Two years ago, I shared with Hong Kong Business readers how we will be able to build smarter retail infrastructure through in-store artificial intelligence (AI). I am pleased to see that AI-based chatbots are now in widespread use around the world. However, the incredible potential of AI remains largely unrealised in Hong Kong, whilst the number of opportunities has expanded immensely.

Over the past few years, the use of AI in business has become a hot topic around the world. Just look at the astonishing strides made in human-to-computer communication with digital assistants like Siri and Cortana, or even Google Duplex, the latest AI natural conversation interface.

With rapidly-improving technology, increasing adoption rates and greater acceptance, AI in the form of chatbots, deep neural networks and data analytics has been creating real benefits for businesses and consumers in markets everywhere, particularly in mainland China.

President Xi Jinping has committed to making China a global leader in artificial intelligence by 2030, aiming to create an industry that will be worth a staggering one trillion dollars. The country is steaming ahead with this plan: the Chinese government, universities and research institutes and industry titans like Baidu, Alibaba, Tencent and iFlyTek are working together to move AI technology forwards.

Alibaba is one of China’s primary investors in AI. The company recently announced plans to invest more than USD 15 billion in research labs over the next three years, focusing on AI, machine learning, natural language processing and more. Alibaba’s AI-powered chatbot, Dian Xiaomi handles over 3.5 million requests per day and is capable of understanding the vast majority of customer enquiries.

In contrast to what is happening just across the border, Hong Kong’s adoption of AI is still in its infancy. According to some, we are still “stuck in the dark ages”: overall investment in AI has been low, with development projects funded only by the government and a few major corporates. Out-dated regulations are slowing down access to data and preventing data from being shared across platforms, whilst general enthusiasm is lacking, with public suspicions about privacy and job losses running high.

But the ship is beginning to turn. In her inaugural policy address earlier this year, Hong Kong Chief Executive Carrie Lam made it clear that innovation and technology are top priorities for this administration. Growing investment in innovation incubators like Cyberport and Hong Kong Science Park – which alone will receive HKD10 billion in government funds – will attract talent and improve our ability to develop commercially-viable AI offerings.

An invigorated attitude is also necessary, as the number of science, technology, engineering and mathematics (STEM) students in Hong Kong’s universities needs boosting – a new generation of tech-savvy young people is required to secure a pipeline of talent as the AI field grows. Improving ties with the mainland will also expand the overall AI ecosystem in Hong Kong, giving start-ups and other businesses access to more funding and better partnerships with larger markets.

These investments will take time to bear fruit, meaning that substantial, Hong Kong-specific AI applications for retail, manufacturing, logistics, customer service and beyond likely not be up and running for several years. During this phase, applications that will deliver direct, measurable ROI will be prioritised, especially in the retail industry where margins are already tight.

So as a business in Hong Kong, how can you participate in the development of AI? Carefully watch what the big industry players are doing, both at home and overseas. Pay attention to their successes and failures – particularly in terms of which AI applications actually drive profitability for the company, as opposed to marketing-driven projects designed to raise a brand’s profile.

I am confident that in the near term AI will not only lift profitability and drive growth in Hong Kong’s business sector – it will also lead to enormous advances in the economy and in the day-to-day lives of everyone. We just need to put our suspicions to the side and welcome the future with open arms. 

Only 1 in 5 firms has technologists in leadership roles.

When it comes to tapping the people with the know-how on technology, Singapore wins the game against its rival Hong Kong, a research from Calastone revealed.

In a survey that interviewed firms from both Singapore Exchange and Hong Kong’s Hang Seng Index, it was revealed that whilst 44.6% of listed companies examined in Singapore had a technologist in a leadership position in 2016, Hong Kong lagged significantly with just 20.3%.

However, both markets have seen steady increases in the number of companies with technologists in leadership positions – Singapore saw an increase from 17.9% in 2011 and Hong Kong from 6.3%.

The banking sector leads the way in Singapore, whilst accounting has 12% of technologists in a leadership position, followed by real estate management and development, food and staples retailing and aerospace and defense.

Meanwhile, the information technology sector dominates in Hong Kong, accounting for over 46% of technologists in a leadership position, followed by financials and consumer goods.

