The Rise n Fall of Hang Seng Index

Comparing the performance of 16 years prior and after the handover, Hang Seng Index showed a significant difference.

BY STACEY TONGTHE EPOCHTIMES STAFF

Since Leung took office, with the exception of its initial rise following the desirable market situation, the Hong Kong stock market has suffered continuous shocks especially recently. Monday last week it even dropped below the 20,000-point mark. Although it has recovered somewhat but the Hang Seng index is bound to fall nearly 10% this year making Hong Kong’s ranking second to the last in the region while Mainland China rank last.

Leung’s economic policy is without much thought of how Hong Kong should handle itself but blindly following Mainland China which is not the right way. Following the wrong step that Mainland China has been going causing it to be the most risky market around the globe.
Senior renowned analyst and writer Richard Duncan said a few years ago during the Lyon Investment Conference that China faced much more serious problems than the US; he even held a serious debate of the point with Fidelity’s Anthony Bolton in the conference. The result is that Duncan’s prediction is right at the point; Bolton announced his retirement plan earlier and left the Chinese financial market disappointingly.

Looking back the past year, the world had endured endless major economic happenings, each region encountered its own multiple challenges; for example, the ending of QE in the US, the debt issues in Europe’s Greek and Cyprus and the high inflation in India are critical and serious issues. Hong Kong has its own problems like the overpriced real estate market, however, it is not a serious issue compared with the problems faced by other regions. It is a pity that Leung did not resolve any of Hong Kong’s important issues on the contrary, his policy increased chaos and complexity to Hong Kong’s financial market due to the bearish market which made Hong Kong’s stocks underperform compare to the US, and also worse than that of Greece and Spain.

Contrarily, the assumed real estate market price falling didn’t happen. According to Centa-City Index (CCL), the high-end real estate price has increased 15%, at the same time consumer income increased only 6% during Leung’s time in office. What can prospective buyers do? The two plots that were designed and promoted as “Hong Kong land for Hong Kong people” were sold at a high price of HK$ 4.5 billion to a Chinese developer China Overseas (00688). Those real estate properties were meant for Hong Kong residents only. It was obvious that the deal was letting hard-earned money by Hong Kong people to flow into the pocket of Mainland enterprises.

Leung messed up both the stock and the real estate market, but the staff and the people who worked with him endured disgrace; it is very unfortunate especially for those newly joined professionals who have nothing to do with it. We have given Leung a year’s time for his policy, time is up and we can clearly see that he is not a competent executive.

Some retail investors believed that Hong Kong would benefit from the handover to China, the market would have its run following the rise of China. The boom lasted for a very short period. In the past 16 years, Hang Seng Index had underperformed the US, European, Korean, Austrian and Indian market. As a matter of fact, it would be hard to find another market that performed so poorly, maybe only Japanese market.

Comparing the performance of 16 years prior and after the handover, Hang Seng Index showed a significant difference. Hang Seng Index increased a mere 37% undergoing three executives Tung, Tsang, and Leung vs. an 800% increase in the past; there is no comparison.

In fact, it is not well known but large holders and investment experts have been reducing their holdings of Chinese and Hong Kong stocks because numerous problems exist in the environment; however, the media is blocked and truth cannot be told. But large holders going through global information center can learn the truth sooner with more accuracy, 9 out of 10 of those in the fund industry take bearish view of Chinese and Hong Kong stocks. According to Merrill Lynch latest statistics, compared with the baseline, the percentage of Chinese market stocks held by the global fund industry is ranked second to the last.