THE recent enemy of the Hong Kong stock market is not interest rates, even though this is the current focus of investor attention.
A bigger threat is the relatively high cost of blue chips, following last year's 116 per cent rise, the highest on record since the 147 per cent increase in 1972.
The risk of China suffering a crash landing later this year, in line with the boom-bust cycle of the mainland economy, also poses a serious threat to the market.
Hong Kong's property prices are also reaching risky levels.
A sharp correction could occur, causing deflation, rather than inflation to engulf the territory, and hurting companies and individuals stuck with assets bought at record prices.
If things go wrong, investors may blame interest rates, but this is not the basic problem.