DENISE TSANG AND ALLEN AU-YEUNG
PUBLISHED : Monday, 21 December, 2015, 1:49am
UPDATED : Monday, 21 December, 2015, 3:56am
Financial Secretary John Tsang. Photo: Jonathan Wong
Financial Secretary John Tsang Chun-wah says it is hard to predict how the Fed’s decision to raise the US interest rate last week will affect Hong Kong, but the city’s financial system is solid enough to overcome any volatile capital flow.
In his weekly blog , Tsang says Hong Kong, which is vulnerable to overseas economic situations, should closely monitor whether asset prices are volatile and, if so, whether this will hurt appetite for shopping and investment.
The US raised its interest rate a quarter percentage point last week, the first increase in a decade, sparking what Tsang described as “worries or concern” on the city’s economic prospects.
He cited that Hong Kong saw mixed reactions to three rounds of interest rate increases in 1994-1995; 1999-2000 and 2004-2006.
The Hang Seng benchmark index slipped in the six months after the rate rise in 1994-1995 but not the other round in 1999-2000, which means the city’s economic health does not necessarily turn sour as a result, he said.
“This shows the reactions of higher interest rates to economic and financial markets are hard to predict,” he said. “The US interest rate is only one factor affecting the global economy.”
Nevertheless, Hong Kong faces the risk of capital outflow after an accumulated US$130 billion of capital poured in the city after the US and Europe launched quantitative easing programmes to soothe their economic wounds following the global financial crisis in 2008.
Secretary for Financial Services and Treasury, Ceajer Chan Ka-keung, warned yesterday that investors should be cautious about risk management and be prepared for any financial downturn as the city is enveloped in more uncertainty.
“In spite of the US interest rate rise, Europe central banks further relax their monetary policies, which causes more volatility to global financial markets, currency and capital flow,” he said. “Together with the mainland’s economic slump, the interest rate rise brings challenges to Hong Kong.” But he and Tsang believed the city’s solid financial system would be able to counter any outflow.
Meanwhile, speaking at RTHK’s City Forum yesterday, Centaline Property Agency co-founder Shih Wing-ching said the interest rate rise should have little substantive impact on Hong Kong’s property market for now.
“The Fed’s current policy is relatively transparent. There are had been discussions of raising the interest rate for almost a year. already. So the market has already digested its impact,” said Shih.
“I think the rise will have little substantive impact for now. But, psychologically, I can see investors becoming increasingly pessimistic about the market later.”
http://m.scmp.com/news/hong-kong/economy/article/1893606/hong-kong-solid-enough-cope-volatile-capital-flow-after-us
