Stop-go smart guys face lesson in power reality
Jake van der Kamp
The market's initial reactions to the Government's seven-point stimulus package announced on Friday are just like the package itself - stop and go.
First, we have the punters on Saturday thronging to snap up Cheung Kong's latest offering of new flats, with property agents moving among them to bid for the chips entitling holders to flats.
The suspension of the Government's prohibition on the resale of uncompleted flats before assignment had made everything look like old times before the prohibition was imposed in order to restrain speculators.
Then, on Monday, the stock market nosedived. The stimulus package had not persuaded share-buyers, who thought it not enough and had in mind the negative growth rate of the economy in the first quarter and the continuing troubles of other Asian markets.
There are reasons to treat the Government's package with some uncertainty. Band-aids are removed when the open cuts they cover are healed. At what point will the Government decide that this one is healed and rip the Band-aid off again? What we need is someone in authority to tell us just what the official definition of a speculator is.
Is a speculator a nasty person with greasy hair and shifty eyes who makes himself undeservedly rich by driving prices up so that the rest of us can no longer afford the things we need? Or is he someone who provides liquidity to the housing market, so that homeowners can more easily sell and buy their flats when they need to; someone who also fills the economic function of taking the risk from the hands of the developers, so that they can get on with their business of building more in greater security? Personally, I think there is a lot to be said for this second definition, not the least of it being that the first definition makes me greasy-haired and shifty-eyed; you too, probably.
Have you ever bought shares on the market not for dividend income but in the hope that the price would jump and you would make a rapid profit? You nasty speculator, you.
The Government seems to have swung to the second definition on Friday, but we all know that its dictionary is a changeable one.
So what is it to be? If the authorities want the stability needed for continued economic growth, then they will have to make up their minds. If they do not, then the only thing they will need in hand to identify the culprits for the up and down swings of Hong Kong's fortunes is a mirror.
Much the same applies to the measure by which the Hong Kong Mortgage Corp will sign agreements with the banks to buy a certain amount of residential mortgages within a one-year period.
This is intended to help the property market by providing greater assurance of the credit available.
At the moment, the corporation cherry-picks what it likes. Now, however, it will have to set strict guidelines on credit quality or face the risk of being lumbered with doubtful mortgages, because it has committed itself to taking a set amount.
This is all very well when times are good. There won't be many doubtful mortgages, and the banks will be lining up again to sell their mortgage services.
But a measure of this sort is intended to provide support in bad times, not good. The difficulty is that, in bad times, doubtful mortgages may abound and either force the corporation to rethink its purchase programme or to take only the good and leave the bad with banks, who will then be doubly reluctant to put wobbly mortgage books at further risk.
The distinct danger of this new measure is that, in truly dire times, it could be counter-productive and further accentuate the negative aspects of the Government's stop-go approach to the market.
The fundamental problem is that some people easily fall victim to the notion that they are smarter than the market and can make it go where they want it to go. They are, invariably, in for a humbling experience.