Dollar Still Firm

The US dollar gained against most of the major foreign currencies last week, but the overall tone, leaving aside the yen, was largely consolidative in nature. The greenback was soft in the first half of the week but recovered in the second half.

The Australian and Canadian dollars were the only major currencies that managed to hold onto some of their gains (0.55% and 0.40% respectively). The yen was the weakest of the majors, losing 1.2%, as the panic from the week before died down. Equity markets were mostly higher, with the Nikkei's 5.2% rise, leading the major markets. US 10-year Treasury yields rose 8 bp. Core bonds generally traded heavier, but European peripheral bonds were firmer, in line with the calmer conditions.

We were never persuaded that last week's turmoil would prevent the Fed from completing its tapering operation, and see that in the market, cooler heads are prevailing. Talk of "tapering the tapering" has diminished, and no one is taking too seriously the prospects of QE4. Nevertheless, we note that both the December 2015 Fed funds and eurodollar futures contracts were unchanged on the week at 46 bp and 77 bp respectively.

Perhaps offsetting the diminished interest rate support for the dollar has been speculation that more action from the European Central Bank and the Bank of Japan could be imminent. Reports suggested that the ECB may consider adding corporate bonds to its asset purchase program. There were also report suggesting that the BOJ sees risk that inflation may fall, and this could prompt an extension of the already aggressive Qualitative and Quantitative Easing. We are skeptical that either will materialize in the coming weeks. The BOJ meets next week and the ECB the following week.

Technically, the euro looks poised to continue to consolidate. Most of last week's price action took place within the $1.2625-$1.2886 range set on October 15. In recent session, the euro flirted with the lower end and slipped to about $1.2615. The euro spent the second half of the week below the 20-day moving average, which comes in near $1.2690. This is the nearby cap. Of note, the nearly four-cent bounce in the euro has not been accompanied by a sharp change in euro positioning The confidence of the euro bears is palpable and quite widespread.

The bearishness toward the yen was more evident in the price action than in the euro. We had identified the yen's gains as among the most exaggerated in last week's technical note. The dollar's recovery last week recouped 61.8% of its slide from the push marginally above JPY110 on October 1. It closed above its 20-day moving average in the two sessions before the weekend for the first time since early this month. The RSI has been recovering, and the MACDs have now crossed higher. The risk is that the speculation of more action by the BOJ is getting ahead of itself. This may help cap the dollar, where a trendline drawn off the early October highs comes in around JPY108.70-80 next week.

From a technical perspective, sterling continues to look constructive.Bullish divergence continues to be evident in the daily RSI and MACD. It could be important that the $1.60 area largely held in the second half of last week. It appears that sterling may be carving out a head and shoulder near $0.8650. Before the weekend, the aussie tested both sides of the pattern. It closed firm, in an outside day, though off its high and just below the previous day's high. This is still impressive because of increased speculation that the central bank is considering cutting interest rates. This chart pattern is notorious for false breaks, and the technical indicators do not appear to be generating strong signals.

The US dollar pulled back against the Canadian dollar to challenge the past month's uptrend. It is found near the 20-day moving average, just above CAD1.1210. The US dollar could not get back above CAD1.13 in the first half of the week and came down to test CAD1.1180-CAD1.1200 in the second half of the week. It has been unable to close below the 20-day average for a month. The MACDs are turning lower, though the RSI is in neutral.

The US dollar has also been riding the 20-day moving average higher against the Mexican peso. It comes in now near MXN13.48. The greenback has lost some momentum in recent day but has not pulled back from the highs very much. There is no compelling technical evidence to conclude a dollar top is in place.

- Marc Chandler

Cooking With Dali - Very Spicy Sweet & Sour Lamb

I think I had versions of this dish in many older Hakka establishments or those who cooked for colonial masters during their time.I have not had a decent one for a long time, so I tried to dissect the dish on my own. 

Its my own recipe, so you can tweak it as you like ... but let me tell you, its very very goooood!!!

I use lamb shoulder as it is more flavorful when you fry them or stew them. Ask your butcher or supermart guy to cut it into small pieces for you.

This is the list for making the sauce: vinegar, Lingam's chilli sauce, tomato sauce and chicken broth.

Pick and choose your veggies, I used large onions, red onions, capsicums, cherry tomatoes and bird eye chillies.

