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Wednesday, June 19, 2019, 17:03
Analysts: HK outlook remains positive despite recent protests
By Prime Sarmiento in Hong Kong
Wednesday, June 19, 2019, 17:03 By Prime Sarmiento in Hong Kong

This aerial photo taken on Dec 19, 2018 shows a general view of the skyline of Hong Kong. (DALE DE LA REY / AFP)

Hong Kong’s business and economy is seen to remain stable despite protests that disrupted the city’s main legal and administrative center recently, analysts said.

“I don’t think these protest actions (will have a big) impact on Hong Kong businesses,” said Iris Pang, Greater China economist for the Dutch investment bank ING.

Hong Kong has been the gateway through which much foreign investment and technology has entered China. It continues to play that role, particularly its financial sector.

Capital Economics

Pang said that most investors still believe in “the special role of Hong Kong as an international financial center that is close to the mainland”.

The Hong Kong government in March proposed amendments to plug legal loopholes that have prevented the extradition of fugitives between Hong Kong, Taiwan, Macao or the Chinese mainland.

ALSO READ: CE Carrie Lam apologizes for HK extradition bill controversy

The move was triggered by a 2018 murder case in which a 20-year-old pregnant Hong Kong woman was allegedly murdered by her 19-year-old boyfriend during a holiday in Taiwan.

Pang said past crises – including the 2003 Severe Acute Respiratory Syndrome epidemic and the 2014 “Occupy Central” movement – did not deter businesses from investing in Hong Kong. It is also unlikely, she said, that demonstrations against the proposed extradition law will scare investors away.

“It’s not as if the rule of law in Hong Kong will disappear overnight,” Richard Harris, chief executive of the Hong Kong-based consulting investment management firm Port Shelter Investment, said.

He said Hong Kong’s rule of law and its position as the gateway to the Chinese mainland has made it attractive to international investors.

The current protests will have a “minimal” impact on the economy and still expects the Hong Kong economy to grow by 1.5 percent this year, said Capital Economics.

“Hong Kong has been the gateway through which much foreign investment and technology has entered China. It continues to play that role, particularly its financial sector,” the London-based research firm said in its latest report.

According to the report, more than 60 percent of foreign direct investments that go to the Chinese mainland are still coursed through Hong Kong, making the city an important source of financing for Chinese companies. Hong Kong also serves as a jumping off point for Chinese companies to expand globally.

In the short term, however, analysts believe that the mass protest will impact some Hong Kong’s businesses.

Alicia Garcia Herrero, chief economist for Asia-Pacific at French investment bank Natixis, said the protest actions may keep away some tourists from Hong Kong for the moment.

READ MORE: Economists: Rising economic, political woes taking their toll

“Retail sales are expected to plummet (especially those from visitors) and the same is true for hospitality,” Herrero said.

Capital Economics said tourism and retail sectors, which account for 20 percent of Hong Kong’s GDP, might be affected by the protest actions but noted that “the immediate economic impact will be small”. It cited the 2014 ‘Occupy Central’ protest actions as “a useful benchmark”.

“They (2014 protest actions) brought gridlock to large parts of Hong Kong Island for over 70 days, but there was no noticeable effect on either retail sales or tourism arrivals,” Capital Economics noted.

But the Hong Kong government’s decision on June 15 to suspend the proposed amendments to the city’s extradition laws is expected to ease tensions, with Hong Kong returning to its business as usual mode.

Carie Li, an economist at OCBC Wing Hang Bank Ltd, said the suspension helped tame the concerns felt by both the consumers and investors over the protest actions.

“The government’s action might have helped to calm the sentiments at this moment,” Li said.

Harris of Port Shelter Investment said overall business confidence will be restored if this quiet mood will last in the next few months.

Li of OCBC added, “After suspending the (legislative debate over the) bill, government may hear more voices and revise the bill to make it more acceptable to the public.”

prime@chinadailyapac.com

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