Central banker rejects decoupling in globalised environment Hong Kong's economic growth will slow this year because of its dependence on the mainland and the United States, but it is unlikely to slide into a recession, Joseph Yam Chi-kwong, the chief executive of the Hong Kong Monetary Authority, told legislators yesterday. Although already dragged down by the subprime crisis, 'the US economy has not bottomed out yet', Mr Yam said. 'However, it's too early to say if it will enter into recession. 'Asia markets can not be decoupled from their US and European counterparts under a globalised environment,' he said. Meanwhile, Beijing's tightened monetary policies, designed to combat inflation, could cause slower economic growth on the mainland, which also would affect Hong Kong. Chief Executive Donald Tsang Yam-kuen earlier this week said he expected Hong Kong's economy to grow 5.5 per cent to 6.5 per cent this year. Mr Yam said the financial markets were likely to remain volatile as there was still a great deal of uncertainty, and market sentiment had changed dramatically. 'Some people were in denial' thinking the problem would disappear. Later, others, became almost 'doomsday-ish', he said. But he said he saw no reason for the government to intervene since there was no systemic problem in the market as there had been in 1997 and 1998. He added that Hong Kong financial markets could weather financial crises if proper risk management was in place. He encouraged lenders to make adequate provisions for subprime-related investments. Mr Yam said the rate the Hong Kong Exchange Fund would be required to pay the government, based on past performance, would be more than 7 per cent this year. However, given the volatile market this year, the fund might not get the same return as last year. In such a case, it would have to supplement the payment. He said he did not know when the 'through-train' scheme - which will allow mainlanders to invest directly in Hong Kong stocks - would be implemented. 'The recent subprime crisis may cause mainland lenders concern,' he said. Eventually the mainland government would allow capital outflows, either in the form of a through train, a qualified domestic institutional investor scheme, or another way to permit mainland residents with foreign exchange to invest overseas, he said. Mr Yam also said a slowdown in the economy could shorten the duration of the negative interest-rate environment in the city. Separately, Singapore's Temasek Holdings raised its stake in Standard Chartered from 18 per cent to 19.03 per cent, edging closer to the level that would disqualify the London-based lender as a banknote issuer in Hong Kong. Mr Yam declined to comment on individual cases but said the HKMA would communicate with note-issuing banks whenever a foreign sovereign shareholder held a stake close to the 20 per cent cap, to know their intentions.