Hong Kong a Regional Hub

The current wave of price rise in property market is different from what happened in 1997. At that time, China's economy was much smaller than now and it's influence on Hong Kong was relatively weaker than the power of West. Also, the property bubble in 1997 was covering the whole Hong Kong that even the flats in Tuen Mun could fetch $6000 per sq.ft. Now, we have two markets - high end and users.

From latest statistics of monthly income and current interest rates, the average ratio of mortgage to income is still within safe limit. With the huge increase of wealth in China cities, especially those in South China, Hong Kong being a regional hub and free port for money flow has become the destination of funds from motherland. Basically, our own wealth has also built up since SARs. All these elements are exactly the right constituents for a boom market.

When property becomes the few easily accessible assets, people with reasonable saving will start pay attention on how to join the party. Now, it is just the start of show time and we still have a long way to the end. 

It is interesting to discuss in such direction.

Comparing with RMB, Hong Kong dollar is a well recognised international currency which has high regard in the world. Now, Hong Kong is closely intergrating with South China in the region of Pearl River Delta. The combined strength of this region is huge which may be comparable to the economic size of California though there are no figures yet to support my statement.

Hong Kong dollar is being used in mainland daily money trading and its influence to China is beyond our imagination. Of course, the highest priority of China is to get RMB be internationalised. But, it will have great risk to China finance infrastructures which have not been tested by recent financial crisis. Say, is the State Department be ready to take on challenge of attack by Hedge Funds, like what happened in Hong Kong in 1998, or the other case that Sterling was attacked by Soros in early 1990s?

Personally, I do think that State Department has great reservation to take on the challege directly as they do not have experience before. Simply, they are not sure what the risk is. The collapse of RMB in front of the West is an unacceptable and intolerable humilitation to our senior leaders who were born and educated in a entirely different place than us. They are not used to lose face of this scale. From these considerations, there are already rumours that State Department may make use of Hong Kong dollar as a shelter for RMB or it acts as a first defence line of RMB for the process of internationaliztion. The details of this mechanism is yet to be disclosed.

Bubble and Human Life

The bubbles inflated in every cycle of economy have always caused damages at the time of bursts. More and more economists have to accept that the markets are not rational in nature and principle. It is because people are invovled in every market and they make decisions in every second in trying to earn the best advantages. Most people claim that they have applied rational thinkings and every kind of advanced models to make judgements in all sorts of investment. However, it turns out that all these decisions are at large part come from their basic instincts or feelings which are irrational and not predictable. This kind of behaviour is fully reflected in the crisis.

When millions of people act together in one society, the outcome is highly unpredictable. At most of the time, they have herd instinct to follow the so-called successful leaders. Of course, at the start, they will try to find out who is most successful and spend time to observe. Then, when a large group seems to be more successful than the others, the remaining mass will exercise the instinct to follow suit. Their decisions will then be decided by the basic human nature rather than reasonable calculations. This is the stage when the bubble is inflating and its appearance is most beautiful. At such time, people have the thought that everything is so perfect that world is having no problem and there are endless happy days forever. From old thinking, this is the time when the party is to end.

From the above observation, people can see that no matter how the bubble is damaging, it cannot be avoided because the bubble is part of human nature. It is what we want to be exciting and wonderful in our life.

To be fair, without bubbles, life is very boring to most people whom would prefer to die young.

To get rid of the bubble is meaningless at all.

Relationship of Demand and Supply

People have been talking about the limited supply of new flat units affecting the market prices. This statement should require careful examination.

Firstly, we need to look into what the meanings of supply and demand are.

Supply of properties is in the hands of property developers, government and property owners. The number of these people is small in comparing with the general public but the wealth of society is almost under their control. Their behaviour can be easily predictable as their aims are well known.

On the demand side, it is generally referred to public behaviour which is always changing to cope with latest economic development. Say, for living spaces, people could accept to live in very crowded shared flats in early 60s when Hong Kong was still in primitive development state. Public could hardly afford to pay for large apartments. At that time, one 200 sq.ft of public flat could accomodate up to 7 persons. The demand for new private units was scarce.

After the economic boom since 70s, more Hong Kong people were well off and they had strong desire to live in larger units which then drove up the demand for new flats. To match with such requirements, the boom of property markets had then started and the trend is still going on till now. Simply speaking, the demand is moving with economic development. Whenever there is a downturn, the demand for new flats will drop as people cannot afford expensive large units.

In a recession, no matter how you limit the supply, the demand drops faster than developers can predict. Same happens in a upward market but in a reverse direction, people have desire to upgrade the living standard and like to regard properties as assets which can earn money. Under such conditions, even with hugh supply, the demand will at most time outstrip the new flats as offered in the market.

This relationship of demand and supply had been fully reflected in our last downturn from 1998 to 2003. During this period, government and major property developers had been trying to limit supply but not be able to resist the declining trend of prices.

For investment in property market, we should place more attention on demand rather than supply. It is due to sole reason that demand as moving with economy is highly unpredictable which is major factor affecting the prices.

Likely Trend of US Dollar

The points are well established that there is really a risk of inflation due to the policy of quantitive easing by all western countries.

However, the scenario of inflation is based on the assumption the world is starting to recover and the excess liquidity in market will drive up the assets prices. This has not happened yet and may or may not happen in the near future. From recent data, the borrowings of private sector in Europe and US have not yet picked up to a comfortable level. There was recentlly published figures indicating that the inflation rate of Europe was almost dipping below zero.

In fact, the Fed and ECU have admitted that the present economic situation has not returned to healthy condition. The risk of downside is still in exist.

Against this backdrop, we should not be worry much about inflation which may be running at very low rate in the years ahead following what Japan had been doing in 1990s.

