26 October 2016
If Donald Trump wins and China-US relations sour, Hong Kong might play an enhanced role as a middleman between the two countries. Photo: Reuters
If Donald Trump wins and China-US relations sour, Hong Kong might play an enhanced role as a middleman between the two countries. Photo: Reuters

Why Trump victory might not be a disaster for Hong Kong

Hillary Clinton’s health has become an issue in the US presidential election after she had a fainting spell and was diagnosed with pneumonia.

This may boost the chances of her rival Donald Trump.

Investors should dump Hong Kong real estate stocks if Trump wins in November, said Hans Op ’t Veld, head of listed real estate at PGGM.

If Trump wins, the United States would launch more protectionist moves and this would hurt Sino-US trade relations, which in turn would have a significant impact on Hong Kong as a major transit port between the two countries, Op ’t Veld told Bloomberg in an interview.

 “The minute Trump gets elected I would worry about Hong Kong and dump Hong Kong property stocks,” he said.

His view is widely shared among global fund managers, who believe that if Trump takes over the helm of the world’s largest economy, that might not be good news for the world economy.

A Trump win could shave 0.8 percentage point from the global GDP growth, according to an earlier study by Citigroup.

It could cost China 4.8 percent of its GDP, according to Daiwa Capital.

As such, a Trump victory is clearly seen as a disaster for the markets.

Trump tops Clinton with a 45 percent against 43 percent support ratio in the CNN/ORC Poll taken on Sept. 1 to 4. Clinton’s lead evaporated after she fell ill in public recently.

Hong Kong, as an open economy, is also one of the world’s financial and trading hubs. If global economic growth and trade suffer, the city would be affected.

However, it might not suffer the most as Hans Op ’ts Veld said.

Hong Kong’s economic miracle has been based on a sound legal system and stable social environment, and more importantly, its middleman role between China and the world.

In fact, things might tip in favor of Hong Kong if Trump’s victory hurts US-China relations.

If Trump wins, and the US and China start imposing trade sanctions against each other, Hong Kong could play a bigger role as a transit port, and more mainland companies would be forced to raise funds and remit money through Hong Kong.

In the meantime, if Trump becomes the president and the US economy suffers as feared, the Federal Reserve may hold back from its tightening its monetary policy.

If that happens, the US dollar, and thus the Hong Kong dollar, won’t become stronger, and that will be good news for the city’s retail and tourism sectors.

Meanwhile, China may stand a better chance of pushing ahead its Belt and Road strategy if US relations with other countries sour under a Trump presidency.

And as China taps into more emerging markets, Hong Kong will also benefit.

This article appeared in the Hong Kong Economic Journal on Sept. 15.

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist

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