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