Hong Kong economy slows as stocks climb, property booms

The Hong Kong government cut its growth target for the year yesterday after a disappointing second-quarter performance as stock and property market indicators reached new heights.

Real gross domestic product increased by 1.8 per cent year-on-year, down from 2.6 per cent in the first quarter and lower than the market-expected 2.4 per cent. On a quarter-to-quarter basis, real GDP dipped by 0.1 per cent.

The poor performance, caused by a drop in tourist spending and weak domestic demand, prompted the government to lower its full-year forecast from a range of 3 to 4 per cent, to between 2 and 3 per cent.

It was the slowest growth since the third quarter of 2012. The economy expanded 2.9 per cent last year.

The grim outlook was in stark contrast to the frenzy in the stock and property markets. The Hang Seng Index yesterday broke the 25,000 barrier for the first time since May 2008, before closing at 24,954.94 - the highest since November 8, 2010.

An index compiled by Centaline Property reflecting private residential property prices reached a peak of 125.66, an increase from last week. The index was 100 in October 1997.