Hong Kong is poised to enjoy a business boom over the next three years as big as anything we have seen in the past 20. This very bullish outlook comes from Morgan Stanley Asia research managing director Peter Churchouse. The view and the arguments behind it are not necessarily new. What is a bit different this time is Mr Churchouse is nailing his colours to the mast with a prediction of 28,000 on the Hang Seng Index sometime over the next three years. In a straw poll of the bears, Mr Churchouse says those with a negative view of the territory's prospects say: The Hong Kong dollar peg will break in the future. Inflation is wiping out the territory's international competitiveness. Hong kong's trading performance is deteriorating and is likely to continue to do so. Uncertainty is huge as the sovereignty handover looms and in the days following the mainland takeover. Fears about mainland rule after 1997 are also paramount as doubts linger about the rule of law, rising corruption and the likelihood of heavy-handed economic intervention. Mr Churchouse argues some of the bears who hold these views have failed to fully comprehend the important role China has played in Hong Kong's development to date and the rising economic importance of the mainland to Hong Kong ahead. The enclave view of the territory, with six million people, is out of date. 'Instead, we believe Hong Kong should be considered as the capital city of a sub-region of perhaps 100 million people, a region that has been growing at north of 10 per cent a year for a decade,' Mr Churchouse says. The investment bank says the Hong Kong dollar peg has almost served its purpose. Within three years the mainland yuan will become fully convertible and the reasons for holding on to a separate currency in the territory will slowly fade out. Fears of big mainland intervention in the economy should be tempered, as China will be keen to see Hong Kong succeed after 1997. Failure to achieve this will mean Taiwan will probably not be brought back into the fold. Post 1997, Mr Churchouse argues, the territory's role as the global Mr Fixit for mainland business interests will grow and the territory's population will grow. 'For some residents, it may not be quite as secure or sociable a place to live, but it probably will be a great place to invest in and make money,' Mr Churchouse says.