Use Lea Perrins to fry the lamb on a non stock pan for 3 minutes each side, adding Lea Peerins before they dry out.

I use Pomegranate juice for the sauce base, or you can use pineapple juice, but I always have pomegranate juice in my fridge... so ...

Fry 3 minutes each side and sprinkle a touch of sea salt, set aside.

The soft ones, cherry tomatoes quartered and chillies diced.

The hardier veggies, brown the onions first in a bit of oil, mid-low fire for 3 minutes. Then add the capsicum and stir for another 3 minutes. Put in half a cup of chicken broth and stir fry till almost completely dry.

The sauce is up to you. I poured in half a box of chicken broth. Half a cup of vinegar, Half a small bottle of ketchup. Three big spoonfuls of Lingam chilli sauce (or as much as you want for fire in your mouth... 3 spoons are a lot already). Add one cup of pomegranate juice or pineapple juice. Add two big spoonfuls of sugar... stir and taste and boil for a couple of minutes. You can add any of the above to tweak to your taste.

Add  a couple of tea spoons of corn starch with water to thicken sauce. Then put in all the veggies, plus tomatoes and chillies.

Add in the lamb, let it stew on medium flame for 10 minutes ...

You are good to go ...




(p/s kids will love this dish with rice, just substitute chicken pieces for lamb, remove all chillies and the Lingam sauce)













Previous manly cooking recipes:

CURRY PORK RIBS
http://malaysiafinance.blogspot.com/2013/08/cooking-with-dali-curry-pork-ribs.html

DRUNKEN CHICKEN
http://malaysiafinance.blogspot.com/2012/09/cooking-with-dali-drunken-chicken.html

BRAISED SPICY GARLIC FISH HEAD
http://malaysiafinance.blogspot.com/2013/09/cooking-with-dali-braised-spicy-garlic.html

PIG TROTTERS VINEGAR GINGER BROTH
http://malaysiafinance.blogspot.com/2012/09/cooking-with-dali-pig-trotters-vinegar.html

Dr Tareq Suwaidan's View

Ridiculous to stop non-Muslims from using ‘Allah’, says Muslim Brotherhood leader

BY MOHD FARHAN DARWIS

Published: 19 October 2014

Kuwait's Muslim Brotherhood leader Dr Tareq Suwaidan says there are many examples in Islamic history which shows that non-Muslims are not prohibited from using the word 'Allah'. – The Malaysian Insider pic by Nazir Sufari, October 19, 2014.Prohibiting non-Muslims from using the word "Allah" is ridiculous, says Kuwait's Muslim Brotherhood leader Dr Tareq Suwaidan.

He said this was because there was no law or ruling within the Islamic realm which prevented the use of the word by non-Muslims.

"I have been following this development in Malaysia, this use of the word 'Allah'... there is no law in Islam that says so," he told a forum organised by PAS international committee last night.

He noted that there were many instances in Islamic history where non-Muslims had been encouraged to use the Arabic word "Allah".

"Do not be confused, this is just wrong, I have hundreds. No, thousands of proof on this," he said, in front of a crowd of 100.

His comment came after an Indonesian scholar Dr Ulil Abshar Abdalla waded into the “Allah” controversy, saying Muslims who believed the word was exclusive to Islam were “confused”.

Ulil, who was denied entry into Malaysia this month for allegedly opposing its Islamic stand, said Muslims did not have a monopoly of the word “Allah” as it was a general term to refer to God.

“The term ‘Allah’ comes from two words which are ‘Al’ ‘and ‘Ilah’ which means God.

“If we mention the word ‘Allah’, it is translated as God. The people of Mecca also used the word ‘Allah’ before Islam came,” he had said.

Tareq and Ulil's view of the “Allah” controversy echoes that of Muslim scholars and clerics, both locally and worldwide, who have criticised the ban of the use of the word among non-Muslims here.

Even the United Nations Special Rapporteur on freedom of religion and belief, Heiner Bielefeldt, had said that many Muslims were of the view that the court ruling undermined the credibility of Islam, in a reference to the Federal Court decision that the word “Allah” could not be used in the Catholic publication, Herald, on grounds it was not an integral part of Christianity.

Earlier this month, evangelical denomination Sidang Injil Borneo (SIB) obtained leave from the Court of Appeal to seek a declaration that the word “Allah” could be used in Christian publications.

