HK investors, it seems, will have to buckle up for a rough ride ahead
For Hong Kong investors who think that 2018 was a bad year for stocks, they may have to brace themselves for something even worse in 2019.
It’s all about the deteriorating economic environment around us. Topping their worries is, of course, the economic state of the Chinese mainland where the economy is taking a beating from multiple fronts.
While mainland officials have remained upbeat about their ability to maintain economic growth at above 6 percent, economists in Hong Kong and elsewhere are wondering if the central government’s economic stimuli are as effective as they were before.
A major concern is the expectation of a further slowing down in the manufacturing sector as indicated by the fall in imports, which consist mainly of raw materials and manufacturing intermediary components and parts. Fears of layoffs and wage cuts are seen to have depressed consumer expenditure on a wide range of non-essential goods, including cars and phones.
The effectiveness of the government’s measures to shore up the economy mainly by injecting fresh liquidity into the system is questioned by economists who noted that many enterprises are taking out new loans to pay back old ones instead of investing in new plants and machinery.
The proposed tax cuts would certainly help boost corporate earnings. But share buyback with tax savings to prop up prices is not a common practice in mainland management.
The prospects of other major world economies look even more downbeat. Europe is on the verge of slipping into a recession, prompting European Union financial officials to call for the firing up of the monetary loosening mechanism. Germany’s growth engine is sputtering and France is beset by internal strife. The UK is mired in the Brexit standoff which is posing a threat to political stability.
Even the US, which has seen the strongest and most enduring growth in recent years, is viewed by some bankers and economists as facing headwinds down the road. Despite the robust labor market and rising wages, some economists are sowing fears of a recession round the corner.
Then, there’s the specter of an escalating trade war between the US and the Chinese mainland. Recent reports noted that the latest face-to-face talks between the two sides in Beijing have produced little, if any, progress as the deadline for the temporary truce draws near.