Living with danger in 2016
Any investor brave or reckless enough to try bargain hunting in the Hong Kong stock market at the moment could be playing with fire.
Yes, we know. It’s so tempting to jump in, with stock prices having sunk so much in the past few months.
But before calling your broker, listen to the distant thunder of pessimism emanating from Wall Street and the City of London, and reverberating from market to market around the world.
In recent weeks, the New York stock market has tanked, and the slide in prices of some major tech stocks listed on the Nasdaq, including Apple, has sparked fears of a dot-com bust that could even be bigger in scale than that which hit investors in 2000.
On top of such ominous developments is the prognosis of doom by some eminent investment gurus, including Societe Generale strategist Albert Edwards, who predicted that the Western economies are about to be hit by a financial crisis that could short-circuit a US economic recovery and plunge the euro zone back into disarray.
It is also reported that analysts at the Royal Bank of Scotland have curtly advised investors to “sell everything” or risk being caught in an imminent global stock market crash. That sounds serious.
Sitting in Hong Kong and hearing all those reassurances from local government officials, investors may take a more sanguine view of the future. But they would feel more worried if they set their sights beyond the region which has benefited from the hard lessons learned from the 1997 Asian financial crisis.
The basket case of Brazil — once a shining example of everything good that an emerging economy could achieve — has the potential to trigger a global debt crisis with far-reaching repercussions. Russia, another emerging economy, is reeling under the dual pressure of slumping oil prices and US-led economic sanctions.
The problem this time is that the Chinese mainland, which is beset by its own set of issues, could not be expected to come to the rescue as it did in 2008. Meanwhile, central banks of the United States and European countries would find they have run out of ammunition to fight another financial crisis. They have already cut interest rates to near zero, leaving little room for further reductions.
To investors in Hong Kong’s externally oriented economy, 2016 is unfolding as a year of living dangerously. So, take care.
Investors in Hong Kong’s externally oriented economy must heed the distant thunder of pessimism emanating from Wall Street and the City of London.