A three-man Court of Appeal bench, chaired by Datuk Rohana Yusof, said the Federal Court held that the September 14 finding that “Allah was not an integral part of Christianity” was a mere passing remark.

Among the groups which have defended “Allah” as exclusive to Muslims are Malay rights group Perkasa and Ikatan Muslimin Malaysia (Isma).

The “Allah” row started in 2008 when the Home Ministry threatened to revoke the Herald’s newspaper permit, prompting the Catholic Church to sue the government for violating its constitutional rights. – October 19, 2014.

- See more at: http://www.themalaysianinsider.com/malaysia/article/ridiculous-to-stop-non-muslims-from-using-allah-says-muslim-brotherhood-lea#sthash.Y7apqsfb.2ML4r9nZ.dpuf

Democracy would see poor people dominate vote, CY Leung saysas he initiates his own seppuku

Wow... I thought Malaysia had a stranglehold on politicians making the silliest comments. Now we have some competition. Hong Kong's Beijing-backed leader Leung Chun Ying told media that if the government met pro-democracy protesters' demands it would result in the city's poorer people dominating elections.Hence, you cannot run a HK democracy and that free elections were impossible.



Conclusion and side-admissions:
a) the poor people know nothing in HK/China
b) the other 50% deserve less than a vote per person as citizens
c) the poor do not know what's best for the country
d) HK only serves the rich and powerful, otherwise how did we get here
e) you, the other 50% are basically screwed and I am telling you in your face
f) poor people, you are Fucked and Fuck You

This is almost like the political crisis in Thailand, in that the poorer rural folks side with the ousted Thaksin and his cronies, while the city folks think that Thaksin is the devil incarnate and that the rural folks are stopping genuine demands for liberation and freedom from cronyism and excessive corruption.

Anyway, back to CY Leung:

"If it's entirely a numbers game and numeric representation, then obviously you'd be talking to the half of the people in Hong Kong who earn less than US$1,800 (S$2,250) a month," Mr Leung said in comments published by the WSJ and INYT.

Mr Leung's latest comments are likely to further fuel the anger of protesters who see him as hapless, out of touch and pandering to the whims of a small number of tycoons who dominate the financial hub.

("Gee... I am royally fucked by what I said" ... "must go to Chinese medicinal shop and ask for cure for foot-in-my-fucking-mouth disease")

His quotes also echo that of Mr Wang Zhenmin, a well-connected scholar and regular advisor to Beijing. Mr Wang said recently that greater democratic freedom in the semi-autonomous city must be balanced against the city's powerful business elite who would have to share their "slice of the pie" with voters.

"The business community is in reality a very small group of elites in Hong Kong who control the destiny of the economy in Hong Kong. If we ignore their interests, Hong Kong capitalism will stop (working)," he said in August.

If it’s entirely a numbers game – numeric representation – then obviously you’d be talking to half the people in Hong Kong [that] earn less than US$1,800 a month,” he said in reference to the median per capita wage. “You would end up with that kind of politics and policies.”

The Paper Sculptor

Anna-Wili's sculptures are stitched together from archival cotton rag. Her works explore the organic qualities and resistance of paper, generating a tension between the complex realism of form and the limitations and economy of the materials used. They represent animal life in an immediate way that conveys the energy, movement and physical character of different creatures. Her aim is to engineer a moment of contact with nature in a way that emphasises both the startling differences and similarities of human and animal forms and consciousness.


Born in Sydney 1980, the daughter of a Puppeteer, Anna-Wili studied Fine Art at the National Art School, Sydney. In 2008, after working as a Scenic Artist for Opera Australia, she began making sculptures independently by commission. Her works are held in private collections around the world and have featured in numerous publications.

Why Oil Price Is Sagging

The respected site oilprice.com did a summary of why oil prices are sagging, but MISSED out one big factor. 

The strengthening USD over the past few weeks. Three or four months back, the turmoil in Iraq was causing some disruption anticipation to oil supply, which have been eased following the "drones strategy with partners". 

The USD has rallied over the past few weeks in anticipation of a uptrend in interest rates there, coupled with better recovery in the US compared to other developed counterparts. However, to me the strength in USD is not that permanent but rather a rebalancing and will not rise by much from hereon.

