Date
22 January 2017
John Greenwood expects the US Federal Reserve to raise interest rates four times this year. Photo: HKEJ
John Greenwood expects the US Federal Reserve to raise interest rates four times this year. Photo: HKEJ

Property prices to slip 5-7%, says father of HK dollar peg

John Greenwood, chief economist at Invesco Ltd., expects property prices in Hong Kong to decline at least 5-7 percent this year given the return of the interest rate raising cycle in the United States.

A total of four hikes in the US Fed funds rate is likely this year, he was quoted as saying by the Hong Kong Economic Journal Thursday.

Greenwood, who’s known as the father of the Hong Kong dollar’s peg to the greenback, forecast that the US will raise its benchmark interest rate in the months of March, June, September and December, each time increasing it by 0.25 percentage point.

Nonetheless, the countercyclical measures that the Hong Kong Monetary Authority implemented over the past few years should be good enough to protect the bank’s and individuals’ balance sheets from a systemic crisis similar to the one in 1997, he said.

Meanwhile, Greenwood said, the trading halt mechanism in the mainland stock markets that took effect this week will likely hinder the inclusion of A shares in the MSCI Emerging Markets Index.

Trading in the markets is suspended when the benchmark index moves 5 percent or 7 percent.

There is a temporary halt at the 5 percent mark, but the market closes for the day when the 7 percent trigger point is hit, as happened on Monday and again on Thursday.

The thresholds are way too low, even compared with the usual fluctuations in mature markets such as the US, Greenwood said.

[Chinese version中文版]

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