The quantitive easing of money supply will give rise to fearsome inflation is well recognised and supported by a large group of traders and economists.

However, there is another school of thought that the world is now having excess capacity in respect of production and labours. As a result, the unemployment rate will not go down for a few yeasrs until excess capacity is gone and corporations start to expand staff for increasing production. With the house bubbles bursts happened in US, UK and parts of Europe, the individual households will need to repay the debts of mortgage contracts in the years ahead. 

Against this backdrop, the private consumption will be continuously constrained at low level while the consumers are repaying the debts. The wages will not have momentum to go up as the labour markets are still having abundant supply. The combined effect is to restrain the inflation. The other factors affecting inflation are currencies values and commodities prices.

For US dollar, people have been saying that it should be declined to reflect the strength of US economy. However, UK and Europe are suffering the same problem. All these major currencies - dollar, sterling and euro are facing the same downside risks. If they are at the same situation, then there is no way that trade ranges among these currencies will be widened. Simply speaking, it is very likely that the values of these currencies will be stable for quite a while.

Economy of Hong Kong

From the economic performance in last few years, it is considered that Hong Kong is moving in an expansion cycle starting from 2003 when SARs was happened. The last downturn and recession lasted from 1998 and ended in 2003. Then, the recovery started right after SARs. The time span of current economic expansion will depend on many factors. Judging from Hong Kong special circumstance, the low tax and high saving rate have always promised a much longer periods of expansion than contraction.

The happening of SARs in 2003 was so severe which could only be matched by the WWII. After sufferings in SARs, the economy recovery will be much stronger than people normally expect. This is a kind of human behaviour that when people recover from serious sufferings, they usually can build up a strong will and heart to face new challenges. We can see our mainland neighbours whom have been prospering at world record rates after Cultural Revolution. Hong Kong people are no exception but they do not know themselves yet.

In fact, the trend of rise in local consumption had only just started in late 2005 and the pace of moving up was disrupted by financial crisis in last year. At the moment, most people do not know the real strength of Hong Kong and the overall accumlated wealth. It is most probably due to misleading news coverage by local media which have always over-emphasied our weakness. The other main reason is that the gap between rich and poor has been much widened. We have a large proportion of working population earning just a few thousand each month. The news about them have occupied the mind of everyone. However, people do not recognise that the percentage of persons earning more than 30,000 has been also increasing. This group of high income peope is the real engine for domestic consumption propping up the local retail and property market.

一個中年人當上選委的獨白

這篇文章寫於二○○七年初

一個中年人當上選委的獨白

寫這篇文章的心情相當複雜，當中充滿人到中年對世情的憤慨，部份內容可能冒犯您們中的一些人，請不要見怪，或借此引起大家反思，來文駁斥，提高討論氣氛。

記得在一次競選選委討論中，有眾政府工程師向我們數人致敬，表示高度讚賞我們勇於面對選舉帶來的政治挑戰。事實上，我並不具備甚麼勇氣，亦不相信會有甚麼政治壓力。我衹是有一股傻勁，眼中衹看到眾多不平事，心中充滿怨氣，腦海中有很多問號。

孕育在香港傳統教學制度，有幸躋身本地大學，我深深相信精英主義在香港政治的重要性，原來在英殖民地政府時代，這套制度運作良好，曾經歷過多少風雨，亦能安然渡過。但自從回歸後，每一樣事情都引起了變化，很多傳統價值觀念都嚴重受到侵蝕。在政治方面，我們祇看到太多沒有意義的爭拗，政府的威望因種種失策日漸下滑，事事都受到立法會阻撓，有很多良好政策被弄得支離破碎。而我們的尊貴議員，亦不見得能承擔責任，在議會中進行有深度和見地的討論，每每流於情緒化，敵疊分明，將社會利益拋諸腦後。作為小市民的我們祇感到無奈、無助、無望。

這股政治低壓再加上經濟衰退，緊緊地罩住這個本來幸福快樂的小島，市民唯有將希望放在普選立法會和行政長官上。但在這漫漫民主進程中，市民的政治意識又是令人摸不著頭腦。陳方安生的小旋風，正是一個很好的寫照。一個忠心效力於殖民政府的政務官， 突然變成香港良心和民主女神，完全沒有付出任何努力，幾乎垂手可得泛民盟主的寶座，民望高倨首位，聲望一時無倆。試問民主黨幾位老當家，又有如何感想。究竟市民的民主概念是否停留在這個社會一貫推崇的名牌效應？敢問普羅大眾對民主思想有多少認識？

另一奇怪現象，就在我們身邊大眾傳媒中出現。一份銷量領先的生果報，屢次報道失實，道德全無，誠信盡失，居然能肩擔起民主旗手的角色，一聲號令，帶動七一群眾效應的奇功。這是否反映市民可以理性分開政治和誠信，又抑或是有太多人是人格分裂，看待事物以個人喜好來決定，沒有對事件本身有深入認識和討論，凡此種種，無形增加了心中的抑鬱。

從開始參選選委的一刻，都知道選擇行政長官的可能結果，曾蔭權應該得到支持順利當選。不過我們期望能夠通過這次選委選舉向當權派說「不」，在政治各種流向中找尋一條中間路線，在議政過程注入理性討論元素，為香港政治困局付出一點努力。我們團隊爭取的特首競爭性選舉應該會首次出現，我們應該見到良性選舉工程的展開。雖然今次選舉離普選還差一大截距離，但這一小步，正為大步向前作出準備。將來是不可測，好好把握現在，每人付出一點努力，結果總是美好。我這個凡夫俗子都能夠為香港做一丁點事情，您們又如何呢？