Along with the rush of assets to global economies comes, of course, concerns that the money is coming a little too quickly. Hong Kong is the latest fast-growing nation to contend with these worries.
Those fears aren’t unfounded:
- The International Monetary Fund is already warning Hong Kong of a re-run of the real estate crash it went through in the late 90s and early 2000s.The Wall Street Journal reports that warnings aside, Hong Kong’s economy is humming; the IMF predicts GDP growth of 6.75% this year and 5% to 5.5% in 2011.
- If Hong Kong doesn’t cool growth, consumer prices could likely rise at a 5% clip by the end of next year.
- Housing prices have shot up 20% over the past two years, raising fears of a bubble, a feeling many Americans are none-too familiar with.
- Consumer spending is growing quickly, too: retail sales surged 21.6% in October from a year ago, Sophie Leoung for Bloomberg reports. It was the biggest gain in eight months.
Fiscal stimulus measures in the United States may have affected the well-being of Hong Kong’s economy, too. According to M&C, the move to pump hundreds of billions of dollars into our economy could put pressure on inflation in Hong Kong, when they least need it.
iShares MSCI Hong Kong Index Fund (NYSEArca: EWH) has fared decently this year, up 20.8% in the time span. It’s more than 7% above its 200-day, but it could be in store for some pain if Hong Kong doesn’t keep growth in check. If you’re in this fund, be sure you have a plan for getting out when and if the time comes.
Tisha Guerrero contributed to this article.