Hong Kong stocks were under pressure from the US to raise interest rates last week. The Hang Seng Index fell 214 points to close at 17,933 points, hitting a ten-year and nine-month low. It fell 848 points for three consecutive days, and fell 828 points for the whole week. On the last trading day, the turnover fell to the edge of 80 billion, showing that investors are not doing well. Amid worries about a recession triggered by continued sharp interest rate hikes, and the United Kingdom’s sprinkling of money and tax cuts, which triggered a sharp drop in European stock markets, the three major U.S. stock indexes fell for 4 consecutive days, closing down nearly 2% in a single day last Friday.
The Dow Jones Index fell below the 30,000-point level, once plunged 826 points to a low of 29,250 points, and closed down 486 points, closing at 29,590 points, the lowest since November 2020. The Nasdaq closed at 10,867 points, down 198 points; the S&P 500 closed at 3,693 points, down 64 points, and fell to this year’s low set in mid-June. The Dow fell nearly 4% in a week; the S&P 500 fell 4.6%; the Nasdaq fell nearly 5.1%, and the three indexes fell for the second week in a row.
Rising interest rates, strong dollar and strong oil exchange
The effect of the recession triggered by the U.S. interest rate hike swept the commodity asset market, with New York oil futures falling below the $80 mark, the lowest closing price since January. New Zealand crude oil fell as low as $78.04 at one point, and closed down $4.75 at $78.7 a barrel, a one-day drop of 5.7%, and a weekly decline of about 7%, the fourth consecutive week of declines. Brent oil futures in London also fell to an 8-month low, falling below $90 a barrel again to close at $86.15 a barrel, down 4.8%, and down 5.7% this week.
Under the blow of the strong dollar in the foreign exchange market, the central bank and the government have taken action one after another. The UK announced a mini-budget, launched a series of economic stimulus plans, drastic tax reduction measures, including canceling the plan to increase the company tax to 25%, maintaining the company tax at 19%, abolishing the maximum income tax, and greatly reducing the property stamp duty threshold Wait, the scale will reach 45 billion pounds in the next five years. Zhuohuisi has already allocated 60 billion pounds to subsidize the energy expenditure of citizens, and now he has cut taxes and distributed money, which has led to the three killings of stocks and foreign exchange bonds. A new low since the beginning of the year, the pound against the Hong Kong dollar also passed the “8.7 calculation” to 8.6544, down 2%.
In order to cope with the latest mini-budget spending, the Chancellor of the Exchequer proposed to raise the amount of public debt issued by 72.4 billion pounds this year to 234.1 billion pounds. The yield on the UK 5-year government bond jumped 57 basis points to 3.51%, the largest one-day rise in history. Japan fell sharply in the yuan exchange, and was forced to intervene in the exchange rate last week, but no Western allies cooperated. The pound has fallen like this. Those who intend to immigrate to the local area or have children studying in the UK are happy to have the opportunity to hold the balance, but those who have assets in the UK or have exchanged sterling should disguisedly subsidize the UK to reduce taxes to save the economy.
0+3 successfully won applause
The U.S. rate hike to fight inflation is like a whirlwind sweeping the world. The chief executive, Li Jiachao, came out to “send a surprise” before the market closed last Friday, announcing the relaxation of entry restrictions to “0+3”. The business community originally expected the new measures to be “0+7”, but it was reduced to 3 days of home medical observation. When you go out for activities, you just can’t go to restaurants, bars, and fitness rooms. Hong Kong people are thinking about traveling abroad at the first time. It is about returning to Hong Kong and returning to work immediately, and it will not be a day’s work. After the announcement of the news, tourism-related stocks have been doing well. Zonghengyou (8069) surged 13% to close at 0.187 yuan; Dongying Travel (6882) rose 36% to 1.05 yuan; Cathay Pacific (293) rose 1% to close at 8.92 yuan; Ctrip (9961)’s Trip.com announced that the total number of searches for Hong Kong flights increased by nearly 95 times on a weekly basis, and Japan’s ticket orders increased by 50 times on a weekly basis. The stock price rose 5% to close at 206.8 yuan.
