During the recent Hong Kong Economic Summit, guest speakers expressed mixed views regarding the prospects for the global economy and financial markets.
Peter Wong Tung-shun, deputy chairman and chief executive of Hong Kong and Shanghai Banking Corp. warned of the possibility of extreme volatility in various asset classes across the world, and urged individual investors to be very careful.
But another participant, Gao Hongbing, who is director of AliResearch and vice president of Alibaba Group, said the internet and tech sectors of China and US will continue to drive global economic expansion.
Coming back to Wong, he pointed out that monetary easing measures introduced in the wake of the 2008 financial crisis have inflated asset prices and widened the wealth gap. As a result, grassroots people are suffering, and have become increasingly disgruntled, he said.
The surprising outcomes of the Brexit vote and US election are partly due to the social and economic disparities, he added.
As UK begins the process of exit from the European Union, it could trigger further disputes in a key region. Meanwhile, a Trump presidency in the US will bring a lot of uncertainties to the world. In addition, an Italy referendum and elections in France and Germany will also cause some volatility.
Individual investors have to be very careful, Wong said, advising prudence “unless you think you are a very smart speculator — which in case, I would like to get some advice from you too.”
Wong has a good track record in making forecasts in recent years. And he has rarely stressed market volatility to such an extent, and issued stern warnings, as he did last week.
Meanwhile, low-profile Gao, a key figure behind Alibaba, said the internet sector has underpinned China’s 6-percent-plus GDP growth this year, despite weakening external demand and sluggish manufacturing sector.
Internet sector already accounted for 4.4 percent of China’s economic output in 2013, up from 3.3 percent in 2010, and exceeded the level seen in various developed nations including US (4.3 percent), France (4.2 percent) and Germany (3.7 percent), he said.
This year, share of the internet sector in China’s economy has increased further to 6.9 percent, while the corresponding figure in the US stands at 5.4 percent, Gao pointed out.
He believes that we are just seeing the beginning of explosive growth of the internet economy, and that there is still tremendous potential.
Cross-border e-commerce, cloud computing, Internet of Things and FinTech — all these new technologies might see big breakthroughs in the short term.
Other emerging technologies like artificial intelligence, virtual reality and augmented reality will also gradually mature.
Given this, despite the sector’s rapid expansion in recent years, it’s too early to predict the peaking of the internet and tech industry.
Perhaps investors should adopt a hybrid approach next year, keeping part of their assets in defensive assets while selectively betting on the high-growth tech sector.
The tech sector holds a lot of promise for sure, but identifying the winners can often be difficult.
This article appeared in the Hong Kong Economic Journal on Dec. 2
Translation by Julie Zhu
[Chinese version 中文版]
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