This is strangely similar to the new normal in which Hong Kong is back to business, but with a different economy. dominated Depending on the fate of China's economy.
Brave talk about Hong Kong's return will only materialize once China recovers from this period of extraordinary downturn. You may not be able to wait long. Markets tend to move before there are any signs of green shoots in the real economy.
Shanghai and Hong Kong markets suffered from exposure to bad news in the first three weeks of this year, but quickly reversed, with the former posting 2.2% by the end of the quarter.Hong Kong fell 12% big autumn in january But by the end of the quarter, it was up 11% from that low.
this column called the bottom Hong Kong and Chinese stock markets in February. This was neither a guess nor a hunch, but rather an analysis of how Chinese authorities were at risk of stimulating a struggling economy. Just last month, International Monetary Fund Managing Director Kristalina Georgieva bluntly told top-level decision makers at the China Development Forum that this is the state of the Chinese economy. “Fork in the road”. To achieve growth, it is necessary to choose between past policies and “market-friendly reforms''.
Investors will need to decide which of the two highways Chinese authorities will use. Past results seem uncertain. The need for growth is more urgent.
A series of small announcements over the past six months have led to a significant injection of liquidity into the economy.President Xi Jinping protests against Americans Beijing CEO By presenting the case for more inward investment.
The People's Bank of China (PBOC) instructed to restart For the first time in 20 years, government bonds are being traded, rather than relying solely on re-lending tools and bank lines of credit to inject liquidity.The People's Bank may also issue “Very long-term” bonds – Probably over a period of 30-50 years and issued on only the last three special occasions – to sustain debt-ridden real estate and local government sectors.
Fearing damage to the yuan, authorities have taken a number of small steps rather than taking big steps all at once. But a weaker currency improves exports, which strengthens the currency, a J-curve that takes time and patience. China's economic stimulus is showing signs of steady recovery.last weekend manufacturing figures Despite the continued slump in the real estate sector, it showed expansion after five consecutive months of contraction.
The weakness in the Chinese market contrasts with the unexpected strength of major stock markets in the first quarter.of Artificial intelligence boom It was supported by confident spending, low unemployment and good business growth funded by post-COVID-19 liquidity.
Despite the backdrop of two wars, the US S&P 500 rose 10.2% in the quarter, its best start to the year in five years. Japan and Europe's benchmark stock indexes rose 20.6% and 12.4%, respectively, supported by the strong dollar.
Don't confuse a booming stock market with the actual health of the economy
At only the slightest hint of reflation by the Japanese, Chinese authorities boosted the market It has increased about 40% since February 2021, and has finally surpassed the all-time high line for the first time in 35 years. By comparison, the Shanghai and Hong Kong markets are at the bottom, with major indexes still at about half their all-time highs.There is room for recovery in the Chinese market, even as global markets appear to be worried about another rally. Interest level.
Hong Kong is one of the options in the Chinese market, and if China does well, our market will score even better. Stock prices are an indicator of confidence. They see through their own assumptions and won't settle for just a nice word from their coach or an inspiring halftime speech.
China wants to stabilize Hong Kong's economy and has begun to reverse policy. Hong Kong is returning to its original role of being a level playing field for business, with decisions made by businessmen. Large crowds will be cheering on their favorite teams this weekend. But there is no louder cheer than the one for the Chinese team in Hong Kong.
Dr. Richard Harris is the Chief Executive Officer of Port Shelter Investments, a veteran investment manager and author, and a rugby player in his 61st season.