-----------------------------------------------

By Chris Pedersen for Oilprice.com

1. The U.S. Oil Boom
America’s oil boom is well documented. Shale oil production has grown by roughly 4 million barrels per day (mbpd) since 2008. Imports from OPEC have been cut in half and for the first time in 30 years, the U.S. has stopped importing crude from Nigeria.  

2. Libya is Back
Because of internal strife, analysts have until recently assumed that Libya’s output would hover around 150,000-250,000 thousand barrels per day. It turns out that Libya has sorted out their disruptions much quicker than anticipated, producing 810,000 barrels per day in September. Libyan officials told the Wall Street Journal last week that they expect to produce a million barrels per day by the end of the month and 1.2 million barrels a day by early next year.

3. OPEC Infighting 
There have been numerous reports about the discord between OPEC members, leading many to believe that OPEC will not be able to reign in production like it has done so in the past. The Saudis and Kuwaitis have reportedly been in an oil price war, repeatedly lowering their prices in order to maintain their market share in Asia. John Kingston, the news director at Platts, believes that the Saudis will not be willing to give up market share like they have done during previous price drops.

4. Negative European Economic Outlook
European Central Bank president Mario Draghi has left investors concerned about the continent’s slow growth. Germany’s exports were down 5.8 percent in August, stoking the fears of anxious investors that the EU’s largest economy had double dipped into recession last quarter. Across the Eurozone, the IMF again lowered its growth forecast to 0.8 percent in 2014 and 1.3 percent in 2015.

5. Tepid Asian Demand 
Beyond slow economic growth and currency depreciation, a number of Asian countries have begun cutting energy subsidies, resulting in higher fuel costs despite a drop in global oil prices. In 2012, Asia’s top spenders on energy subsidies, as a percentage of GDP included: Indonesia 3 percent; Thailand 2.6 percent; Vietnam 2.5 percent, Malaysia 2.3 percent, and India 2.3 percent. India is a primary example. Between 2008-2012, India’s diesel demand grew between 6 percent and 11 percent annually. In January 2013, the country started cutting the subsidies of diesel. Since then, diesel consumption has plateaued.

Could Malaysia Be The Next "Houston" (oil & gas hub)

Interesting article from oilprice.com:

Helped along by a stable, transparent, pro-business government, Malaysia has been quietly building itself into an oil and gas hub, and the world’s oil and gas companies -- who increasingly see this country as a natural base for their broader Asian operations -- have noticed.

With Singapore now the world’s most expensive city, Jakarta in constant gridlock and Bangkok the center of recurring coup activity, Kuala Lumpur is fast becoming the preferred central location for businesses looking to take advantage of the expected growth in South East Asia.

The South East Asian market holds great importance for oil and gas firms due to its location in the center of the Asian-Pacific; some estimates are that it will account for 70 percent of global oil demand from 2015 to 2020.

The region will also be boosted by the development of both onshore and offshore gas markets driven by growing regional demand and high gas prices in Japan and South Korea, which could see shallow water drilling grow 29 percent between now and 2020.  

In addition, next year there will be an increase in development wells drilled offshore in the region: Thailand will drill some 370, followed by China and India, each of which will drill around 200. The regional total by 2020 will be 1,600 wells -- a growth of more than 30 percent over 2014.

To manage these opportunities effectively, a robust Asian Pacific central hub is considered crucial, and with Malaysia’s strong pedigree in training, the full range of oil and gas skills, operators, engineering firms, oil field service companies, and consultancies are rushing to expand in Kuala Lumpur.

Malaysia Petroleum Resource Corporation (MPRC) is also driving this growth by recommending appropriate policies relating to the oil and gas sector as it reviews existing business regulations and tax incentives. With 4,446 international and domestic companies registered with the state oil and gas company PETRONAS  (Petroliam Nasional Berhad) that already contribute 20 percent to Malaysia’s GDP, this has the potential to be huge.

EarthStream predicts Malaysia could be the hottest oil and gas job market in 2015, and over time, it could well become the “Houston of Asia,” with career opportunities for expats and locals alike.

The real winners in all of this will be the returning Malaysians, whose skills are in extreme demand. Already, companies are putting employment packages together to attract local workers back from their tax-free assignments in the Middle East.

