After taking a beating in its export industries last year, Hong Kong, along with its related exchange traded fund, could be set to produce some solid numbers. However, the numbers may really only reflect the fact that the economy is stabilizing.
The University of Hong Kong estimates growth of 4% to 5% for Hong Kong’s economy in 2010, with a projected growth of 5% in the first quarter, according to China View. Alan Siu, executive director of the university’s Hong Kong Institute of Economics and Business Strategy, says that Hong Kong’s economy will only rebound back to its levels before the crisis struck in 2008.
Siu also cautions that the rebound in the first quarter of this year as compared to the same quarter of last year should not be construed as a sign of robust growth, but rather as evidence of a gradual recovery.
Hong Kong’s economy relies heavily on its export industry. Exports plummeted 12.1% in 2009, but is expected to make a swift reversal of 10.8% in the first quarter of 2010. Unemployment is projected to drop to 5.0% in the first quarter and CPI inflation is estimated to increase to 0.7% in the first quarter.
Real estate broker CB Richard Ellis Group Inc. (CBG) believes that Hong Kong’s luxury home prices could rise 20% this year as the economy grows and supply of new homes remains low, reports Chia-Peck Wong for Bloomberg. The property market is being supported by a rising employment rate, low mortgage costs, near-zero interest rates and increased demand from mainland China.
However, the Hong Kong Central Bank warns of possible “sharp corrections” in asset prices if fund flows reverse. The government has taken measures to reduce fund flows like raising minimum down payment requirements and suspending mortgage insurance for rental properties in an attempt to stop a property bubble. [Is an asset bubble forming in Hong Kong?]
CBRE Group calculated that luxury home prices in Hong Kong surged 51% last year.
- iShares MSCI Hong Kong Index (EWH)