The Light Behind the Gloom in Hong Kong Positive Trends in Financials and Property

Over the past six months while Hong Kong was mired in mass demonstrations, a key point of discussion was how all this chaos would play out in terms of its negative effects on the territory’s financial and real estate markets. Most people think that it would probably deal a death blow to market confidence from both local and overseas investors and major players would stay away; the stock market would take a huge hit while luxury property market sales would plummet. But taking a closer look at the financial and high-end property markets revealed that the expected economic dark cloud hasn’t actually materialised and in fact, things are looking up.

You would hardly think that admist vandalism against mainland businesses that a major global player from China would turn to Hong Kong to seek billions in funds from investors. But that is exactly what Alibaba did. They raised HK$100 billion in 2019, making Hong Kong’s biggest IPO. According to a recent letter to potential investors from Daniel Zhang, chairman at Alibaba—"hong Kong is one of the world's most important financial centres. During this time of ongoing change, we continue to believe that the future of Hong Kong remains bright." A vote of confidence like that will surely reflect strong confidence in local financial markets and will also help provide a strong fillip to reassure the local property market. Obviously, investors will be heartened that a major powerhouse like Alibaba is willing take the risk and list its shares in Hong Kong. If that’s the case, then the city's long-standing identity as a financial hub must still be intact. Then there’s Weijian Shan, often referred to as the Asian king of private equities, who pointed out that the Hong Kong Stock Exchange was actually a "bright spot" amidst these recessionary times and chaotic developments over the past half year.

In fact, Hong Kong has long been home to a myriad of global financial firms and experienced experts in the finance field managing vast sums of capital exchange across Asia Pacific. The close-knit network of personal and professional relationships that allow for the sharing of know-how and expertise is a hallmark of Hong Kong. Moreover, Beijing needs Hong Kong’s special global financial ties, and its favoured trading status to save millions on transactions. That’s why it’s not likely to abandon or ignore the territory’s financial well-being. Also, while China can use its currency, the yuan, in trade and investment deals, it avoids doing so with financial transactions. China’s home-grown cross-border interbank payment system is incompatible with other payment systems.

In fact, over the past several months the Hang Seng Index has stabilised its performance and even shown signs of improvement, an additional reflection of the long-term confidence in the territory. If the stock market and recent listing activity doesn’t convince you that it’s not all gloom and doom, then a glance at property trends should at least go some way toward dispelling the eschatological mindset that has permeated many in Hong Kong.

Following the policy address in October last year, there has been a 47% increase in overall sales for September and October 2019, the highest figure since the start of the demonstrations. Properties selling in the HK$5 to 10 million range made up the lion’s share of those transactions; properties over HK$10 million also showed renewed activity rising 8%. This is to be expected as more expensive homes require more time to finalise sales transactions.

Since the start of the demonstrations, the media have dutifully followed the old journalistic adage of “If it bleeds it leads.” So, it’s no wonder that a sense of doom has permeated the territory. But given all this activity, if a giant conglomerate such as Alibaba is willing to list in Hong Kong, that should bode well and serve as validation for the city's overall positive prospects.