Hong Kong Country Risk Report Q2 2016 - New Market Research Report

From: Fast Market Research, Inc.
Published: Wed Feb 17 2016

Hong Kong

Core Views

Hong Kong's economic narrowly beat consensus expectations in Q315 despite myriad domestic and external drags on growth. However, the 2.3% print confirms our expectations for the city-state's economic growth to cool in line with a stumbling mainland economy, and corroborates our full-year real GDP growth forecast of 2.5% for 2015. Tepid external conditions and the rising propensity for a domestic property price correction will continue to weigh on the economy in 2016, and we have therefore marginally downgraded our real GDP forecast to 2.3% for 2016, from 2.5% previously.

Hong Kong's residential property market is at a tipping point, and a correction appears ready to take hold in 2016 as supply constraints fade and interest rates rise. At the same time, affordability is extremely stretched relative to median household incomes, and we believe that the confluence of these factors spell a difficult outlook for the property sector over the coming years. This will hit both construction activity as well as the financial services sector in the country. That said, we do not foresee an acute correction taking hold in 2016, and instead expect moderate price declines.

Full Report Details at
- http://www.fastmr.com/prod/1118923_hong_kong_country_risk_report.aspx?afid=302

Hong Kong's quadrennial legislative elections in September are unlikely to produce a significantly different government than the one currently in power in the city-state, as the failure to achieve universal suffrage has left intact a hybrid-electoral system that favours the pro-Beijing camp. Meanwhile, Beijing's grip on the city-state will continue to strengthen over the coming years as the Xi administration maintains a politically conservative line.

Key Risks

The potential for a financial or economic crisis in China continues to be by far the biggest risk factor for Hong Kong. Such a crisis would hit Hong Kong hard given its deep trade and financial linkages to the mainland, and the high proportion that financial and trade services comprise of Hong Kong's economy. We also continue to see a tail risk of a Hong Kong dollar devaluation (taking the form of an adjustment to the currency's peg versus the US dollar) as volatility in the Chinese yuan ramps up. Hong Kong's increasingly deep ties with the mainland could make it difficult for policymakers to maintain the peg versus the US dollar should the CNY experience an acute sell-off, thereby putting downwards pressure on the decades-old peg.

Assess your risk exposure in Hong Kong with our 100% independent forecasts assessing the pace and stability of this key market. Backed by trusted data from BMI Research's 52 million data point economic forecast model, this report will allow you to measure political, economic, business environment and operational risks in Hong Kong with confidence.

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Contact Name: Bill Thompson
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