China, not HK, is where the risks are
A 515-point plunge in the Hang Seng Index was hardly the most auspicious start to the Lunar New Year, and what happens next for local share prices is difficult to judge.
Yesterday's selling came from foreign portfolios, which are still showing handsome profits from last year's surge (apart from some late arrivals from Tokyo).
These investors are obviously not hanging around to dissect the details of Hong Kong's economic story. If they did, they might wonder whether their departure was well timed.
The two sides to the argument are contained in the latest trade figures, which were released in detail yesterday, and the apparently contradictory view contained in the survey of confidence (see page 2).
According to the trade figures, the very economic upswing which is causing inflationary concerns in the US, pushing up interest rates and worrying global investors, is also feeding our exporters with welcome business.
But instead of being all smiles about the future and the prospects of bustling exports, what do we find in Hong Kong? Declining confidence, and gloom.
The clue to this paradox is in the list of subjects which the confidence index shows that local businesses are gloomy about. Most are internal and self-inflicted.
Rents are, not unexpectedly, providing a growing amount of grief. While, universal concerns are of too few staff, and too much competition. The answer to both is improved productivity.
The groaners would do better to start worrying about the trends in China. US strength is welcome, but it is not going to be enough to offset the effects of the coming crunch in China - and that is what should be sending the confidence graph south.