It looks well-placed to benefit from the shift in world economic power towards the East
By DON LEE 28 November 2008
The jetliners serving the financial hub of Hong Kong arrive with more empty seats these days, and lately it’s easier to get a table at Harlan’s oyster bar in the International Finance Centre.
Across the bay in Kowloon, a sales clerk at Italy Fur & Fashion idles away the afternoon. ‘Stocks, stocks, stocks!’ she hollers, when asked why there were no customers, despite steep discounts on rack after rack of merchandise.
Hong Kong’s stock market has fallen by more than 50 per cent this year, and analysts expect the economic slump to continue through at least next year. The Chinese territory is in recession, yet plenty of people there seem to be taking things in stride.
One reason is that Hong Kong has been through worse before; the last downturn lasted seven long years, from the Asian financial crisis in 1997 to the Sars epidemic in 2003. The other is a belief among some people, in and outside of Hong Kong, that the world economic order is shifting, from the West to the East, pushed by China’s rapid growth and now the sub-prime financial contagion.
With the US and Europe worse off than others, there’s little doubt that more capital and talent will swing towards Asia. And few places look as well-positioned as Hong Kong to take advantage of that.
In the financial world, ‘they will all tell you that there are three great listening posts: London, New York and Hong Kong’, says Donald Straszheim, vice-chairman of Newport Beach, California-based Roth Capital Partners, and former global chief economist at Merrill Lynch in New York.
While lacking the critical mass of London and New York, he adds, ‘Hong Kong is increasingly becoming globally important.’ Hong Kong has long been Asia’s most laissez-faire capitalist economy, with easy access for foreign investors, relatively low taxes and little government intervention. The latest financial crisis has Western governments promising tougher regulation of banks and trading houses, but people there don’t think the clampdown in Hong Kong will be as hard. That could give it a competitive edge.
‘This time, because of the turmoil, people want government to do more, but not to the extreme of the US, where the government takes control of everything,’ says Man Cheuk Fei, chief editor of Hong Kong Economic Journal. ‘Hong Kong senior officials argue that this is a golden opportunity to build one or two investment banks ... They can compete with the US in the future.’
Paul Donovan, global economist for UBS in London, says people who run hedge funds and other investment pools indeed might be attracted by Hong Kong’s reputation for a light regulatory touch. But, he adds, that could work against Hong Kong if big investors who have suffered losses seek the safety of a tightly regulated, more transparent environment.
‘It could go either way,’ he says.
At the moment, Mr. Donovan and some other analysts see Hong Kong in the same vein as Singapore, a regional financial hub they view as not quite up to international snuff.
Some of that has to do with Hong Kong’s size: a population of seven million with a GDP of US$207.2 billion in 2007. But economists also say Hong Kong lags its rivals in an array of factors, including quality of life (notably air pollution), a smaller finance-industry labour pool, and a lack of certain developed markets such as commodities trading.
Yet, as Asia drives more of the global growth and wealth, the talent is likely to follow. There won’t be as many opportunities in the world’s dominant financial centres.
On Wall Street and the City, London’s financial district, workers carting boxes from their offices have become familiar scenes. New York’s comptroller recently forecast that 165,000 jobs would be lost over the next two years, including 35,000 in the financial services sector.
Most international financial companies have branches in Hong Kong, and they’ve had their share of layoffs in recent weeks, too. Hong Kong’s banks also sold toxic mortgage-backed securities and exotic derivative products to investors, but they were on a smaller scale than their New York and London counterparts. Lenders in Hong Kong were generally more cautious about extending credit to risky borrowers.
This is one reason why Hong Kong’s banks remain well-capitalised.
Alisha Ma, a 42-year-old mother of two, is emblematic of the optimistic spirit that seems to persist there in spite of the financial downturn.
Looking to China
Ms. Ma recently was laid off from her job as a private banker with Credit Suisse. But two days later, she had lined up interviews with two other banks in the city.
Ms. Ma is also hatching plans to start a consulting business catering to rich Chinese seeking to go abroad and invest their wealth. The number of Chinese millionaires jumped 20 per cent last year, an increase second only to India, according to a report by Merrill Lynch and Capgemini. The Boston Consulting Group estimates China has 391,000 millionaires.
