Who cares whether they are coming as long as their money keeps coming?
Yes, fewer mainland tourists are coming to town.
But the poor sentiment in the tourist industry is almost completely overshadowed by that in the buoyant Hong Kong stock market, which surged about 1,000 points intraday in two consecutive sessions, thanks to what seems to be endless liquidity flooding from the mainland.
It has been quite a while since the Hong Kong stock market has been so exuberant since 2007, when the Shanghai Composite Index reached a peak of 6,124 (before a meltdown of about 70 percent to below 2,000 in 2014).
The buying from the north in mainland stocks has been stunning after Easter, with record daily turnover in excess of HK$250 billion.
Many H shares which have A share counterparts opened 20 percent higher, double the daily 10 per cent limit in Shanghai and Shenzhen, before holding on for a good run during the day, since most H shares are traded at a discount to the corresponding A shares.
Whether the shares are listed in Hong Kong, Shanghai or Shenzhen, they are from the same company, although international investors have been much less bullish than their domestic counterparts in assigning market value to them.
The “One Belt, One Road” stocks of firms that are expecting new orders from China-friendly countries have been hot.
So have the bad companies that can benefit from government-driven reforms to improve their efficiency.
The stock frenzy drove many stock commentators to suggest that stocks on the Hang Seng Index were turning into “Hong Kong A shares” as momentum trading trumped fundamentals with the acceleration of cross-border market integration.
That’s one half of the picture.
The other half is the unexciting Hong Kong stocks in the blue-chip index that trailed far behind their fast-moving counterparts.
In other words, grandma stocks (high-yield stocks with long traditions, like those of banks and utilities) have not benefited from the rally.
Overall this makes an interesting picture, which reminds people of the stock market in 2007, tourism market in 2003 and property market in 1996/7.
As we keep going backward in time, we can see what lies ahead in our political market.
Beijing knows all about this.
The best way to ease anti-mainland sentiment in Hong Kong is to jack up the stock market, because that will occupy the minds of half the people with financial, not political, matters.
Conspiracy theorists would probably suggest the stock surge was all planned, just like a surgeon giving anesthesia before major surgery.
All eyes will be on the report on political reform due out next week.
The Hong Kong government, as instructed by Beijing, knew nothing could be better than sending the Hang Seng Index higher (say 30,000 by next week?) to make sure opposition voices would be drowned out by cheerleading voices, one of which was Hong Kong Exchanges and Clearing Ltd. chief executive Charles Li Xiaojia saying “it is only the beginning” for liquidity inflows.
Who is willing to bet against a strong market in the next few days?
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