Calastone managing director and head of Asia Leo Chen said the research demonstrates the need for a cultural shift in Asia to ensure technology is firmly part of the long-term strategic agenda.

"Calastone believes that an increased level of technological expertise and understanding of emerging and disruptive technologies is vital for the development and sustainability of the financial and funds industry," he noted.

It reached a three-year high.

A report from South China Morning Post revealed that the number of Hongkongers trying to emigrate to other parts of the world reached a three-year high last year.

Figures released by the Security Bureau show 7,600 applied for a certificate of no criminal conviction (CNCC) for outward immigration purposes – 8.6 per cent more than in 2015 and 10 per cent more than in 2014.

The last time so many locals applied to leave the city was in 2013. The United States remained the most popular destination, with 2,800 applying for immigration visas, the highest in five years. Australia and Canada a 

Kwoon Chung Bus and Sun Bus are also interested.

According to a report from South China Morning Post, mainland ride-hailing giant Didi Chuxing and Hong Kong transport firms Kwoon Chung Bus and Sun Bus are seeking to enter the city’s premium taxi market whilst the trade itself is boycotting the government’s plan to start franchised services.

However, industry players warned that a proposed five-year trial scheme to provide a better service for the public, subject to Legislative Council approval, might never take off due to insufficient support from lawmakers. The taxi trade is also lobbying chief executive-elect Carrie Lam Cheng Yuet-ngor to scrap it.

Read more here.
 

It can translate up to 90 different languages.

A free messaging app that instantly translates voice and word chats was recently launched and is now available on all iOS and Android smartphones.

Invented in Australia, the DoTalk app allows users to simultaneously engage in cross-language communications easily and more accurately than any other messaging app available, with six different translation APIs and speech recognition tools combining to provide the most accurate translations possible.

Users of the app have the option to message either via text or a "hold & talk" microphone. They can also conduct a group chat with up to 10 people in multiple languages in real time. The app also features free voice and video calls.

DoTalk Founder Reno Nicastro said the goal of the app is to create a free, fun, and easy-to-use app which provides an open forum for people to easily connect and communicate, regardless of language barriers or location and without delay.

“Whether you are travelling, booking a cab or hotel overseas, want to communicate with international relatives, someone exotic you’ve met online, as the modern-day pen pal, or you just want to learn another language – DoTalk is the tool to connect you to people regardless of where they are or what language they speak,” Nicastro said.

He said the app already has registered users from a wide range of countries and languages in its Beta testing, with English, Chinese, Korean, Japanese, Russian, Spanish, French and Indonesian proving the most commonly used in the app.

Moving forward, Nicastro and his team are planning to add more features and functionality over time that will further enable broader industry applications including regional/global conference calls, customer service, education, media and customer engagement.

“As the market continues on a growth trajectory, we believe we have assembled an exceptional team and that we have the best messaging app platform in the market. We are currently working on DoTalk Premium applications that will run on the current DoTalk Realtime Translation Technology Engine and DoTalk Team for Business. DoTalk Premium will break down language barriers by providing real-time communications tools to get the job done,” he said.

Average daily inflows through HK exchange links swelled to the highest.

According to a report from Bloomberg, cheap Hong Kong equities are suddenly back in vogue with Chinese investors. As tightening capital controls turn the city’s stock market into one of the few Beijing-approved destinations for offshore investment, mainland traders are piling into shares that have long been priced at much lower levels than their counterparts in China. Average daily inflows through Hong Kong’s exchange links swelled to the highest since September this month, while the city’s Hang Seng China Enterprises Index is the best performer worldwide this week.

The influx of mainland money has helped narrow valuation gaps between the markets, which persisted for more than two years despite growing cross-border connectivity. Even so, dual-listed stocks remain 33 percent cheaper on average in Hong Kong. Pictet Asset Management and East Capital say the city’s re-rating has further to go.

Read more here.

Value sales rose 2.3% in December.

According to a report from Citi Asia Economics, luxury goods sales and cosmetics benefited from recovering tourist trend, as value sales of jewellery, watches and clocks and valuable gifts rose by 2.3%yoy in December.