‘The money has to go somewhere,’ Ms Ma says.
Thanks to China’s booming economy, Hong Kong in 2006 surpassed New York in the total volume of initial public offerings. As much as 70 per cent of Hong Kong’s economic growth now depends on the mainland, says Donald Lam, assistant general manager at Hang Seng Bank, one of this city’s largest.
Not surprising, Beijing’s Nov 9 announcement of a US$586 billion economic stimulus package was applauded in Hong Kong. Many people hope it will rev up China’s economy, which has been losing steam because of weakening exports and a slumping real estate market. That has contributed to job losses in Hong Kong’s shipping and logistics industry, as well as at retailers and offices that support thousands of factories across the border in Guangdong province.
Hong Kong’s official jobless rate, 3.4 per cent in the third quarter, is expected to rise significantly over the coming months, although still nothing like 2003 when unemployment rose above 8 per cent. David Dodwell, chief executive of the public policy enterprise Strategic Access, says Hong Kong is better off today because of the hard lessons it learned during those lean years, when the property market tumbled and wobbly lenders and over-extended borrowers all suffered.
Today, lenders say, mortgage loans make up no more than 70 per cent of the value of properties. The government, which owns all the land in Hong Kong, helped keep things on even keel by maintaining tight supplies that limited overbuilding and supported prices.
Dodwell, a British native who has lived in Hong Kong for 20 years, says it should come out stronger from the global economic turmoil, which he believes ‘will be the tipping point marking the end of US hegemonic power’. China ‘is going to be an increasingly powerful locomotive for the global economy’, he says.
For decades, Hong Kong thrived as an economic gateway to China, says Richard Vuylsteke, president of the American Chamber of Commerce in Hong Kong. But in the future, he sees thousands of mainland-Chinese companies looking to Hong Kong to help them take their products and investments abroad.
‘It’ll be uniquely positioned to be a gateway out of China,’ he says. -- LAT-WP
1 comment:
Hong Kong Takes Downturn in its Stride
It looks well-placed to benefit from the shift in world economic power towards the East
By DON LEE
28 November 2008
The jetliners serving the financial hub of Hong Kong arrive with more empty seats these days, and lately it’s easier to get a table at Harlan’s oyster bar in the International Finance Centre.
Across the bay in Kowloon, a sales clerk at Italy Fur & Fashion idles away the afternoon. ‘Stocks, stocks, stocks!’ she hollers, when asked why there were no customers, despite steep discounts on rack after rack of merchandise.
Hong Kong’s stock market has fallen by more than 50 per cent this year, and analysts expect the economic slump to continue through at least next year. The Chinese territory is in recession, yet plenty of people there seem to be taking things in stride.
One reason is that Hong Kong has been through worse before; the last downturn lasted seven long years, from the Asian financial crisis in 1997 to the Sars epidemic in 2003. The other is a belief among some people, in and outside of Hong Kong, that the world economic order is shifting, from the West to the East, pushed by China’s rapid growth and now the sub-prime financial contagion.
With the US and Europe worse off than others, there’s little doubt that more capital and talent will swing towards Asia. And few places look as well-positioned as Hong Kong to take advantage of that.
In the financial world, ‘they will all tell you that there are three great listening posts: London, New York and Hong Kong’, says Donald Straszheim, vice-chairman of Newport Beach, California-based Roth Capital Partners, and former global chief economist at Merrill Lynch in New York.
While lacking the critical mass of London and New York, he adds, ‘Hong Kong is increasingly becoming globally important.’ Hong Kong has long been Asia’s most laissez-faire capitalist economy, with easy access for foreign investors, relatively low taxes and little government intervention. The latest financial crisis has Western governments promising tougher regulation of banks and trading houses, but people there don’t think the clampdown in Hong Kong will be as hard. That could give it a competitive edge.
‘This time, because of the turmoil, people want government to do more, but not to the extreme of the US, where the government takes control of everything,’ says Man Cheuk Fei, chief editor of Hong Kong Economic Journal. ‘Hong Kong senior officials argue that this is a golden opportunity to build one or two investment banks ... They can compete with the US in the future.’
