Normally, the word 'I' should have no place in a financial column like Monitor. But once a year I make an exception to the rule, looking back at the columns I've written over the last 12 months and seeing what I got right and where I went wrong.
I do this usually at New Year, but as I will be away for the next few weeks, this seems a good time to review my hits and misses of 2008.
Certainly, 2008 was a tremendously difficult year for anyone trying to peer into the financial future. There was an awful lot to be wrong about, and I got a lot of it wrong. But although I've been criticised by some readers for being too pessimistic, my biggest mistake of the year was being too positive on Hong Kong's outlook.
On December 31 last year, I wrote 'although 2008 could well be another volatile year, asset prices are likely to carry on rising in coming months. In fact, there is a real probability the bull market in Hong Kong stocks and properties could inflate into a full-blown bubble next year.'
The reasoning was simple. With inflation rising and interest rates negative in real terms, I reasoned savers would take their money out of bank deposits, where it was losing value, and invest it in asset markets.
That turned out to be wrong, but in retrospect, only half wrong. As the first chart below shows, the stock market had a terrible 2008. But the story in the property market was different, at least during the first few months of the year.
Between September 2007 and March this year, residential property prices climbed 27 per cent, according to the Centa-City index. That rise carried home values to more than double their 2003 low and did indeed leave the market looking bubbly. Prices have now fallen 21 per cent since June.