By Kevin Gibson of Earthstream

Great Find - Double Claypot Curry Fish Head (SS2)

I go to SS2 quite a bit so whenever there are new shops I would notice. I think this eatery just opened less than a week or two ago. Basic, clean spartan design with a visible open kitchen, which makes sense nowadays as we diners like to see how hygienic the food preparation process is.





 
 
 Gave it a try, and the verdict is very very good. They are so confident that they only have two main dishes, the fish head curry (Chinese style) and the ribs pot. Main thing here is the curry fish head, certainly one of the best ever (Chinese style). They have servings for 1, 2, 4, 6 pax .... so no worries there. Everything that needed to be in that claypot were there like old friends for mahjong... ladies fingers, eggplant, cabbage, taufoopok, fuchuk, long beans and long beans... and the fish head of course (as the heads are not cheap, there will never be enough fish head parts in the curry to satisfy us ... but I think the veggies go very well with the lemak curry anyways).

I think I tasted tomatoes too, it was a good move as the sourishness balances out the lemak. Its hard to call it the best ... its more like you go to a friend's house whose mum can cook very well, and she serves the most complete and sincere fish head curry (no shortcuts) ... thats the best home cooked feeling I got.  9.5/10

 Its on the same row as Watson's, Bee Chiang Hiang, Jojo's Kitchen and the pet shop. But, close on Mondays I think.

The braised ribs is actually soft bones, which I really liked. Its pretty good ... 8/10 ... just needed to add fatiu and partkok.... then would be a 9/10.

Remember to order the side of fuchuk, freshly fried and crispy... to dunk into the curry.

Seriously Side Splitting Signs

Internships & Fresh Graduates' Positions

Murasaki ts (a MSC status company) is looking for two interns and two full time positions for fresh graduates. If you are interested to get a footing into the world of finance, markets and immerse in the energy of a start up, we would like to hear from you.

Our office is located at Solaris Mont Kiara. Email CV to: joanne.tee@murasaki.co

More information about the company can be obtained by visiting www.murasaki.co

Here's Why Oil Prices Are Sagging

Its FRACKING ... or shale oil. Almost without warning, the US is almost self sufficient in oil. The map from Fortune is amazingly clear. The US already produces as much oil as the following combined countries: Venezuela, UK, UAE, Ukraine, Libya, Oman and Ecuador. All the less reasons to go to war from now on.

FORTUNE: U.S. oil production suddenly rivals that of some major exporters.

The U.S. is in the middle of an oil boom. Over the past several years, advances in fracking technology have allowed the U.S. to tap into its vast reserves of shale oil, making the country one of the world’s largest producers of crude, upending the global energy marketplace. With nearly two-thirds more output now than six years ago, the U.S. produces 8.4 million barrels of crude per day. That’s still less than Russia, but more than twice as much as Iran or Canada. Texas alone now out-gushes the United Arab Emirates, Mexico, and Nigeria. Forget OPEC—meet the new league of oil-producing states, the united ones. (click the map to enlarge)

Equity Risk Premium - The New Best Single Measure For Stocks

Great article from Fortune magazine:

It’s called the Equity Risk Premium, or ERP, and it’s been lauded as the Holy Grail of corporate finance.

Investors have come down with a case of the jitters, and for a good reason.

Since September 22, the Dow has careened through three days of 100 point-plus losses. The gigantic pop in the Alibaba IPO and the Chinese e-commerce phenomenon’s epic valuation have begun to stir fears that we’ve hit a market peak.

What’s worrying is that prices are displaying far greater faith in the future than the unimpressive fundamentals suggest is warranted. We’re living in a world of record-high corporate valuations and mediocre earnings growth.

To get the most accurate picture of the situation, let’s examine a metric that tells you when stocks are really a buy, and when they’re overly pricey. It’s called the Equity Risk Premium, or ERP, and it’s been lauded as the Holy Grail of corporate finance. The name may sound wonky, but for making money in stocks in the long-term, it’s the most practical measurement you’ll ever find.

The Equity Risk Premium is the extra return that investors demand for taking the additional risk of choosing stocks over far safer Treasury bonds. The higher the ERP, the bigger the potential future returns. Risk premiums ballooned, for example, in the panic of 2009, and folks who bought then profited handsomely. By contrast, when the ERP is below average, gains on equities tend to be weak or non-existent in the years to come.

