At last there appears to be light at the end of a long dark tunnel. Certainly, the right signs have been emerging over the past two months that Hong Kong's economy is turning the corner.
While private consumption in the third quarter was still down slightly from the same period last year, retail sales grew by a robust 2.9 per cent in August. Shopping malls and restaurants are once again teeming with people. The central government's relaxation of travel restrictions, allowing mainland visitors from Beijing, Shanghai and eight cities in Guangdong to visit Hong Kong on their own, is partially responsible for the surge.
But primarily, locals are feeling better and spending more to satisfy needs and desires suppressed during the outbreak of Sars between March and May. With air passenger numbers back to 95 per cent of pre-Sars levels, the Apec Study Centre of the University of Hong Kong estimates the economy has grown 2.3 per cent in the third quarter compared with the same period last year. It expects the full-year growth rate to be 2.6 per cent, which is at the high end of forecasts.
While unemployment remains an issue because more than 8 per cent of the labour force is still out of work, an increasing number of those with secure jobs are making the plunge to buy property. Over the past few weekends, the number of transactions has risen steadily. Although a full recovery is still some way off due to a large inventory of empty flats, the housing market is surely picking up and this will mean more business for real estate agents, decoration workers and those in the home appliances trade.
If we believe the stock market is an indicator of future economic performance, then the outlook seems destined to be rosy. An influx of foreign and local money into the bourse has pushed share prices higher across the board. Not every analyst is convinced that the bear has been laid to rest, but bullish sentiments are pushing the Hang Seng Index towards the psychologically important 12,000 mark.
Significantly, even though the local currency is pegged to the US dollar, the massive inflow of funds has caused the exchange rate to move in favour of a stronger Hong Kong dollar. That was unthinkable a few months ago when discussions over dinner tables were more likely to focus on expectations that the peg would be ditched over time, with the Hong Kong dollar losing 10 to 20 per cent of its value.
