Date
18 October 2017
Will pro-democracy protests help or hinder the Hong Kong stock market? One can only wait and watch. Photos: HKEJ, financialcontent.com
Will pro-democracy protests help or hinder the Hong Kong stock market? One can only wait and watch. Photos: HKEJ, financialcontent.com

Hong Kong market: Some wishful thinking

Hong Kong stocks opened firmer on Thursday as fears over the Occupy Central movement, triggered partly by downbeat comments from HSBC and Barclays, subsided, helping the market come off the post-July 1 lows.

As for the prospects going forward, no one can really say, but how about envisaging this scenario from a third British bank, just for argument’s sake?

Royal Chartered Bank* announces an upgrade of Hong Kong’s sovereign rating and rates the market as a strong buy as the city moves toward true democracy, with citizens hopefully able to elect their leader directly in the 2017 Chief Executive polls.

Pointing out that the Hong Kong stock market has been trailing other major global bourses such as New York, London and Frankfurt in the last two years, the bank suggests that the only route now is upward.

In a note to clients, the bank says: “History showed that democracy-friendly countries commanded a big premium over third-world countries. That neatly explains why Hong Kong has been a laggard for such a long time. Now, Occupy Central is the catalyst for re-rating.”

The record turnout of 510,000 people in the peaceful pro-democracy rally on July 1 is a good sign for a breakthrough, says Royal Chartered.

With Chief Secretary Carrie Lam Cheng Yuet-nor due to release a constitutional reform report next week, it is widely expected that civic nomination will not be included in the state version of universal suffrage. That will almost certainly lead to a fresh round of demands and give momentum to the Occupy Central movement.

The worry on Occupy Central was overdone, just as Occupy Wall Street had little effect on Standard & Poor’s and Nasdaq indexes, according to Royal Chartered. The launch of the new iPhone 6 may, in fact, have a bigger impact on investors’ sentiment than political movement in any major equity markets.

Meanwhile, investors should not underestimate the effect of through-train in autumn because it could speed up the integration of stock markets in Hong Kong and Shanghai. As capital flows from China into Hong Kong, it will show that mainland investors are parking money here not just for profits but also for freedom and democracy. A pilot program for having direct election in the board of municipalities will be an option in the free-trade zone in Shanghai.

The growing unity shown by protesters, 60 percent of whom were estimated to be below 25 years in age, will be a testament to innovation, creativity and independence among the future generations of Hong Kong, making them more compatible to their peers in Beijing, Shanghai and Guangdong.

Royal Chartered rated fast-food counters such as Cafe de Coral, Tsui Wah Group and other restaurant groups with outlets or takeout services in Central as its top picks after they served over 100,000 additional lunch or dinner boxes per day.

It also upgraded Wharf (Holdings), Swire Properties and other landlords with exposure outside Central as they will see increased rental demand for office space at other locations due the protests in the Central district.

The bank maintained a “sell” on Next Media as its publications such as Apple Daily could see a drastic drop in circulation if Hong Kong were to have full political reforms. Owner Jimmy Lai Chee-ying once said that his mission will be over when the city gets true democracy.

*Dear readers, hope you understand that Royal Chartered Bank actually does not exist. This is just a wish — or wishful thinking, if you may — for the future.

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BK/JP/RC

EJ Insight writer

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