What’s misleading is that the real, sustainable ERP has been disguised by a temporary phenomenon: unsustainably low interest rates. But it’s no great challenge to unmask an adjusted, realistic ERP from the illusory, official one. And as we’ll see, that slender figure is cause for alarm.

The ERP is simply the expected return on equities minus the inflation-adjusted yield on 10-year treasuries—that’s the extra cushion, or margin for error, you’d expect for braving equities. The best measure of the expected return is the earnings yield on the CAPE, or Cyclically Adjusted Price-Earnings Ratio, developed by economist Robert Shiller. The CAPE is the most reliable yardstick for returns since it adjusts for temporary, highly misleading swings in profits. Right now, the E/P (earnings to price ratio) on the CAPE stands at 3.8%. That’s the inverse of the Shiller price-to-earnings ratio of 26.3.

So the expected return on stocks is now 3.8%, adjusted for inflation. The second step consists of subtracting the real rate on the 10-year Treasury to get the ERP. The long bond is now yielding around 2.5%, and inflation is running at around 2%. So the real yield is a mere 0.5%.

Hence, the ERP is our 3.8% expected return minus 0.5%, or 3.3%. By historical standards, that’s a good figure. It’s an encouraging signal for the bulls, even the responsible ones. They can argue that the expected return of 3.8% plus inflation of 2%, or 5.8% in total, isn’t great, but clocks the yields on the long bond. So why not buy stocks?

Even the optimists, however, acknowledge that interest rates need to rise. Today, the incredibly low 0.5% real yield has created a mirage in the form of a superficially strong ERP. Things always go back to normal, so consider the results when the Fed unshackles interest rates and lets them swing back to their historic norms. Over time, real rates hover in the 2% range. What will happen when they rise from today’s level of 0.5% to 2%, bringing the yield on the 10-year Treasury bond to 4% (the total of the 2% real yield plus a 2% premium for future inflation)?

Now, we can re-calculate the ERP to eliminate the funhouse mirror effect of artificially low interest rates. The expected return of 3.8%, minus the reasonable, future real rate of 2%, leaves an under-nourished ERP of just 1.8%.

That’s not enough to justify investing in stocks. Let’s assume investors still demand a spread over bonds of 3.3 points, matching what they’re supposed to be getting today. Now they’ll require future returns not of 5.8%, but 7.3% (that’s the real rate of 2% plus the ERP of 3.3% plus inflation of 2%).

Restoring the ERP to attractive levels will require a sharp drop in company valuations. The Shiller PE would need to fall from 26.3 to 18.9, causing stock prices to drop by 28%. The S&P would look alluring again at around 1,425. Watching the ERP is all about what really matters in investing: ensuring you are well paid for risk. So follow the sovereign of all market metrics.

The Fun Rides Are Getting Ridiculously Crazy

I like fun rides at amusement parks, not a lot but I am OK to participate. Some roller coaster rides have been getting more and more nerve racking, more turns, spirals, speed and heights that they drop from. Thats still OK because once you move its kinda like on its own speed.

This new ride at Phantasialand in Germany called TALOCAN reminds me of a gut churning ride, Loop-de-Loop, which you still see nowaday of a trainlike seating that goes up in a full circle, like a loop and will stay upside down for a few seconds before dropping. The TALOCAN does that but with a lot more twists. You take this ride, you'd be walking with weak knees for an hour.

Why Hongkongers Will Soldier On

Anson Chan defends and details why HK is in the state she is in.

Anson Chan has re-emerged in the spotlight amid a growing fight by Hong Kongers for democratic rights. Photograph: Scott Eells/Bloomberg News

She is often called the “Iron Lady” of Hong Kong. Anson Chan earned respect serving as Hong Kong’s second-highest official when the British were in charge. And when the colony was handed back to China in 1997, Beijing enlisted Chan to help with that transition.

While she no longer holds any official government position, Chan, 74, remains one of the most influential political figures in Hong Kong and has re-emerged in the spotlight amid a growing fight by Hong Kongers for democratic rights.

At the heart of the fight is China’s promise during the 1997 handover that Hong Kong would be allowed a level of autonomy. Many in Hong Kong believe China has broken that commitment – especially when it comes to media freedoms and the process of choosing a chief executive, which is currently done by a committee tightly controlled by Beijing.

Amid the growing polarisation, Chan has staked out a centrist position, supporting pro-democracy activists but pushing them to take a measured, practical approach to negotiating with China.

