A leading economist has cast doubt on the sustainability of Hong Kong's recovery, saying the latest rebound is fuelled purely by a psychological feel-good factor.
Lingnan University president Edward Chen Kwan-yiu warned that people should not overestimate the positive impact of the Closer Economic Partnership Arrangement (Cepa) on the economy.
His remarks came after Chief Executive Tung Chee-hwa and Financial Secretary Henry Tang Ying-yen said the economy had turned the corner. Professor Chen said the latest improvement in the economy and consumer sentiment underlined the huge potential purchasing power of Hong Kong people, who had total bank deposits of $3 trillion.
The Hang Seng Index surged to 11,295.89, a 15-month high, on Wednesday and turnover hit a three-year high of $21.3 billion on Thursday.
Funds poured into the stock market last week as investors bet that deflation was abating and companies would benefit from an improving economy.
But Professor Chen, also chairman of the Hong Kong Committee for Pacific Economic Co-operation, said he doubted the rebound could be sustained into next year. 'I don't see any basic changes in Hong Kong's economic fundamentals,' he said.