Hong Kong's Outlook Improves Despite Growth Risks in China
Even as debate rages as to whether China's economy is heading for a hard landing, the economic outlook for this particular corner of the country looks surprisingly positive.
Domestic demand in Hong Kong is on the rise, and Chinese tourists are also pumping cash into local shops. An end to years of crippling deflation looks closer than ever. And a successful property auction this week signaled a strong vote of confidence in the real-estate sector, a pillar of Hong Kong's economy.
All this is reason to remember that while Hong Kong might be part of China, from an investor's perspective, they are very different places to park your cash.
"The two sides are increasingly integrated, but they are still two very separate systems," said Dong Tao, chief economist at CSFB in Hong Kong.
Close Trade Ties
Few doubt a hard landing for China's economy would have a big impact on Hong Kong, which relies on China for most of its trade. And Hong Kong's fortunes are clearly tied to China, both economically and politically. Already, big divisions among Hong Kong lawmakers over constitutional changes rejected by Beijing last month "could undermine the administration's mandate to enact tax and expenditure measures," Brian Coulton, head of Asian sovereign research at Fitch Ratings, wrote in a report this week.
Still, he upgraded Hong Kong's outlook to stable from negative, citing easing deflation and "sharply improved prospects for economic growth."
Also, a Chinese slowdown wouldn't necessarily stop the flow of Chinese capital to Hong Kong's economy. The number of visitors from mainland China to Hong Kong rose 47% in March from a year earlier, and was more than double levels in March 2002, thanks to China's decision to ease restrictions on such travel last year. Hong Kong's government expects the city to receive about 11.5 million tourists from China this year.
Tourism Spending Forecast
Spending by tourists in Hong Kong is likely to rise to $11 billion by 2011 from slightly more than US$6 billion in 2006, according to a report by MasterCard International released this week.
"We have no doubt that a China slowdown will have an impact on the Hong Kong economy," said Mr. Tao, "but you have to ask yourself, will the mainland tourists stop coming to Hong Kong? It's unlikely."
Yiping Huang and Don Hanna, economists at Citigroup in Hong Kong, in a report argue too that even if China's economy slows, "the growth impact on the rest of the world looks manageable" -- and that includes Hong Kong, which they concede has the highest exposure to its neighbor's economy.
Hong Kong consumer confidence reached its second-highest level of the past six years during the three months ended in mid-April, according to the latest results of the ACNielsen Consumer Confidence Index. Domestic demand is now the key economic driver in Hong Kong, contributing more to real gross domestic product than trade, according to data from the Hong Kong government and CSFB.
Some economists expect an end to Hong Kong's five-year bout with deflation. Declines in Hong Kong's consumer-price index have shrunk steadily since the third quarter of 2003. In April, consumer prices fell 1.5% from the same period last year, easing from a 2.1% year-to-year drop in March, according to official data.
Easing deflation will take some of the sting away from an expected rise in interest rates, as a likely tightening of monetary policy by the U.S. Federal Reserve is expected to push Hong Kong rates higher, thanks to the city's currency peg.
Land Auction
That means a rebound in the property market won't necessarily flag as rates trend higher. CSFB, which expects U.S. interest rates to rise two percentage points over the next tightening cycle, says Hong Kong property would still be more affordable than during the past three decades. Currently, Hong Kong's real prime rate (the rate of borrowing adjusted for inflation) is about 7.1%, compared with a peak of 15.4% in 1999.
Optimism about Hong Kong's real-estate sector gained support Tuesday, when Hong Kong held its first government land auction since September 2002. While the property market has been showing signs of peaking after an eight-month rally drove home prices up about 40%, the city's biggest developers showed up in force to bid for two plots of residential land -- and placed winning bids much higher than many analysts had predicted.
The participation of the city's largest property companies, including winner Cheung Kong (Holdings), the flagship property firm of tycoon Li Ka-shing, has done as much to boost confidence as did the higher-than-expected bids. "This will probably have a meaningful impact on the market, at least in the coming weeks," Mr. Tao said.
