Chief Executive Donald Tsang Yam-kuen will tell us what he plans to do with Hong Kong on Wednesday. Whatever he says is futile unless he has some ideas for what to do about the looming asset bubble.
Liquidity has already pushed home prices skywards. The stock market has not been spared. With the Hang Seng Index reaching a two-year high, another illuminating case is the stellar performance of Agricultural Bank of China.
It was dubbed the worst state-owned bank in China and had a hard time getting its mega initial public offering completed only three months ago.
Yet the bank has seen its shares in Hong Kong gain more than 30 per cent since then. Ironically, as its H shares reached new highs almost every day, its shares in Shanghai have been striving hard to stay above their offer price.
The result is a 30 per cent premium for its H shares over the domestic ones. Why will a bank dumped by the locals be so much loved by the foreigners?
Is it because the foreigners have a better understanding of the bank's management and loan quality; the bad debt problem looming in the country; or the new capital requirement that are to come? Hardly.