Finance leader defends Hong Kong stock market after US economist claims it is ‘over’

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Finance leader defends Hong Kong stock market after US economist claims it is ‘over’

The chairperson of Hong Kong’s bourse operator has defended the city’s stock market after a US economist wrote in the Financial Times that the Hong Kong market was “over”.

Outgoing chair of Hong Kong Exchanges and Clearing (HKEX) Laura Cha was speaking to reporters after a ceremony on Wednesday to ring in the first trading day of the Lunar New Year.

Laura Cha speaks to reporters after a Lunar New Year ceremony on February 14, 2024. Photo: Screenshot via RTHK.

“I understand that people have seen the views of a few stakeholders who hold a pessimistic view towards the Hong Kong market, and that Hong Kong is ‘over’. I fully disagree,” Cha told reporters in Cantonese.

She was referring to remarks made by former chair of Morgan Stanley Asia Stephen Roach in a Financial Times opinion article titled: “It pains me to say Hong Kong is over”.

Cha said that the recent underperformance of the Hong Kong market was due to macroeconomic factors and a sluggish Chinese economy.

“I think when the macro situation changes, the investors will come back, and I’m sure that we will have a more lively market,” she said, speaking English. “Our fundamentals are strong, and the factors that have made Hong Kong great as a financial sector [haven’t] changed.”

HKEX on February 2, 2024. Photo: Kyle Lam/HKFP.
HKEX on February 2, 2024. Photo: Kyle Lam/HKFP. Credit: KYLE_LAM.Y.K

In the Financial Times article published Monday, Roach wrote: “A city I once called home and have cherished as a bastion of dynamism has had the world’s worst-performing major stock market over the past quarter of a century.”

The Hang Seng index last month dropped below the 15,000-point mark, marking a 15-month low and a return to levels not seen since the city’s handover from Britain to mainland China in 1997.

The benchmark index closed at 15,943 points on Thursday.

‘Hong Kong is over’

The city’s “demise,” Roach said in the Financial Times, was a confluence of three factors: domestic politics, mainland China’s economy, and global developments.

“The wheels came off in 2019-20 when, under [then-chief executive] Carrie Lam, the Hong Kong leadership made the mistake of proposing an extradition arrangement with China that sparked massive pro-democracy demonstrations,” Roach said.

Stephen Roach at the World Economic Forum in Davos, Switzerland, January 28, 2009. Photo: Wikimedia Commons.
Stephen Roach at the World Economic Forum in Davos, Switzerland, January 28, 2009. Photo: Wikimedia Commons.

Beijing’s response, which was to unilaterally impose national security legislation in Hong Kong, “shredded any remaining semblance of local political autonomy,” he added.

“The Chinese economy has hit a wall,” Roach wrote, also pointing to the US-China rivalry, which he described as having “gone from bad to worse,” with “Hong Kong trapped in the crossfire.”

“Moreover, America’s ‘friendshoring’ campaign has… driven a wedge between Hong Kong and many of its largest Asian trading partners,” Roach said. “The stock market is likely to remain in the mire until we see convincing economic measures from Beijing.”

The Yale economist’s remarks come a little more than two weeks before Hong Kong’s finance chief Paul Chan delivers the government’s budget proposals on February 28 for the 2024-25 fiscal year.

Chan, at the Wednesday ceremony, said the mainland Chinese economy was “stable and improving.”

“It’s very challenging to forecast what will happen in one week, or in the next day… but I’m very confident that in the medium to long term, the characteristic of Hong Kong … will allow it to thrive as an international financial centre,” said HKEX CEO Nicolas Aguzin.

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