Wealth deflator

If anyone is still in denial that the financial crisis sweeping through the world will be relatively 'light' on Asia, they need to think again. The rich in Asia, including those in Hong Kong, are taking a real beating. These are the people with money to invest and consume, and they have already deserted expensive eateries and shops.

Top-priced abalone will remain in the kitchen for a while, even as exclusive restaurants drop their prices. The conspicuous consumers won't be in the mood for lavishness because the toxic assets in their investment portfolios of stocks, commodities, currencies and derivatives have taken away much of their enthusiasm for spending.

These people are the ones getting regular margin calls from their investment managers when their investments drop in value past a certain point and they have to put up more money or sell off the assets. In a bad market, like now, margin calls are calls from hell. These people are not sleeping well.

Market chatter points to the richest and supposedly most knowledgeable as being heavily exposed. When the tycoons and the wealthy suffer en masse, the trickle-down effect is palpable. It is not a good time for the rest of us to gloat.

Many enterprises will suffer in the coming year, including charities managed by non-governmental organisations. It will be much harder to raise donations and sponsorship from individuals who are not so wealthy now, and companies worried about their bottom line will probably be less generous.

There is another class of investors - working people with modest savings who made investments through retail banks. When they lose their shirt, the pain and grief is hard to bear. The Lehman-backed minibonds are a case in point. With the collapse of the Wall Street giant, these financial instruments became worthless. Reports indicate that more than 30,000 Hongkongers invested billions in them. Buyers claim bank staff did not adequately explain the risks involved.