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Hong Kong Rebound?
The Hang Seng index has been on the rise, the property rental market has stabilized, and local commentary has turned positive on the back of China stimulus hopes. Is this the beginning of a trend economic recovery?
Unfortunately, it's too early to talk about a rebound. Mainland travel to Hong Kong has not recovered, local retail and services activity is still decimated, and of course the bigger story in the background is the ongoing property bust, with the sector weighed down by valuations and debt levels for a good while to come.
In addition, there's the fact that China has yet to undertake anything resembling meaningful stimulus at home - and even if the authorities step up the pace this year, it may be a long wait before any impact makes it to Hong Kong given the ever-more-evident closing of the mainland economy.
This doesn't necessarily mean a sell call on equities, however. The Chinese A share market still has significant rally potential given record-low rates and yields and record-high liquidity, and any upside there could ignite a further rise in Hong Kong valuations as well.
Hong Kong Rebound? (PDF)
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