The Slow Decline of Hong Kong: Fourth Year of Falling Stocks
Hong Kong has seen a continuous decline in stocks for the fourth consecutive year, with a drop of 13.8% in 2023 and a further 39.5% over the past four years, according to figures from the Hong Kong Stock Exchange.
Prospects for 2024 are not looking any brighter, as the decline seems to be confirming last year’s joke among Chinese netizens that Hong Kong has become “the ruins of an international financial center.”
“The company only fired 10% of its people last June, and there will be another wave of speculation next week. No one knows when it will be their turn,” said Mr. Xie, an investment banker, expressing his concern over the ongoing financial slowdown in Hong Kong. “Now there are no streets in Hong Kong.”
Major foreign banks have been witnessing waves of layoffs, and Chinese companies have not been able to escape the disaster. Despite being state-owned enterprises, they are also laying off employees due to the business being too bad, as stated by Mr. Huang, a senior executive at a major Chinese bank.
The decline in the stock market has had a cascading effect on the overall economy, dragging down the property market and consumer confidence, and the negative wealth effect has been pervasive. With the immigration wave causing a sharp decline in population, negative sentiment has overtaken the entire economy.
The root cause behind the bear market has been attributed to the “deterioration of the soil,” signifying that if Hong Kong changes from an international financial center to an ordinary city in China, foreign capital will leave Hong Kong’s financial market, and domestic companies will not raise funds in Hong Kong.
The sensitivity to political risks in the market is evident from recent reactions, with the Hang Seng Index taking a hit following the rediscovery of the highly controversial local legislation on Article 23 of the Basic Law last year.
The impact of Beijing’s “iron fist supervision” on the Hong Kong market has also been significant, with more than half of the companies listed in Hong Kong being mainland companies. The Chinese government’s controls, which have been considered as ideologies overriding economic reform, have directly impacted the Hong Kong market.
Economist Xu Jiajian does not agree with the “relics of an international financial center” theory and believes that Hong Kong still has a lot to do at the technical level to curb capital outflows, suggesting reforms to the “easy in and hard out” mechanism of the Hang Seng Index constituent stocks.
On the other hand, Li Zhaobo, a scholar at the Chinese University of Hong Kong, believes that exploring emerging markets might not be the answer and that Hong Kong needs to find its international positioning again to save the market from the current state of regulatory and prosperity.
As the decline in the stock market continues to affect the overall economy, the future of Hong Kong’s financial center remains uncertain, with various experts and analysts sharing different perspectives on possible ways forward.