Paul Donovan, global economist for UBS in London, says people who run hedge funds and other investment pools indeed might be attracted by Hong Kong’s reputation for a light regulatory touch. But, he adds, that could work against Hong Kong if big investors who have suffered losses seek the safety of a tightly regulated, more transparent environment.
‘It could go either way,’ he says.
At the moment, Mr. Donovan and some other analysts see Hong Kong in the same vein as Singapore, a regional financial hub they view as not quite up to international snuff.
Some of that has to do with Hong Kong’s size: a population of seven million with a GDP of US$207.2 billion in 2007. But economists also say Hong Kong lags its rivals in an array of factors, including quality of life (notably air pollution), a smaller finance-industry labour pool, and a lack of certain developed markets such as commodities trading.
Yet, as Asia drives more of the global growth and wealth, the talent is likely to follow. There won’t be as many opportunities in the world’s dominant financial centres.
On Wall Street and the City, London’s financial district, workers carting boxes from their offices have become familiar scenes. New York’s comptroller recently forecast that 165,000 jobs would be lost over the next two years, including 35,000 in the financial services sector.
Most international financial companies have branches in Hong Kong, and they’ve had their share of layoffs in recent weeks, too. Hong Kong’s banks also sold toxic mortgage-backed securities and exotic derivative products to investors, but they were on a smaller scale than their New York and London counterparts. Lenders in Hong Kong were generally more cautious about extending credit to risky borrowers.
This is one reason why Hong Kong’s banks remain well-capitalised.
Alisha Ma, a 42-year-old mother of two, is emblematic of the optimistic spirit that seems to persist there in spite of the financial downturn.
Looking to China
Ms. Ma recently was laid off from her job as a private banker with Credit Suisse. But two days later, she had lined up interviews with two other banks in the city.
Ms. Ma is also hatching plans to start a consulting business catering to rich Chinese seeking to go abroad and invest their wealth. The number of Chinese millionaires jumped 20 per cent last year, an increase second only to India, according to a report by Merrill Lynch and Capgemini. The Boston Consulting Group estimates China has 391,000 millionaires.
‘The money has to go somewhere,’ Ms Ma says.
Thanks to China’s booming economy, Hong Kong in 2006 surpassed New York in the total volume of initial public offerings. As much as 70 per cent of Hong Kong’s economic growth now depends on the mainland, says Donald Lam, assistant general manager at Hang Seng Bank, one of this city’s largest.
Not surprising, Beijing’s Nov 9 announcement of a US$586 billion economic stimulus package was applauded in Hong Kong. Many people hope it will rev up China’s economy, which has been losing steam because of weakening exports and a slumping real estate market. That has contributed to job losses in Hong Kong’s shipping and logistics industry, as well as at retailers and offices that support thousands of factories across the border in Guangdong province.
Hong Kong’s official jobless rate, 3.4 per cent in the third quarter, is expected to rise significantly over the coming months, although still nothing like 2003 when unemployment rose above 8 per cent. David Dodwell, chief executive of the public policy enterprise Strategic Access, says Hong Kong is better off today because of the hard lessons it learned during those lean years, when the property market tumbled and wobbly lenders and over-extended borrowers all suffered.
Today, lenders say, mortgage loans make up no more than 70 per cent of the value of properties. The government, which owns all the land in Hong Kong, helped keep things on even keel by maintaining tight supplies that limited overbuilding and supported prices.
Dodwell, a British native who has lived in Hong Kong for 20 years, says it should come out stronger from the global economic turmoil, which he believes ‘will be the tipping point marking the end of US hegemonic power’. China ‘is going to be an increasingly powerful locomotive for the global economy’, he says.
For decades, Hong Kong thrived as an economic gateway to China, says Richard Vuylsteke, president of the American Chamber of Commerce in Hong Kong. But in the future, he sees thousands of mainland-Chinese companies looking to Hong Kong to help them take their products and investments abroad.
‘It’ll be uniquely positioned to be a gateway out of China,’ he says. -- LAT-WP
Post a Comment