Ques­tion of con­fi­dence

China Daily (Canada) - - FRONT PAGE -

Stock an­a­lysts and in­vestors pre­dict that an ex­pected rise in the share prices of Hong Kong’s three ma­jor banks, which posted bullish re­sults last week, will lift the lo­cal stock mar­ket out of the dol­drums.

This is en­tirely pos­si­ble be­cause of the three lenders’ sub­stan­tial com­bined weight­ing in the bench­mark Hang Seng In­dex. But the cru­cial ques­tion is whether their first-half re­sults are strong enough to in­spire in­vestor con­fi­dence in the out­look for the sec­ond half of the year.

Prob­a­bly, the banks will do fine in the com­ing months due to the strong in­come stream from their lo­cal oper­a­tions. Loan de­mand, es­pe­cially from the prop­erty sec­tor, is ex­pected to stay strong de­spite the specter of an in­ter­est-rate hike later this year.

There are clear in­di­ca­tions that the US Fed­eral Re­serve will raise in­ter­est rates as early as Septem­ber. But the in­creases are ex­pected to be mild and pro­gres­sive. They are not ex­pected to cre­ate a shock that could throw bor­row­ers off bal­ance.

Un­der the linked ex­change rate ar­range­ment, Hong Kong is ex­pected to fol­low the US in rais­ing in­ter­est rates. This could add pres­sure on prop­erty prices, which have soared to what are widely seen as un­sus­tain­able lev­els.

But the im­pact of mod­er­ate rate in­creases is not ex­pected to pose an im­me­di­ate threat to the bank­ing sys­tem or the prop­erty mar­ket that are deemed to be ad­e­quately shielded by cau­tion­ary mea­sures im­posed ear­lier by the cen­tral bank. Brisk sales and the short turn­around time of de­vel­op­ment projects have kept the av­er­age gear­ing of the ma­jor de­vel­op­ers at man­age­able lev­els.

The big­gest down­side is the un­cer­tain out­look of the Chi­nese main­land econ­omy and the er­ratic per­for­mance of the Chi­nese stock mar­ket. On top of that is the specter of a tech startup bust.

No­body ex­pects an eco­nomic slump on the main­land. But the un­cer­tain­ties sur­round­ing the pos­si­ble im­pact of the slow­down on as­set value and the ser­vic­ing of some lo­cal gov­ern­ment debts are weigh­ing heav­ily on the minds of many in­vestors. De­spite gov­ern­ment ef­forts to sta­bi­lize share prices, many in­vestors are still jit­tery as the highly geared stock mar­ket is go­ing through the painful process of un­rav­el­ing the tan­gled web of mar­gin trade and over-val­u­a­tion.

Hong Kong is al­ready feel­ing the rip­ple ef­fects of the main­land stock mar­ket malaise. The au­thor is a se­nior fi­nan­cial editor at China Daily Hong Kong Edi­tion. hongliang@chi­nadai­lyhk.com

Newspapers in English

Newspapers from China

© PressReader. All rights reserved.