"[T]his is a meaningful positive print after 26 months of negative. This is in line with the improvement in Mainland Chinese tourist arrivals – which also have returned to positive growth of 6.1%yoy after 18 consecutive months of decline," Citi said.

Similarly, medicines and cosmetics, which are additional top shopping list items for Mainland tourists, saw sales value rebounded to 4% in the same period. 

Cost of puts versus calls is the cheapest among Asian markets.

For investors wanting to hedge Hong Kong shares, the market offers the cheapest options among major regional peers, according to a report from Bloomberg. Ahead of the Chinese Lunar New Year holiday, contracts protecting against swings in the Hang Seng Index in the coming month have tumbled to their lowest prices in more than a year versus Australia’s S&P/ASX 200 Index, Korea’s Kospi 200 Index and India’s NSE Nifty 50 Index. Relative to the Nikkei-225 Stock Average, they’re near their cheapest since September.

Further ahead, though, volatility bets haven’t fallen as much. That’s because the earnings season will start soon after the week-long break, just as investors will have to deal with potential changes in U.S. trade policies, according to Royan Lam, the head of Hong Kong warrants sales and marketing at Macquarie Group Ltd.’s commodities and global markets unit. The HSI’s implied volatility for the next three months is near its highest level since March 2015 relative to shorter-term wagers, data compiled by Bloomberg show.

Read the full story on Bloomberg here.

But average rental costs have fallen around 13% since 2012.

Hong Kong remains the most expensive location in Asia for high-end rental accommodation. This was one of the findings of the latest Accommodation Survey published by ECA International, the world's leading provider of knowledge, information and software for the management and assignment of employees around the world.

ECA International has been conducting research into accommodation for more than 20 years to help companies provide the right housing options as part of the overall compensation package for mobile employees. The survey compares rental accommodation commonly leased by expatriate staff in over 230 locations worldwide.

“Over the past five years, Hong Kong has continued to top our regional rankings. With a high population density and a consistently limited supply of property, average rents in the territory have long been more expensive than in other high-profile cities,” said Lee Quane, Regional Director – Asia, ECA International.

Rents for an unfurnished three-bedroom apartment across popular expatriate neighbourhoods in Hong Kong average US$10,189 per month.

“Despite high rental prices in Hong Kong, average rental costs here have fallen by around 13 per cent since 2012. Over this period, the residential rental market has been facing downward pressure as many homeowners are leasing out their properties rather than selling them. On the demand side, factors such as companies reducing the levels of assistance provided to assignees and the conversion of assignees to permanent terms, where company assistance in meeting housing costs is reduced or removed, has also meant that landlords with properties in the areas popular with expatriates are having to reconsider the rents they demand,” said Quane.

Hong Kong's retail scene is expected to brace for more headwinds.

The decline in Hong Kong's retail sales widened to 8.6% YoY in the first 11 months in 2016 from the 3.7% decline in 2015, corresponding to a 5.4% drop in tourist numbers in the same period. Sales of watches and jewellery were impacted the most, falling by 19.2% y-o-y in January to November 2016.

According to CBRE Hong Kong, high street shop rents fell a further 12% in 2016, after falling 17% in 2015, bringing the total decline to date to 27% from their peak in 2014. Shopping centre rents, however, were broadly flat in 2016.

“In 2017, slower economic growth in China and depreciation of the Renminbi are set to undermine mainland tourist spending in Hong Kong,” CBRE Hong Kong executive director for advisory & transaction services-retail Joe Lin said.

He added, "However, the fall in high street shop rents is not expected to exceed 5% in 2017, and by the middle of the year, most leases that were signed during the market peak of 2014 will have expired, meaning that rents are expected to stabilise from then on. Leasing momentum is expected to gradually improve from 2016.”

Buyers snapped up 130 units in the first two hours.

According to South China Morning Post, Hong Kong home buyers seem undeterred by rising flat supply and imminent interest rate increases after a residential project launch in Tsuen Wan received an overwhelming response on Friday. Hundreds of buyers, escorted by agents, began queuing up at the sales office of The Pavilia Bay in Tsuen Wan, jointly developed by Vanke Property (Overseas) and New World Development, when the sale of the first batch of 400 units started at 9am.

