For investors in Hong Kong, crisis creates opportunities
Undeniably, Hong Kong has seen more bullish times in its investment markets, however, as the old adage goes, “crisis creates opportunities,” and for financial investors at present, there are many ways to view the situation and potentially profit. These beliefs are often the negative view of Hong Kong currently depicted in the world media.
As Founder and CEO of The Hong Kong Corporate Services Group, Ken Deayton, has lived and worked in Hong Kong for over 40 years.(In fact, it’s thought he has worked here in finance longer than any other Australian.) He’s seen many peaks and troughs of investment cycles and is well versed in recognising patterns. “I believe in riding it out, remembering that investment is sometimes a long term game with the cycle of recession, recovery, growth and decline. Savvy investors keep abreast of new opportunities. The current situation poses the classic case of ‘buy from the pessimists and sell to the optimists.”’
Deayton believes Hong Kong is- and always will be – about dynamic investment. “There are ups and downs, but over many decades, I’ve seen Hong Kong bounce back in extraordinary ways in extraordinary times. For astute investors, it’s about recognising opportunity.” he says.
Even when it seems that storms can’t subside, the day after Hong Kong Chief Executive Carrie Lam withdrew the Extradition bill, The South China Morning Post reported “Investors reacted favourably to the news, with the benchmark Hang Seng Index rising 995 points, or 3.9 per cent, to 26,523 on Wednesday, its biggest gain in 10 months.”
Similarly, as Hong Kong was coming out of the 2003 SARS epidemic, which had seen the Hong Kong tourism sector virtually grind to a halt – both the financial markets and property taking a battering- the front cover of The South China Morning Post reported the highest number of property transactions since before the 1997 Handover and the Asian Dollar crisis.
The Hong Kong investors’ mindset seems to be to sit on their hands for only so long in challenging times, and then take action and move forward. It can be argued that SARS was a fillip to the property sector; Hong Kong “can do” at its best.
Weighing in on Hong Kong bricks and mortar, Deayton added: “It is more than possible that property prices in particular will come down and this will be a big boon to many. This could be the silver lining in a dark cloud as many get to realise the dream of home ownership for the first time, and prior investors can consolidate their portfolios.”
Property aside, because Hong Kong is technically in recession with two consecutive quarters of negative growth, it is considered a good time to buy in many sectors. As Benjamin Graham, financial mentor to Warren Buffet, is quoted to have said. “The market is a voting machine, but in the long run it is a weighing machine.”
And weighing things up, it could be argued that Hong Kong is in the process of rising like a phoenix from the ashes as it historically has done. Apart from the property market, there is the potential for resilience in certain sectors such as shipping and lower priced restaurant chains, the latter having performed well in previous recession as the luxury dining sector simultaneously came off the boil.
On September the 4th, The South China Morning Post ran the Headline “Extradition Bill’s withdrawal ‘is first step’ in getting Hong Kong back to business.”
The article reported: “Hong Kong’s business community welcomed Chief Executive Carrie Lam Cheng Yuet-ngor’s decision on Wednesday to withdraw her administration’s proposed extradition bill, with industry groups calling it the first step to restoring confidence and the city’s international reputation.
After three months of protests against the bill, Lam said the proposed legislation would be dropped completely
The article included quotes such as these:
‘’Business chambers welcomed the decision as a breakthrough ”
‘’Joe Chau Kwok-ing, president of the Hong Kong General Chamber of Small and Medium Business, also said that withdrawing the bill was a first step to showing the administration’s goodwill in resolving the political crisis.’’
‘’Stewart Leung Chi-kin, executive committee chairman of the Real Estate Developers Association of Hong Kong, said the announcement was a ‘good start.’”
As one of the world’s largest financial hubs, much of the corporate sector is holding its ground.
Most corporates are taking a watch and wait approach and many don’t see any major implications for the corporate world at this stage.
Said Jacinta Reddan, CEO of Austcham, “Hong Kong is incredibly resilient. It bounced back through concerns prior to the Handover. It survived and thrived post Asian financial crisis- as well as the GFC- and it bounced back after SARS.
“We are all hoping for a peaceful resolution and for Hong Kong to continue to be an extraordinary, vibrant, thriving global financial centre,” she added.
While protestors in Hong Kong cited the Bruce Lee quote: “Be like water,” perhaps it is would seem investors in Hong Kong are more like bamboo- flexible and resilient in in all conditions, and able to weather the storms.
THE PROS OF HONG KONG INVESTMENT CONTINUE TO OUTWEIGH THE CONS
* Hong Kong has one of the world’s biggest share markets. The Hang Seng Index has one of the biggest market capitalisations in the world.
* It is the freemarket gateway to China and a respected Global Financial Hub
* It is the Asian Financial Hub where many international businesses have their regional headquarters
* Population of 7.4million and fiscal reserves over HK$1 trillion
* Free economy with no trade barriers
* No sales tax, no import duty, no tariffs
* Simple and low tax system which maximises profits
* Central location and good infrastructure
* Stable and independent legal system; Hong Kong’s rule of law is a western style legal system where the courts are independent
* New opportunities afoot with Australian Free Trade Agreement in March -tariffs on all goods originating from Hong Kong and Australia eliminated and other positive implications.