And she has used her profile to drum up international support for the Hong Kongers’ campaign for democracy. Her recent visits to Britain and to Washington – where she saw vice-president Joe Biden, members of Congress and the state department – secured statements of support even as they drew angry retorts from Beijing.

Chan’s efforts reflect her approach to seemingly intractable problems: identify the best compromise deal possible, then push on every lever possible to achieve that goal.

In a recent interview, Chan talked about her appeals for international support, her assessment of Hong Kong’s fight for democratic rights and her vision for Hong Kong’s future. Here are condensed excerpts from that conversation:

How has Hong Kong’s future turned out differently from what you imagined in 1997?

“Of course, all of us had a bit of apprehension because we didn’t know what actually would happen after the handover. I personally put in a great deal of effort and time to sell the joint declaration, to secure international support and to tell Hong Kong people, ‘All will be well because we have all these promises.’

“I never in my wildest dream predicted 17 years after the handover that Hong Kong would be in this state. Nor did I foresee – and this is particularly disappointing – that all three parties to the joint declaration and the Basic Law [Hong Kong’s equivalent of a constitution] – Beijing, Britain, Hong Kong’s government – would all choose to walk away from their promises to the people of Hong Kong.”

Why have you focused in your proposals on a compromise that gives people in Hong Kong more say in the nominating process for the chief executive, rather than simply “one person, one vote”, as others have proposed?

“Our group, Hong Kong 2020, has listened to all the noise that has been made, particularly by the pro-Beijing forces in Hong Kong and by Beijing officials, and by the liaison office. One message is totally clear, they will not accept civil nomination [allowing voters themselves to nominate candidates for chief executive], because they claim this is a breach of the Basic Law.

“So whilst we dispute this, we say, ‘Let’s try and see whether we can’t broker a compromise solution.’ So we spent one year checking with the different aspects of the community, listening to their views, and we arrived at a set of proposals that are fully compliant with the Basic Law, with no civil nominations but a chance to broaden the representativeness of the nominating committee. Because this is what the Basic Law prescribes.

“But what does the government do? The government keeps telling us that there’s room for negotiation, let’s sit down and seriously talk. But every single compromise proposal – and it’s not just ours, there are several others – one after another, they have been shot down by the government. So where is the sincerity? Where is the commitment towards actually trying to broker a compromise?

“We all know the government is waiting for instructions from Beijing, which are expected sometime in August.”

Why should the international community care what happens in Hong Kong?

“The international community takes an interest in Hong Kong, if for nothing else than their own self-interest. Because they have investments here, they have nationals living here, they have a whole raft of bilateral agreements with Hong Kong, ranging from cooperation in law enforcement, preventing human trafficking, narcotics, protection of intellectual properties. All these have been concluded on the basis that there is a very distinct system in Hong Kong totally different from anything prevailing in mainland China.

“If the two systems go, surely Hong Kong will no longer be in [a] position to honour our treaty obligations.”

How do you see your role in Hong Kong these days? How can you best use that to the advantage of Hong Kong?

“I’ve never been interested in particularly carving out a role for myself. But the reason why I decided to adopt a higher profile starting in 2006 is because I saw things deteriorating very rapidly, both in terms of the government dragging its feet on democratic reforms, but even more importantly on the whole quality of governance.

“One of the things we prided ourselves on was the fact that Hong Kong’s civil servants were a genuine meritocracy. You didn’t have to resort to political patronage. But that’s what has happened ever since [former chief executive] CH Tung introduced the political appointment system in 2002 – which by the way is the reason why I decided to retire early, because I felt that that system was thoroughly, fundamentally flawed.

“Because the chief executive is not popularly elected, to concentrate the power to appoint the top posts within the Hong Kong government in one pair of hands, without having checks and balance, is asking for trouble.”

If the opportunity ever emerged, would you ever run for chief executive yourself?

“I’m a pragmatist above anything else. There are two reasons [I wouldn’t run]: One, I would not be acceptable to China; secondly, this job needs a younger person. I’m already 74.

“I’ll continue to do what I can to encourage people to speak up because it’s very important. I cannot guarantee that even if we speak up and express our concerns, that we will necessarily succeed. But if we remain silent and do nothing, we definitely will lose.”

This article appeared in the Guardian Weekly, which incorporates material from the Washington Post