大陆经济风险无损香港前景
在围绕中国经济是否走向硬著陆的争论日益升温之际，香港这一中国特区的经济前景却是格外光明。
香港的本地需求正在上升，而且大陆游客也蜂拥来港购物。多年来的通货紧缩局面似乎行将结束。本周成功进行的房地产拍卖传递出人们对香港支柱产业房地产业的有力信心。
这些都提醒人们注意，虽然香港是中国的一部分，但从一个投资者的角度而言，香港与大陆是截然不同的投资场所。
瑞士信贷第一波士顿(CSFB)驻香港首席经济师陶冬说，大陆和香港正在加强融合，但它们的体制仍大相径庭。
几乎没有人怀疑，大陆经济的硬著陆将对严重依赖大陆贸易的香港产生较大影响。显而易见，无论是经济上还是政治上，香港的命运都和大陆息息相关。惠誉国际评级(Fitch Ratings)亚洲主权研究主管库腾(Brian Coulton)在本周的一份报告中称，香港立法委员在修改基本法问题上的较大分歧可能会损害港府制定税收和支出措施的权利。
不过，他将香港前景评级由负面上调至稳定，称通货紧缩局面有所缓解，而且经济增长前景明显改善。
此外，大陆经济的放缓不一定会阻止大陆资金流入香港。受大陆去年放开对港旅游限制推动，3月份大陆游客访港数量较上年同期增长47%，是2002年3月的两倍多。香港政府预计，今年接待的大陆游客将达到1,150万人左右。
万事达卡国际组织(MasterCard International)本周发布的一份报告显示，到2006年游客在香港的支出有望达到60亿美元以上，到2011年将进一步增至110亿美元。
陶冬说，诚然，大陆经济放缓将对香港经济产生影响，但大陆游客会停止来港吗？这是不可能的。
花旗集团(Citigroup)驻香港的经济学家黄益平和Don Hanna在报告中也指出，即使大陆经济放缓，它对香港等全球其他地区经济增长的影响也是可控的。他们承认，香港所受影响最大。
AC尼尔森(ACNielsen)消费者信心指数最新结果显示，在截至4月中旬的3个月中，香港消费者信心达到过去6年来的第二高水平。港府和瑞士信贷第一波士顿的数据表明，本地需求目前成为香港经济的主要推动力，对实际本地生产总值的贡献率超过贸易。
一些经济学家预计，香港将结束持续5年的通货紧缩局面。自从2003年第三季度以来，香港消费物价指数的跌幅一直稳步收缩。官方数据显示，4月份，消费物价指数较去年同期下降1.5%，低于3月份的2.1%。
通货紧缩局面的缓解将削弱预期中利率上涨所带来的不利影响。由于香港实行钉住美元的联系汇率制，预计美国联邦储备委员会(Federal Reserve)紧缩货币政策将会带动香港利率上扬。
这意味著利率趋升不一定会抑制房地产市场的反弹势头。瑞士信贷第一波士顿称，与过去30年的水平相比，香港地产价格仍将是可以接受的。它预计，在下一轮紧缩周期中，美国利率将上升两个百分点。目前，香港实际最优惠利率（经通货膨胀因素调整的借款利率）约为7.1%，大大低于1999年15.4%的最高点。
对香港房地产业的乐观情绪周二得到印证，当日香港举行了2002年9月以来首次政府土地拍卖。在连续8个月的旺势推动住宅价格攀升40%之后，香港房地产市场已经时而显露出触顶迹象。但尽管如此，当地大发展商仍争相竞购两块住宅地皮，中标价格大大超过许多分析师先前的预期。
与此同时，此次中标者──李嘉诚(Li Ka-shing)旗帜地产企业长江实业(Cheung Kong (Holdings))以及多家香港大型房地产公司的参与同样有助于提振市场信心。陶冬说，这很可能对市场产生重要影响，至少在未来几周是这样。
