Political instability is seen by investment professionals as the biggest risk to the local market as tensions over electoral reform persist after the Occupy protests.
According to the CFA Institute’s 2015 Global Market Sentiment Survey, nearly half of the 111 respondents from Hong Kong said political uncertainty poses the biggest threat to the local market this year, up from 21 percent in 2014 and 14 percent in 2013.
The survey was conducted by the Hong Kong Society of Financial Analysts (HKSFA) from Oct. 14 to 28, when the pro-democracy protests were still raging in the city.
Jimmy Jim, director and advocacy chair of the HKSFA, said that financial professionals are worried about the long-term development of Hong Kong as a financial center because of the political uncertainty.
“Nobody knows whether there will be another political storm in July [when the legislators cast their vote on the political reform package],” he said. “But it seems that the impact will be quite big if we don’t do anything to address this factor.”
The government’s proposal for universal suffrage in the 2017 chief executive election runs the risk of being rejected in the Legislative Council as pan-democratic lawmakers said the scheme allows Beijing to choose the candidates who will run for the post.
Jim said the sense of political instability also stems from the confrontational relationship between the city’s executive and legislative branches, as well as political tensions in mainland China, the United States and Europe.
Political tensions are seen to have escalated after Beijing issued a white paper on “one country, two systems” principle last June, stating that the territory’s autonomy stems from the authority of the central government.
This was followed by the stringent framework set by the Standing Committee of the National People’s Congress on the exercise of universal suffrage in the 2017 elections, which provides for the creation of a pro-Beijing nominating committee to screen the candidates for Hong Kong chief executive.
All these developments fueled a sense of political instability in the territory as pan-democratic parties rallied against what they perceived as highly restrictive policies.
But while investment professionals may be worried about the central government’s tightening grip over the city, they expect Hong Kong’s economy to benefit the most from the “China factor”.
The Shanghai-Hong Kong Stock Connect and similar stock trading link being worked out with Shenzhen are expected to provide more investment and job opportunities, Jim said.
In the survey, Hong Kong respondents are among the three most optimistic groups about the prospects of their respective economies, projecting a 3.1 percent growth in the local gross domestic product for this year, behind China’s 6.2 percent and India’s 5.8 percent.
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