<<Since RE and the stock market are the two biggest assets for the people of HK, some opined that the crash of these two categories is in essence a devaluation of the HK$.>>
RE and the stock market are a huge source of paper wealth, but only for a small percentage of the population. Look at the reverberations of the decline in value, in one very small case:
The friend I talked to just moved his business to a larger space, getting a long term lease at an attractive price. He saved enough to add new hardware and hire new employees - he's in advertising, primarily on the internet, and demand is sufficient to justify the addition.
Who loses? The owner of the building. Who gains? My friend, the people he hired, the people who sold him the hardware, the clients to whom he can offer more attractive prices, etc., etc. Multiply this by thousands of small and medium service enterprises, and you get the point.
The RE bubble was a fundamental (and as you point out, artificial) distortion that directed resources from active, productive, activity to passive collection (your comment in a later post about factories closing because it's more profitable to rent the space out is a classic example). While it helped a few, it imposed a huge burden on business. Anyone who shops in Asia knows that HK is no longer much of a bargain. Why? Primarily the huge cost of retail floor space, which is inevitably passed on to customers.
Bursting the bubble will cause a lot of pain to a few that can afford it (having raked in huge profits over the last few years), but I think it will ultimately improve the business climate and generate earnings across a wider spectrum.
Business deals in HK, as always, mean trade. Seems to me (from a pretty superficial look) that the manufacturing has largely moved to the mainland, but the deals are still done in HK. China moves a great deal in and a great deal out, and money is being made. I did talk briefly with a fellow selling telecommunications equipment into the mainland, and his news was entirely positive. I didn't do any kind of comprehensive research, but the town certainly didn't seem flat. Restaurants and nightspots were full, stores were hopping, life was going on, crisis or not.
Steve |
