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HSBC backtracks on Occupy Central as reason for downgrading Hong Kong’s outlook

Bank lowers its assessment of stock market prospects over fears about civil disobedience - but Occupy insists impact will be temporary

PUBLISHED : Monday, 07 July, 2014, 11:22pm
UPDATED : Tuesday, 08 July, 2014, 6:25pm
 

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Hong Kong's biggest bank altered a report on why it downgraded the city's stock market prospects, after originally highlighting the risks posed to the city by Occupy Central.

The original version of the bank's flagship equity investment strategy report, penned by analysts and released yesterday, stated: "We reduce Hong Kong to 'underweight' on concerns about negative news flow. Occupy Central... could sour relations with China and may hurt the economy.

However, just hours later, and following criticism on Twitter and Weibo for bringing up the Occupy protests, the report was updated to suggest the residential market was the main reason for concern.

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The amended version read: "We reduce Hong Kong to 'underweight' on the risk of weak residential real estate prices, the slowdown in mainland tourist arrivals, the market's link to US interest rates (the Federal Reserve could raise rates next year) and weak earnings momentum.

"We also note recent concerns about negative news flow regarding the Occupy Central campaign."

A bank spokesman refused to comment on why the report was updated. It was understood that only the banks; clients have access to the document posted on the internet, while journalists were able to obtain it through the bank's media relations team.

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The original bleak assessment of the bank's fortunes came as leaders of the civil disobedience movement considered bringing forward to next month their plan to block streets in Central, with support from student groups who staged a rehearsal on Chater Road after the annual July 1 march.

But Occupy co-organiser Dr Chan Kin-man said he believed the sit-in would create only a temporary disturbance.

"What we are pursuing is the long-term transparency and accountability in the government, which is good for the economy," Chan said. "Investors should not worry as this will be a very peaceful protest."

The Occupy movement wants genuine universal suffrage for the 2017 chief executive election, with the public having the right to nominate candidates, a proposal Beijing rejects.

Dr Billy Mak Sui-choi, Associate Professor of the Baptist University’s Department of Finance & Decision Sciences, said while it is not unusual for analysts to update their reports, HSBC’s quick amendment “seemed a little bit odd and that a lack of co-ordination was involved.”

“There could be three main reasons: First of all, may be there are some big mistakes that need to be clarified; or maybe some new information has emerged, making a prompt update necessary," Mak said.

"Or maybe the quality control was not well done – because if a report was released in the name of the bank it represents the view of the company, but if there’s distance between [the company and the analysts’ views], it is obviously a managerial problem,” Mak said.

The HSBC report came 10 days after ratings agency Moody's restated its negative outlook on the city's banking system, citing concerns about risks to lenders from rapidly expanding exposure to mainland borrowers. Hong Kong is one of three markets in Asia outside Japan that HSBC is downgrading for the third quarter - alongside South Korea and the Philippines.

But Fan Cheuk-wan, Asia Pacific managing director for Credit Suisse Private Banking and Wealth Management, said she believed that Occupy Central would not have a huge impact on the financial system as the industry had taken precautions.

"Foreign investors are more concerned whether the central government is adjusting the policy of 'one country, two systems' towards Hong Kong," Fan said, adding investors also saw judicial independence as essential.

This month, the Hong Kong government is expected to submit a report on the public consultation on political reform to the Standing Committee of the National People's Congress. The committee will next month draw up principles for the electoral reform framework.

Chan said the Occupy Central sit-in protest would begin if the committee stated principles that did not satisfy international democratic standards.

The Federation of Students, the organiser of the sit-in rehearsal, said the revised timetable was "reasonable" and it would join the protest.

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Beaker
HSBC parroting what CCP told them to say. Sort of like agreeing to use UnionPay so China can say "LaLa, China has arrived." HSBC fully knew that the cards were not going to work outside of Asia.
Paradox314
HSBC is clearly under a large deal of control from the Mainland. Why else would they have switched their inter-bank network to Union Pay? Now, if you go overseas you cannot use your bank card in the ATM's there because Union Pay is a Chinese network and has not gained international popularity. This was an absolutely foolish business decision on the part of HSBC and could only have been made because they were pressured by mainland forces who wish to see their own banking network expand. HSBC is NOT a world bank any longer. It is a parochial Chinese bank - and now an mouthpiece for CPP propaganda.
allan94
occupy central?? isnt that what the maids do every sunday?
ssslmcs01
It is strange that a big multinational bank like HSBC would sing to Beijing's tune despite the fact that international business leaders, including some from China support Occupy Central's fight to introduce genuine democracy to Hong Kong.
When we look at other country's efforts to install full democracy it is easy to see that Hong Kong's situation is very reasonable and has been largely peaceful, there have been no threats of violence from the organizers whatsoever. On the contrary, they have stressed that this is a peaceful protest and they have even conducted rehearsals to ensure that it will be peaceful.
Others who have fought for democracy against brutal regimes have paid with their lives. Look at the bloody massacre, 1989 in Beijing or Aung San Suu Kyi 's 20 plus year fight for democracy in Burma. How many people were slaughtered in these student movements or in the two world wars? It just goes to show that the leaders of these big corporations are willing to go a long way to please Beijing, which would beg the question, why? These business leaders have demonstrated that there is a great gulf fixed between them, their staff and the average citizen.
Paradox314
And let's be clear - is it Occupy Central that may disrupt business in HK or is it the increasingly obvious Mainland crackdown on Freedom and Mainland inflexibility on the issue of democratic reform? People everywhere in the world can see that Hong Kong is 'going to hell on a handbasket' and they can see that its because of Beijing - not because of Hong Kong people's aspirations for democracy.
rpasea
Hongkong's shoeshine banking corporation
Dai Muff
HSBC already chooses its advertising outlets in response to CCP directives, so why should this surprise anyone?
Put it another way HSBC. THE NEED FOR Occupy Central may well be the thing that threatens stocks. The awareness that Beijing does not intend to keep its promises as outlined in the Basic Law.
And yes, as others have pointed out, after the UnionPay fiasco you have marked yourself clearly as an organisation that does not mind taking giant steps BACKWARDS in terms of what you deliver to customers in order to kowtow to the CCP.
It is by the way interesting that Moody's is downgrading Hong Kong in response to the mainland's way of doing things (shadow banking).And HSBC is downgrading Hong Kong because it is resisting the mainland way of doing things (rule of law and financial regulation). Damned if you do and damed if you don't.
lamlm38
Hope this comment will cool down the property market and inflation in general :)
53626772-0afc-4cb0-b92a-35000a320969
In my small small small way, I'm a "foreign investor" and my fear is not about the OC movement but, like Fan said, the loss of freedom and judicial independence. I'm not worried about people that ask for real democracy, I'm worried about people that deny democracy!
Dai Muff
Part of the problem is not the bank's analysts. They do this all the time. It is how big the SCMP chooses to play it. In fact, my stocks went UP on July 2nd.
If Hong Kong has a reasonable semblance of democracy, rule of law, less mainland meddling, a government with a mandate that can get things done, its business prospects will only improve. And that includes HSBC who are too dumb to know it. Which may be a good reason to put your money elsewhere.

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