• Thu
  • Dec 25, 2014
  • Updated: 6:24pm
NewsHong Kong
ECONOMY

Hong Kong economy slows as stocks climb, property booms

Stark contrast as government cuts its growth target after drop in tourist spending - yet HSI breaks 25,000 and property hits historic peak

PUBLISHED : Friday, 15 August, 2014, 6:20pm
UPDATED : Saturday, 16 August, 2014, 8:28am
 

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The Hong Kong government cut its growth target for the year yesterday after a disappointing second-quarter performance as stock and property market indicators reached new heights.

Real gross domestic product increased by 1.8 per cent year-on-year, down from 2.6 per cent in the first quarter and lower than the market-expected 2.4 per cent. On a quarter-to-quarter basis, real GDP dipped by 0.1 per cent.

The poor performance, caused by a drop in tourist spending and weak domestic demand, prompted the government to lower its full-year forecast from a range of 3 to 4 per cent, to between 2 and 3 per cent.

It was the slowest growth since the third quarter of 2012. The economy expanded 2.9 per cent last year.

The grim outlook was in stark contrast to the frenzy in the stock and property markets. The Hang Seng Index yesterday broke the 25,000 barrier for the first time since May 2008, before closing at 24,954.94 - the highest since November 8, 2010.

An index compiled by Centaline Property reflecting private residential property prices reached a peak of 125.66, an increase from last week. The index was 100 in October 1997.

While the "through train" plan to allow mainland people to trade directly in Hong Kong stocks starting in October has fuelled the market, the government has reminded investors of potential abrupt reversals of cross-border fund flows due to uncertainties over interest rates.

The Federal Reserve in the United States plans to stop buying Treasury bonds and mortgage-backed assets in October, signalling its confidence in economic growth without its support. But it remains unknown when it will take the more drastic step of increasing interest rates.

"We may see significant changes in market expectation … and there may be greater volatility," government economist Helen Chan said.

Visitor spending dropped 11.5 per cent from the same quarter last year, offsetting the improvement brought by increasing exports. Chan said that as the number of visitors increased by almost one-fifth from the same period last year, the fall pointed to each visitor spending less.

Their waning interest, adding to an exceptional high base of comparison last year due to a gold rush, caused sales of luxury goods in the second quarter to fall by a third year-on-year. The economy is expected to see modest growth by the end of the year.

A sales tax increase took a toll on Japan's economy, which saw the biggest contraction in the second quarter since the 2011 earthquake. The euro zone was flat after a year of weak growth as Germany reported a shock GDP dip of 0.2 per cent.

 

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15

This article is now closed to comments

jaswinderpalsngh@yahoo.com
Just a hoax to scare hk'ers and prompting them to embrace chinese tourists.
virokick
We need a slowdown to a level that would foster long term sustainability.
More important is that this extreme growth accrues in the pockets of landlords, luxury retailers and jewellery shops.
So we must intentionally engineer a slowdown by;
1) occupying Central
2) limiting tourist numbers by unwelcoming them
3) attacking all big business ( property developers), for crony capitalism
This silly talk about a slowdown won't be felt by the average middle class Until property prices drop at least 20%.
A drop in property and rental prices is what the middle class and youths want to hear.
Not a slowdown in GDP growth against record high property prices.
johnyuan
The fallacy that gives us the contradiction of a slow down in GDP yet a speed up in property and stock price is that the GDP in question is measured against the lunacy period of the tourism boon.
.
It is like someone claiming being poor on the second day after winning lottery a day before because he didn’t win on the second day.
.
This is not the understanding of John Tsang and Norman Chan – outsiders of financial outsiders. This is another lunacy in Hong Kong to have them advising Hong Kong.
jgmoreno
The economy is slowing but the stock and property markets are still booming.
Translation:
The majority is struggling but the party is still roaring on for the rich
oxymoron13
Yada Yada Blah Blah BAHOO! The coffer is still flooded and whatever stats you're throwing at us isn't going to undermine our resolve to prevent unwanted guests from the north to lay siege to our city. Whatever it takes to contain the nightmare be it a market crash. Bring it on!
stu.heaver@gmail.com
Poor economic performance reported as caused by drop in tourist spending.
Drop in tourist spending reported as caused by crack-down on corruption in Mainland China.
So future health of entire Hong Kong economy depends on corruption levels on the Mainland?
How did we let that happen?
CutieCat
"The poor performance, caused by a drop in tourist spending.."
.
????? Pretty sure that tourist spending is classified as 'non-resident spending' by the Census and Statistics Dept - and EXCLUDED from GDP.
Jake VDK exposed this scam in June...
caractacus
Wait until interests rates are increased. Then watch the rats leave the ship.....
lucifer
Recipe for disaster.....Chinese investors will be the kiss of death.
franfyh
Tourists' spending is local's income, it's like export which contributes to GDP.

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