2024 RT Amination Banner.gif

China Daily

News> Business> Content
Friday, December 27, 2019, 14:48
Making wise choices when the going is rough
By Edith Lu
Friday, December 27, 2019, 14:48 By Edith Lu

Employees are under pressure to tighten their belts and spend wisely as the economy slows

Pedestrians keep a tab on their phones outside a bank in Hong Kong's bustling business district of Central on Dec 26, 2019. (PROVIDED TO CHINA DAILY)

Martin Lam Ho, 25, is a bit on edge. He has been told the stark news that the hedge fund he has been working for more than a year will close in a matter of months.

Although the company's impending demise has more to do with his boss' personal matters than the beleaguered Hong Kong economy, Lam's in a quandary.

"There aren't that many job opportunities these days as it's a slack season for recruitment," he admits. "Besides, the ongoing social unrest in the city and the recession we're in have made it harder for me to find a satisfying job."

ALSO READ: New trend: HK people spend holiday in Guangdong

Lam has started possibly a grim hunt for a job, talking to various headhunters, but says there's still enough time for him to do so - his company will pull down the shutters in March next year, and he will not tell his family the bad news until he has found a new employer.

According to official data released last week, Hong Kong's unemployment rate had risen to 3.2 percent by the end of last month - the highest level since 2017.

According to official data released last week, Hong Kong's unemployment rate had risen to 3.2 percent by the end of last month - the highest level since 2017

The overall labor market also showed signs of deterioration, with the seasonally adjusted unemployment rate rising from 3.1 percent between August and October to 3.2 percent during September through November.

Secretary for Labour and Welfare Law Chi-kwong has warned that the local labor market will come under even greater pressure in the near term if the economy continues to weaken.

Pay raises for Hong Kong employees are still on the table, but fairly low - averaging just more than 1 percent after taking inflation into account - a report by consulting firm ECA International shows.

Lee Quane, regional director of Asia at ECA International, said even such a low forecast for 2020 may be too optimistic with the more than six months of social unrest still roiling the city.

Adding to the gloom, the Chinese mainland's economy is slowing down. It's forecast that next year's growth could slip below 6 percent as the world's second-largest economy braces for uncertainties created by the Sino-US trade tensions, according to UBS Wealth Management.

Under these circumstances, Hong Kong residents need to adjust their personal finances or tighten their belts to prepare for the worst. For young people, whose careers may still be in their infancy, they could be in a bind as to how to cope with the challenges ahead. Lifestyles built on high consumption or lavishness may have to be abandoned. Forcing oneself to save up for a rainy day may have to be the order of the day, or they may have to rack their brains to make wise investment choices to give themselves extra armor.

On a shoestring budget

As part of a strategy to help keep his head above the water in lean times ahead, Lam is resolved to cut down on his monthly expenditures on consumption and save up more. He's taking advice from financial gurus to cut his coat according to his cloth and set aside some money he could hope to live on for at least half a year and help maintain basic expenses once he loses his job.

"You've to save up a certain sum of money so that you can use it to invest. The earlier you start saving, the earlier you'll have an investment sense," advised Chris Leung Chung-ho, a lecturer in finance at the Chinese University of Hong Kong.

For investment, he suggested diversifying one's investment portfolio to stay resilient. People could reduce their overall investment amount and focus more on foreign equity markets as Hong Kong stocks are likely to continue underperforming other Asian markets.

"It's also a wise choice putting your money in some sectors and markets that aren't so sensitive to global economic cycles," urged Leung. Some emerging markets, such as India, could be a good choice, as these markets are driven more by domestic and regional growth factors.

As interest rates may come down, the attractiveness of income strategy and stocks that offer solid dividend yields has again become more apparent, said Jason Yu, head of multi-asset product for North Asia at Schroders, an asset manager.

The volatile equity market is also a source of concern for some equity funds under the Mandatory Provident Fund - Hong Kong's compulsory pension plan. The MPF recorded gains in November, while equity funds dipped 0.17 percent, according to wealth management consultant Gain Miles.

Funds in the United States and European equity category rose 3.66 percent and 2.44 percent, respectively, while Hong Kong equity funds lost 1.49 percent last month.

"Whether it's an economic upturn or downturn, employees should put some of their money into the MPF regularly," said David Wong Yau-kar, chairman of the MPF Schemes Authority.

"The scheme is made up of funds and the essence of the funds is to spread out the investment risk, so it suits those with a weak sense of investment compared with other financial products," he said.

Saving up wisely

Wong suggested that investors choose funds that offer handsome long-term returns, such as some with mixed assets, primarily a mix of bonds and equities.

If young, novice investors are at a loss as to how to manage their MPF accounts, they could follow the default investment strategy (DIS) which is a ready-made investment solution comprising two mixed assets funds, Wong said. The Core Accumulation Fund - one of the two funds under the DIS - rose 1.22 percent in November.

"For young people, things will never get too bad if they give it a thought early and plan for the future," said Leung.

However, some others may still take things in stride and give little thought to what's in store for the future.

Echo Chen, 26, resorted to a "naked resignation" - quitting her last job at an accounting firm in the middle of this year before being offered new employment.

READ MORE: Rioters give HK 'cold' Christmas holidays

"At that time, I found the environment at my workplace too much to bear. Thus, I chose to leave without taking into account the impact of the macro economy at all," she explained.

Chen relied on her savings for the following five months and, after having spent all that, she began job hunting again. She was lucky enough to be offered one after sending her resume to dozens of companies.

"It was risky and I was nervous at times but, sometimes, you just cannot think of too many things," Chen shrugged. "But now I have a fixed income again, and I'll try to save up some money, at leastss for the rent."


edithlu@chinadailyhk.com

Share this story

CHINA DAILY
HONG KONG NEWS
OPEN
Please click in the upper right corner to open it in your browser !