Ron,
Spent the weekend in HK, doing some business with a fellow that's been doing business there for 20 years plus. He had some interesting observations. The first is that the attention paid to market indices (the "hanging on the Hang Seng" syndrome) can be extremely deceptive. While there is no doubt there has been a slowdown, business is still going on, and at a rather higher level than the markets would indicate. While the hedge funds and the HKMA are doing their thing, deal makers (and HK is built on the business deal, not speculation) are doing theirs, and making money at it.
Another observation is that while outsiders see the reduction in property values as "asset deflation", an item of terror, people in HK see it as manna from heaven. Rents are being renegotiated all over town, and long term residential and business leases are being signed at realistic prices. Families suddenly find themselves able to afford decent living space, or to allocate resources to other goals (the percentage of income spent on rent in HK has been phenomenal). This has led to a substantial increase in disposable income and business liquidity, and is actually encouraging consumer spending. My friend pointed out (and I suspect that he is right) that over the last 5 years the inflated cost of space has become a very real disincentive to business and a drag on the economy. The suffering in the property collapse is borne largely by the tycoons, and the beneficiaries are far more numerous. In HK the movement in property prices is widely viewed less as a collapse then as a restoration of sanity in property pricing.
Hardly a comprehensive summary of many hours of rambling conversation, but a view I thought might be of interest.
Steve |
