Put away your think­ing cap for the time be­ing, just re­lax!

China Daily (Hong Kong) - - HK | BUSINESS - PETER LIANG

The best ad­vice for in­vestors in these in­trigu­ing times is to take an early Christ­mas break. No­body is ex­pect­ing the mar­ket to crash, but some of the lat­est de­vel­op­ments that can have a di­rect im­pact on the mar­ket are look­ing scarier by the day.

Since the US Fed­eral Re­serve raised in­ter­est rates last Fri­day, the Hong Kong stock mar­ket has been mired in a state of list­less­ness, with in­vestors spooked by the prospect of big­ger and more fre­quent rate hikes next year than ear­lier ex­pected. Even banks that are sup­posed to ben­e­fit from higher in­ter­est rates have taken a beat­ing.

In­vestors are wor­ried that global banks, in­clud­ing HSBC and Stan­dard Char­tered, could be hit by Italy’s loom­ing fi­nan­cial cri­sis that could desta­bi­lize the euro zone, which is al­ready trou­bled by stag­nant eco­nomic growth. More threat­en­ing is the rise of euro-skep­tic pop­ulist po­lit­i­cal par­ties in some ma­jor EU economies, in­clud­ing France, Ger­many, Hol­land and Italy.

Closer to home, the bond­mar­ket scan­dal on the Chi­nese main­land has raised the ques­tion whether it’s just an iso­lated in­ci­dent or the tip of the ice­berg. The dis­rup­tion it caused has al­ready cre­ated prob­lems for main­land en­ter­prises in rais­ing much needed long-term cap­i­tal, re­sult­ing in pos­si­ble tight­en­ing of liq­uid­ity that could wreak havoc on stocks.

Just ahead of Christ­mas, in­vest­ment houses will be mak­ing fore­casts for the com­ing year. No one in Hong Kong is known to have kept a tally of the ac­cu­racy of these yearend pro­jec­tions. Re­cent stud­ies in the US have shown that as­sess­ments by an­a­lysts there have been mostly off the mark — by a wide mar­gin in some cases.

While many in­vest­ment gu­rus are still bullish about the US stock mar­ket’s out­look, some an­a­lysts have noted that the eu­pho­ria sur­round­ing US Pres­i­dent-elect Don­ald Trump’s pro­fessed eco­nomic poli­cies is wan­ing. The ef­fec­tive­ness of low­er­ing taxes and in­creas­ing gov­ern­ment spend­ing to stim­u­late eco­nomic growth is not nec­es­sar­ily as­sured.

As for Hong Kong, the lo­cal econ­omy is not show­ing any sign of pick­ing up from the slow­down in the past few years. Be­sides, the threat of a sud­den large out­flow of cap­i­tal to the US is real and the de­cline in ex­ports and re­tail con­tin­ues. Most wor­ri­some for in­vestors is the pos­si­bil­ity of rapid in­ter­e­strate hikes to de­fend the cur­rency peg and staunch cap­i­tal out­flow.

The best thing an in­vestor can do now is to leave all these trou­bling thoughts be­hind. Just sit back and re­lax on a beach else­where sip­ping a cool drink!

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