Market sources said buyers snapped up 130 units in the first two hours, mostly two-bedroom flats worth about HK$8 million to HK$9 million after the discount. Louis Chan Wing-kit, chief executive of Asia Pacific at Centaline Property Agency’s residential department, said 70 per cent of the firm’s signed up potential buyers are end users, and 30 per cent are investors.

Read more here.

Only 1% of CFOs give salary increase when promoting an employee.

In a study released by Robert Half, it was revealed that only 1% of Hong Kong CFOs say they always give a salary increase when promoting an employee.

This came as six in 10 Hong Kong finance leaders say the primary reason for promoting without attributing a corresponding salary increase is because they want to assess an employee’s performance first before remuneration is increased. Meanwhile, just under a third of respondents feel their business lacks the financial resources to increase salaries, followed by 7% who say they urgently needed to fill the role.

Robert Half managing director Adam Johnston said a promotion is not always a clear sign of confidence in an employee, but without corresponding salary increase, it has the potential to negatively impact an employee’s motivation and ultimately influence their decision to look for another job.

"Hong Kong’s tight labour market and low unemployment rate make it essential for companies to reward top performers through career advancement opportunities. However, a competitive salary package is a very effective retention tool, and many employees are prepared to work hard if they are confident of being rewarded by a higher salary or bonus.," he said.

He furthered, “In circumstances where a promotion doesn’t go hand in hand with a pay rise, it is vital to explain the reasons why, as well as discussing exactly what an employee needs to do to make that salary increase happen.”

Mainland investors will turn to buying Hong Kong stocks through cross-border exchange links.

According to Bloomberg, as China tightens its grip on capital controls, one state-sanctioned haven from a weakening yuan is drawing attention. Mainland investors will turn to buying Hong Kong stocks through cross-border exchange links as other ways of purchasing overseas assets become more difficult, said Kenny Tang, vice chairman at Jun Yang Financial Holdings Ltd. An increase in flows would provide a boost to a stock market that has trailed global peers over the last four years, he said.

Policy makers stepped up measures to stem outflows as the yuan suffered its worst annual loss against the U.S. dollar in more than two decades, including requiring extra documentation from individuals converting yuan and blocking the use of Chinese bankcards to buy insurance products in Hong Kong. As a high-profile part of President Xi Jinping’s pledge to integrate China’s financial markets with the world, the Shenzhen and Shanghai bourse links aren’t facing the same threat, even with money flowing into Hong Kong so far in 2017 outpacing cash being sent the other way.

Read more here.

There is also a 25% decline in jobseekers.

As Hong Kong celebrates Christmas and Chinese New Year, candidates have put on ice any efforts to seek new positions in as early as December, leading to the 25% decrease in jobseekers in Q4 according to Morgan McKinley APAC Employment Monitor.

"Sluggishness among multinationals often translates to delays and reduced volumes of hiring for recruiters in this internationally dominated market, but improving trade flows with Mainland China are contributing to an improved economic outlook and optimism on the ground that bodes well for the year ahead," the research firm said.

More so, it noted how the changes around the share and scope of Hong Kong’s banking and financial services employers are beginning to manifest on the ground.

"The increase in focus by Chinese insurance, asset management and banking institutions to grow a stronger foothold in Hong Kong is reflected by the hiring market, with fewer positions becoming available within the territory from the traditional bases of large, overseas multinationals," it said. 

Citic and Carlyle Group will take 80% holding in the deal.

McDonald’s Corp. agreed to sell a controlling stake in its China and Hong Kong operations to a group of investors for about $1.7 billion, a key component of the fast-food giant’s reorganization in a market where it’s striving to catch up with more nimble rivals.

Chinese state-backed conglomerate Citic Ltd., Citic Capital Holdings and U.S. private-equity firm Carlyle Group LP will acquire an 80 percent holding in a deal valuing the business at as much as $2.08 billion, according to a statement Monday. Oak Brook, Illinois-based McDonald’s will keep the remaining stake. The new owners plan to add more than 1,500 restaurants over the next five years in smaller Chinese cities.

Read more here.