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Not everyone is celebrating things in Greater China's capital markets these days.  Photo: huaxi

Translated by Andrew Vanburen from a Chinese-language piece in China Securities Journal

HONG KONG IS CONSISTENTLY rated the world's most competitive economy and the most open place to do business.

That being said, competitiveness ends at the marketplace's door, and the metropolis is still highly dependent on occurings elsewhere for its tremendous wealth.

Hong Kong’s benchmark Hang Seng Index has dipped below its moving one-year average, a red flag for investors and analysts alike. Are we destined to set new lows this half?

Unfortunately for those with capital already tied up in the market – or others anxiously kicking tires on the sidelines – the consensus is that the month of September will offer little in the way of visibility or stability, and is likely to dance wildly around a central maypole... or September-pole in this case.

So how does the rest of the world look at this juncture?

The world’s largest economy – the United States of America – was recently graced with the ultimate blessing from the Federal Reserve (other than another back-breaking stimulus of course).

The Fed said in a regular report that the US economy is showing signs of continuous and steady – if not rather slow – growth.

The second quarter GDP expanded at a year-on-year rate of 1.7%.

But because there is no barnstorming growth in store, it is quite likely that figures might fall below the consensus forecast for the US GDP expansion.

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Hong Kong shares haven't had a great 2012 so far



And that of course opens the door, wide as can be, to economic and political justification for yet another stimulus package from Washington – which would be termed QE3.

The reason it takes on political (as well as economic) considerations at this point is because the leadership of the world’s top economy is about to face a general election, and incumbent Barack Obama has to finely manage the appearance of an economy in expansion phase, and not just wait until a possible reelection to sort things out.

However, the US Federal Reserve Chairman Ben Bernanke is also playing a game of chicken with both the EU and Beijing to see who will pull the trigger first.

Therefore, Hong Kong capital market investors may want to take a step back before throwing in their chips.

That’s because it’s not entirely clear at this point who will blink first and open their pursestrings.

At stake is a huge potential upside to stock markets worldwide.

But equally important is the fact that all three economies in question – the US, the EU and China – are all enduring slow growth now and down the road.

So opening up coffers – or borrowing from abroad to supplement said coffers – is not necessarily an equally acceptable option for all parties involved.

Therefore, it could be said that given the interconnectedness of the global markets – though separated by vast bodies of water – it really doesn’t matter from Hong Kong’s point of view who blinks first.

Because whether Beijing, Brussels or the Beltway – when one pulls the trigger, the others will almost certainly follow in kind to protect their turf.

In the end, Hong Kong capital market investors will win out with more money in the pockets of traders and consumers – no matter where they may hang their hats.

See also:

PROSPERITY REIT: Seeking Right Stuff In Hong Kong

CHINA NEW TOWN Inks Landmark Beijing Fund Deal

SING HOLDINGS: Stock Price Is No Reason For Shareholders To Sing

HOUSE MONEY: Top 500 PRC Developers Assets Up 50% To 5 Trillion Yuan


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