22 August 2019
Louis-Vincent Gave believes China’s liberalization can only happen through Hong Kong. Photo: HKEJ
Louis-Vincent Gave believes China’s liberalization can only happen through Hong Kong. Photo: HKEJ

Interview: GaveKal chief sees bright future for Hong Kong

To make big money in the investment markets, one has to figure out the five Ws — what’s happening and why, when and where, and finally who to trust.

We found one guy we can trust, and who can answer the four other Ws as well. He’s Louis-Vincent Gave, who found time to speak to EJ Insight and its parent Hong Kong Economic Journal.

Gave is the chief executive and co-founder of the independent research house GaveKal Research. The company produces global economic and asset allocation research and publications, including GaveKal Dragonomics, a highly popular reading material among international money managers.

He served as a second lieutenant in the French military before the financial world beckoned. He worked in Paribas as an analyst and went on to establish GaveKal with his father Charles and Anatole Kaletsky in 2001. 

The following year the company opened its headquarters in Hong Kong, where it also launched GaveKal Capital Ltd., a money management firm.

Gave listed French and English, not Chinese, as his speaking languages, although he did spend many hours studying Mandarin in Nanjing University, where he said he once spoke it decently.

But he has no problem explaining why Chinese equities in the past decade has been a poor performer despite the economy’s rapid ascent.

The Frenchman is also highly upbeat about Hong Kong. He believes the territory will benefit tremendously as mainland China opens up its financial industry.

But like any other city, Hong Kong has its challenges, including the widening income gap and tensions brought about by its relations with the motherland, he says.

Question: As a Frenchman who always sees demonstrations, what do you think about the Occupy Central movement?

Gave: I was gone when it started and I have been flying in and out. When I came back, the first thing I did was to walk around the Queensway and get a feel for what happened. The number of people appeared to be declining. Then I left again and now it seems the movement is coming back, right?

In Paris, there are demonstrations all the time but they last one day. They walk from one part to other. It was like that in 2003, for Article 23 [the controversial national security bill], it was not blocking the streets. In France, when a demo gets very big, usually the government is forced to call a new election and start again. Well, the people have spoken, now the government has a new mandate and you move on. But the difference in Hong Kong is that there is no political solution to the problem, and you are stuck.

Question: How do you see Hong Kong’s future?

Gave: I actually think Hong Kong’s future is a bright one. I know it is easy to feel down in Hong Kong because of the political tension, and the government inefficiencies. But here is the positive side that perhaps people forget — China’s liberalization, which can only happen through Hong Kong.

Hong Kong is the financial center and capital center of China. If China liberalizes the market, Hong Kong will benefit tremendously. The capital center of Europe is London. London developed so much in the past 20 years on the back of greater European integration. Capital flowed, from family-owned, it has grown into a global group. London gets a piece every time.

Small companies become bigger as China gets out of state-owned companies. All these will happen through Hong Kong.

The activity here will become very strong. But it has the potential for creating more tensions. As China is pushing more business to Hong Kong by creating dim sum bond and renminbi business, it says, “Hold on, we’re doing all these businesses for Hong Kong, not Shanghai as previously planned. We need to make sure who is in control in Hong Kong. We basically want to pick the chief executive and change the rule for us. We pick three candidates, and you pick whoever you want.” And you say, “Hold on, that is not the deal.” And hence the tension.

Question: So does that mean we are financially OK, but not politically or socially?

Gave: Because you have a financial center that does quite well, people get quite rich. Hong Kong has massive disparity between rich and poor, and between a tycoon class that has a monopoly on land, food distribution and utilities, and the general population who pays the wrong price for everything.

They pay too much for food and utility and it is hard to see it is changing, and so the tension can be amplified. 

Economically and financially, it is very easy to be optimistic about Hong Kong. Politically it is easy to be very concerned because you have big part of the population getting left behind. The government must free up land — one way or the other — either it eats into national parks or rezones all the industrial areas in Aberdeen or Kwai Chung because factories are never gonna come back, so knocking down those buildings and replacing them [may be inevitable]. The government should be more aggressive on public housing. The single biggest tension is that people can’t afford places to live, unless you are in financial industry.

Johnson Sze contributed to this story

[Go to Part II of this story]

[Chinese version 中文版]

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EJ Insight writer

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