Dennis
Mind if I comment.
The Hong Kong (and to a certain extent, Singapore, except that the stock market in Singapore had merely rosed from ~1200 to 2100 between 1988 and Jul-1997, whilst the Hong Kong market has gone up from 3000 to 15000+ in the same period) situation is reminiscent of the situation in Japan 6 to 7 years back (TSE 38000+, property values in Tokyo itself is equivalent to that of the whole of California).
Property loans in Hong Kong is approx 47% of total loans. 3 months back, a 1600 square ft apartment in 'Repulse bay' ('Mid-levels' apartments would be more expensive) will sell for US$3m and rent out for US$11000 a month. The new government in Hong Kong has announced that it will be releasing vast amounts of Government land in the coming years for residential purposes. At the same time, the HKMA is bent on preserving the fixed exchange rate (1US$ = HKD7.8) which has caused interest rates to soar. In addition, Hong Kong is becoming more expensive (for exports) vis-a-vis the rest of the Asian markets (trade is the lifeline of Hong Kong). The effects of a crash of the Hong Kong stockmarket affects markets in this region since there are many cross-holdings, and it will also affect the London stockmarket to a certain extent. The fear now is whether New York will take this as an 'excuse' to tumble.
The devaluation of the South East Asian currencies, except for Singapore, is properly overdone! The exchange rate for Singapore to the US$ is now almost 1.6 and may have some more downside.
To quote from World Bank international economics adviser, Amar Battacharaya:
"The exposure of East Asia banks to property lending is higher than in any other region in the world". He had singled out Hong Kong and Singapore as being especially vulnerable in this respect ... a "potentially vicious cycle" had developed linking the banking system with the macroeconomy via an asset boom.
Guess there is more to come, the only bright spot on the SES being CREAF!
Regards |