“0+3” was generally well received. The authorities suspended the press conference on the epidemic from yesterday, and then released the normal message. Some experts believe that as long as the cases are stable, the government can relax it to “0+0” soon, that is, to lift the restrictions in an all-round way. Under the shadow of recession, the world is fighting fast to ease restrictions. Japan and Taiwan have relaxed restrictions one after another. Under the general trend, Hong Kong, an export-oriented international city, must fight fast with other regions, because slowing down is also a loser. There are basically no restrictions in the West and Southeast Asia. The new crown is regarded as an endemic disease. If Hong Kong does not follow the opening up, it may become Hong Kong people traveling abroad, and foreign tourists have not returned. It is reported that the authorities have paid attention to this effect and are ready to attract tourists.
With the sound of returning to normal, the prospects of the hotel industry have changed. Under the entry restrictions, quarantine hotels have become a way out, which is better than no business. Now it has become zero isolation, and the business of quarantine hotels has disappeared overnight, and Hong Kong people can travel abroad. With less staycation in local hotels, the hotel industry appears to be the loser. However, being a quarantine hotel is just a piece of cake. In the long run, the hotel will have a bright future for returning tourists and business travelers. Therefore, the future of the hotel industry depends on how fast the road to return to normal is going. Hotel stocks are generally still at a low level, mainly due to the psychological impact of the short-term quarantine business being cleared. Regal International (078), which owns the most hotels in Hong Kong, closed at HK$2.92 last week, down 1%, and continued to fluctuate at a low level.
The HKMA’s antihypertensive test reduces the heat in a disguised form
In addition to entry restrictions, local banks have announced an increase in the local prime interest rate after the interest rate hike in the United States, but the increase is only 0.125%, which is far from the United States. While banks are raising interest rates, the HKMA has issued guidelines to banks to lower the stress test requirements for property mortgage loan interest rates from the current 300 basis points to 200 basis points. The adjustment applies to all property mortgage loans with immediate effect. The President of the HKMA, Yu Weiwen, has made a point before commenting on the US interest rate hike that he will adjust counter-cyclical measures, and follow up with actions.
The HKMA’s stress test aims to ensure that mortgage borrowers are able to cope with the repayment pressure caused by rising mortgage rates. The bureau pointed out that considering that the US Federal Reserve has raised the target range of the federal funds rate by a total of 300 basis points since March this year, in the face of rising capital costs, banks have earlier raised the upper limit of interest rate lock-in for newly created interbank mortgage loans, and recently they will be the most favorable. With the increase in loan interest rates, the HKMA believes that it is appropriate to reduce the rate of increase in the assumed interest rate in the stress test from the current 300 basis points to 200 basis points, which is considered sufficient to ensure that the mortgage business risks of banks are properly managed.
Some people in the real estate industry have mentioned that it is inevitable that interest rate hikes will have a short-term impact on the property market. However, in the past two years, the number of mainlanders coming to Hong Kong to buy properties has dropped significantly. The property market is now mainly supported by local rigid demand. The bureau has reduced the stress test requirements, and the financing capacity for building users has increased, making it easier to get on the bus. This action shows that the government has made efforts in all aspects to ease the pressure on the US to raise interest rates. Originally this was good news, but the real estate stocks did not respond. On the day the news was announced, the whole line fell. The leading real estate stocks SHK (016) closed at 93.05 yuan, down 0.6% in a single day; Henderson Land (012) reported 24 yuan, down 0.8 %; Changjiang (1113) reported 52.75 yuan, down 0.5%.
Compared with the British government’s desperate tax cuts, the SAR government’s tricks are still gentle and drizzle for the time being. The British government has printed a lot of silver paper, but she is not the United States. Hong Kong has a linked exchange rate restriction and cannot print money at will, but there are still a lot of reserves in Hong Kong’s coffers. The debt level of local companies and individuals is not high, and there is still a lot of room for interest rate hikes.
It is better to drink herbal tea when the economy is warming up
On the other hand, the current unemployment rate in Hong Kong is relatively low. Although inflation is not as high as in the United States and Europe, if the local economy is likely to heat up after customs clearance, raising interest rates, such as drinking a cup of herbal tea, may not be a bad thing. Powell indicated that there is room for the Federal Reserve to raise interest rates. The challenges facing Hong Kong will come one after another in the future, and the performance of the stock market and the economy will depend on how to deal with them. Business people see that the room for rising interest rates in Hong Kong is still far lower than that of the United States. As long as companies have business and wage earners have jobs, they should be able to bear it. The most important thing is that the SAR government should make adequate preparations and launch policies to relieve the situation in an orderly manner. Slowing down, stimulating the investment confidence of the business sector and the public’s desire to consume, the lethality of raising interest rates may not be as terrible as imagined.
Jin Riku