Hi Mark, Exchange of horror stories with others –
(a) My office landlord is pleading with my partnership to keep the upcoming rent decrease to 10% only. When we first moved in seven years ago, we paid the first landlord USD 3.16 per square feet per month, and the original landlord had then just bought the office space for USD 760 psf. Four years ago, at the onset of Asian Financial Crisis, the current landlord bought the office for USD 591 psf, and leasing to us for 2.95 psf per month. Now we are paying USD 2.12 psf per month, and in the new lease starting April 2002, we are asking USD 1.67 psf per month, effectively valuing the office at USD 309 psf.
(b) Reverse Dutch auctions on salary held by employers amongst their staff appears to be one way Hong Kong service companies are quickly adjusting to economic realities in the absence of devaluation against the USD. 10-18% decrease in ‘voluntary’ salary decrease appears to be the fashion.
(c) SEAsia resorts, with the exception of Thailand, appears to be 80% empty for the upcoming holiday seasons (Christmas, New Years, Chinese New Years) and regional airlines are cutting flight schedules and have put a good portion of their staff on reduced time for reduced pay, voluntary, of course.
(d) Shops are shutting down for good all up and down the streets I walk on, and several good restaurants in my neighboring fishing village have gone bust, with the rest discounting their menu to make ends meet, even as they offer better service and same quality food.
(e) There appears to be bargains on second hand BMW 8 series and Porsche of all series.
(f) There appears to be plenty of HK shares selling for apparently 5+% dividend yield now, and rising. More and more stocks are now yielding more than bank deposit interest, not by boosting dividends, but by sinking interest rate.
(g) Annual mortgage interest rate on monthly adjustable mortgages are now at 3.50%, will be adjusted to 3.25% within days, and the banks, though contractually able, have not yet started the true panic by demanding top-up cash from existing pool of negative asset mortgage borrowers to seal the hole punctured on the original valuation of asset vs. current valuation.
(h) Enough money manager pals and acquaintances all around the globe have taken NAV hit on the order of 30-50% and are hoping that the markets will be lifted enough to offer an opportunity for repenting to make me even more cautious than usual, trembling fingers tightly pressing against the trigger of a Redeemer Rocket Launcher, crouching deep within the den of bearish rocks.
(i) American expatriate friends who used to work in Asia are phoning back from USA enquiring of work opportunities, and American expatriates friends in Asia are moving back to the US to look for work to do. I would imagine either one or both groups are wrong about their premise on what is happening and assumptions about what may occur.
(j) All folks across all economic classes I know have cut back on spending, and many quite sharply, especially the better-off ones. My office staff will likely have their best compensation year ever, and yet they have cut spending, some out of concern due to what they see, and others out of need to help other extended family members through the coming time of uncertain duration.
(k) Even some long distance bus fairs are decreasing (HK to Shenzhen), due to increased competition and increased rider count.
Time for a message of hope, and an easy one for me to deliver because the number of times I have been asked by mainlanders, Hong Kong-ers, international clients, staff, and relations.
It is now easy to predict that Hong Kong is merely making a realistic imitation of Japan’s deflationary death rattle, losing its grip on economic vitality and sinking into the morass of time long forgotten, kept under by the weight of historic waves of adverse demographics, savage competition, and rigid structuring.
There appears to be a migration of Hong Kong working folks to the mainland, earning a slightly lower (for those who made the move) but rising mainland income, and an opposite migration of well-off mainland business types paying for the privilege of living under British Common Law as administered by Hong Kong’s self-interested elites (the wealthy, the civil service, and all professionals).
Meantime, Taiwan watches.
Fractal analyzed, geopolitics is always simple.
As long as Hong Kong is the freest Chinese city, and as its flexible people can keep taking risks within the protection of the inexpensively administered law, Hong Kong will be OK, just different, and be rewarded for that difference.
In time, I believe Shanghai will become as free as Hong Kong is now, and at that time, Hong Kong will do even better, as just another Chinese city, but one that is the financial capital of SEAsia and Southern China.
I hope, because I am an optimist at heart. But I may be very wrong, and so I keep watching. In any case, I can spin with the best of them.
Chugs, Jay |
