Entering text into the input field will update the search result below

Reports Of Hong Kong's Death Seem Greatly Exaggerated


  • Latest big news in Hong Kong is the new national security law being drafted in Beijing, which would outlaw acts considered "treason, secession, sedition, or subversion" in Hong Kong.
  • Critics of this measure have called this the end of the "one country, two systems" model that has made Hong Kong Asia's leading financial hub.
  • Although the US has already started responding, and increased the level of uncertainty, Hong Kong's status as a financial center is far from binary.
  • Hong Kong handled the COVID-19 pandemic better than most other cities of its size, with only 4 deaths so far, and retains many other difficult-to-replace features.
  • Chinese investors seem to be viewing this as a buying opportunity.  This article provides a list of specific events and risks to watch out for.
  • Looking for a helping hand in the market? Members of Long Run Income get exclusive ideas and guidance to navigate any climate. Get started today »

The big news in Hong Kong in late May 2020 was an extension of national security laws by the National People's Congress in Beijing to outlaw certain activities in the former British colony. An earlier draft of what this would cover refers to Article 23 of the Hong Kong Basic Law (effectively the city's mini-constitution), which requires the city to "enact laws on its own to prohibit any act of treason, secession, sedition, subversion against the Central People's Government...". This move seems clearly aimed at last year's increasingly violent anti-government protests, which seem to be re-starting after months of social distancing during the COVID-19 outbreak, during which an impressively low number of only 4 people have died in Hong Kong so far.

Plenty has been written about this topic by many sources, and while I am not a Basic Law constitutional scholar nor a political analyst, I do aim to highlight some of the main points investors may want to watch out for in the coming weeks, months, years, and decades. In particular, the view that Hong Kong was London last month and became a suburb of Shanghai the next month is unrealistically binary, and there are many details worth watching in this story.

ETFs Affected By Hong Kong

The main ETF tracking Hong Kong-based companies is the iShares MSCI Hong Kong ETF (NYSEARCA:EWH). Additionally, the iShares China Large-Cap ETF (NYSEARCA:FXI) should also be considered a "Hong Kong ETF" as 100% of FXI's holdings are HK-listed mainland Chinese companies or HK-listed futures tracking an index of them. US investors might draw the analogy of having one ETF holding only NYSE-listed companies headquartered in New York City, and a separate ETF of NYSE-listed companies headquartered outside New York City, with some additional differences described under the "One Country, Two Systems" section below. The often quoted Hang Seng

Are you looking to improve the income generating ability of your portfolio, not just this year, but for decades to come?  Members of Long Run Income get my regular short form analysis, "dividend check" reviews on dozens of quality stocks, screens, model portfolio updates, and ideas like these that can significantly increase your investment income over time, as well as access to our members-only chat room for discussing your questions.  See more of my latest ideas with your free trial to Long Run Income

This article was written by

Tariq Dennison profile picture

Tariq Dennison, runs an RIA focused on international clients and portfolios, applying his on-the-ground experience as an expat investing in diverse foreign markets. Tariq is the author of the book "Invest Outside the Box" and soon-to-be-released "10 Ways To Invest." He lives in Switzerland, and has worked in Finland, Canada, the UK, Hong Kong, and Singapore.

Tariq is the leader of the investing group The Expat Portfolio where he helps members invest internationally with greater clarity and confidence. Features of the service include: Frequent, short, and focused analysis, access to his watchlist and dashboard, guides to specific foreign markets, and direct access to Tariq and his community in chat for discussion and questions. Learn more.

Analyst’s Disclosure: I am/we are long HKXCY, VWO, IEMG, SBUX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (7)

HK money and international money are fleeing as Chinese money coming in. I think the story of Ant Group and what happened to Jack Ma show you the way how business is run when the Chinese communist party is in rule. By the way, be careful if you want to be bearish on HK market or Chinese market while you are in HK, because you may be arrested under the "national security law" if you do so. If you think I'm making this up, you do not understand the CCP well enough or you are viewing it through your "western lens". 47 candidates in HK running in primary election were arrested for subverting the country. They are still in custody, most of them denied bail by the HK Courts - yes, HK Courts. To be fair, you wrote this article before all these happened. About "greater bay area", I don't even know where to start. Let's just say it's an idea to use fake HK entities (companies/universities) to acquire foreign technologies. As for HK markets, good luck! Everyone is pulling their money out lol.
Hong Kong no longer has the autonomy like before. Obviously you can't 'feel it' now but this is how power works. They push the bottom line bit by bit until they gain absolute control. Like the crack in a dam, they have reached a breaking point. It is only wise to treat Hong Kong like mainland China or you will be making the same mistake the West has made 40 years ago.
Tariq Dennison profile picture
Hong Kong never had "autonomy" (especially not under British rule), and that's exactly what I think most Anglophone critics missed if they pretended otherwise. There's a reason it's called a "Special Administrative Region" rather than anything with the word "Autonomous".

As I tried to describe in the article, greater integration with the Greater Bay Area and mainland is something many businesses welcome, but in many practical ways, I see important differences that are likely to persist even beyond 2047. It's the binary view that misses all the nuances that I think is most mistaken.
Tariq Dennison profile picture
Also worth reading are the comments of our local AmCham president Tara Joseph published in the SCMP over the weekend: www.scmp.com/...
nicholas davout profile picture
In a post-Trumpian America there will never be the stomach to go toe-to-toe against the Chinese
monstrosity so its a certainty that HK will be submerged under the mainland tyranny at some point. Anyone in HK with any brains knows that and is moving out asap with their assets.In retrospect the ending of the British Empire was the death knell for Asia & Africa as the US short term presidencies do not allow for any consistent resistance to tyrannical entities like China which is busy buying or influencing or bullying those continents. Truman's mistake was not threatening to nuke North Korea when Chinese troops were not withdrawn in the Korean War.
Paul Wong profile picture
Thanks for the level-headed article.
We aspire to be independently objective in our views and to learn about world financial history of the past 600 years. Prosperity for all people with respect is the ultimate journey for us to strive for.
New Low Observer profile picture
"...for most of the first nine years I lived here, politics never occupied even a fraction of the advertising space or conversation time as topics like travel, watches, stocks, apartments, or a dozen other more interesting and business-friendly topics."

This depends on who you associate yourself and what you chose to talk about. Since the handover 23 years ago (and many decades before), there has been significant political discussion. This remark reads as though the issue of politics was created in a vacuum...it wasn't.
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.