Hong Kong's Protests Could Send Its Property Market Into The Worst Slump Since The 1998 Asian Financial Crisis


hong kong protest


Pro-democracy protestors took to the streets of Hong Kong on July 1 marching for universal suffrage (the right to vote) in the 2017 elections.

This came on the back of not just an informal referendum on making the 2017 elections more democratic, but a white paper published by the State Council Information Office in China in June.

The paper stated that there are "many wrong views are currently rife in Hong Kong" as concerns the "one country, two systems."


Now, banks are warning about the implications of the Occupy Central protests on broader asset classes.

Paul Louie at Barclays has warned that "unexpected shocks" like the Occupy Central protest could cause a slump in Hong Kong's property market, according to South China Morning Post. "If a shock were to occur, we believe the subsequent recovery could take a long time, and better resemble 1998 [than the two later crises]," Louie is quoted saying.

While Louie didn't go in to detail on the impact of the Occupy Central movement in the report, he told Joyce Ng, Jeanny Yu and Ray Chan at SCMP, that the protests "could be one of the unexpected shocks".


Meanwhile, HSBC cut its outlook on Hong Kong stocks saying, "we reduce Hong Kong to underweight on concerns about negative news flow. 'Occupy Central a campaign for greater democracy, could sour relations with China and may hurt the economy," according to Dennis Chong at AFP.

But after the report sparked some outrage, it was amended to show that the new rating was because of "the risk of weak residential real estate prices, the slowdown in mainland tourist arrivals, the market's link to US interest rates... and weak earnings momentum"," in addition to the protests.

HSBC was criticized and accused of trying to appease Beijing, and independent financial analyst Francis Lun told AFP that "they're trying to distance themselves, even they realise that they made a mistake."


We previously reported that despite suggestions of the sort, Beijing is unlikely to send its military to Hong Kong because of the implications for business and investor confidence in Hong Kong.

And remember, Hong Kong has significant exposure to mainland China through inter-bank lending to mainland banks, "a complicated loop of cross-border banks and non-bank corporate entities," and "a house price crash," Freya Beamish at Lombard Street Research pointed out in a note earlier this year.

We'll keep an eye out for "unexpected shocks."