So what’s the big deal about all this cap­i­tal flight?

China Daily (Canada) - - HONG KONG -

If you’ve been fol­low­ing the ad­vice in this col­umn to sell ev­ery­thing, you’d be sit­ting on the ring­side watch­ing the stock mar­ket melt­down. But don’t feel smug about it. You should be wor­ry­ing about where to park your money other than keep­ing it in the bank to earn a mea­ger in­ter­est re­turn.

Ac­cord­ing to in­vest­ment gu­rus, even the US, which is boast­ing about its eco­nomic re­cov­ery, faces the dis­tinct pos­si­bil­ity of be­ing pulled into a vor­tex of global re­ces­sion by Europe and China.

In­deed, the op­ti­mism in the US, as pro­fessed by Pres­i­dent Barack Obama in his last State of the Union ad­dress, is based just on the in­crease in em­ploy­ment while eco­nomic growth has re­mained ane­mic.

Al­though miss­ing its 2015 growth tar­get by just a whisker, the Chi­nese main­land’s econ­omy con­tin­ues to be trou­bled by ex­ces­sive ca­pac­ity, a highly lever­aged prop­erty sec­tor and bal­loon­ing debt.

Mean­while, Europe and Ja­pan are fac­ing the real threat of de­fla­tion de­spite stim­u­la­tion ef­forts by their re­spec­tive gov­ern­ments.

If you’re naive enough to be­lieve what the lo­cal me­dia has been say­ing in the past week, you’d think Hong Kong’s econ­omy is fac­ing im­mi­nent col­lapse with its cur­rency go­ing down the tube. Of course, noth­ing is fur­ther from the truth.

It’s noth­ing like what hap­pened dur­ing the 1997 Asian fi­nan­cial cri­sis. This time, the pres­sure on the ex­change rate of the Hong Kong dol­lar has stemmed mainly from the out­flow of hot money that had flooded into Hong Kong in the past few years. The linked ex­change rate sys­tem is not un­der at­tack as it was in 1997, and con­fi­dence in the SAR govern­ment’s re­solve and ca­pa­bil­ity to de­fend the lo­cal cur­rency is not in doubt. Some eco­nomic an­a­lysts said the cap­i­tal out­flow was trig­gered by the need for for­eign in­vestors to cover their po­si­tions in over­seas mar­kets which have also taken a beat­ing.

Money flows in and out of Hong Kong all the time. It’s no big deal.

In­stead of switch­ing to US dol­lar de­posits, you can save some costs and trou­ble by just leav­ing your sav­ings in Hong Kong. And do your­self a fa­vor, stop read­ing those lo­cal me­dia re­ports that ob­vi­ously be­lieve in the old adage — bad news sells news­pa­pers.

Money flows in and out of Hong Kong all the time. There is no cause for panic.

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