living is higher. It is. It's about 43% above the U.S. average, so the entry-level Cathay, using iMail's figure, still works out to US$33k adjusted for cost of living if that job were in the U.S.
That's comparing nice salaries. Now to the nitty gritty. The average monthly salary in HK as of March 2001 for employees up to supervisory level is HK$11,356. That's the way much of HK lives, and that average is made up of plenty of people below it. Second, the SCMP listed "professionals" as being able to get HK$25-40k in one of their job articles. What that means is a little unsure. Third, Asiaweek for 2000 said the purchasing power parity adjusted average income in HK is US$20,832 per year.
The pilots may be comparing themselves to their Lan Kwai Fong mates, but objectively they still fit the vague definition of a "cushy salary" and "comfortable lifestyle."
quamnet.com |
