Hong Kong’s financial system was already in recession when the pandemic hit in January. Six months of working battles between pro-democracy campaigners and native authorities had deterred lots of the guests who gasoline the profitable tourism business, whereas the specter of violence on the streets and closures of outlets had despatched retail gross sales down almost 1 / 4 on the earlier yr.
With a lot of Asia shut down by coronavirus restrictions throughout the winter months, there was little expectation of a restoration till the spring, when the extent of infections fell to virtually zero throughout mainland China and a lot of the remainder of the area, and the measures could possibly be eased.
Some analysts anticipated the restoration to be robust. Hong Kong is a hub for monetary companies in competitors with Singapore. Many employees might function from residence and preserve the identical degree of exercise.
However Hong Kong’s dependence on commerce from India, the Philippines and the US, the place the virus continues to flourish, left it extra susceptible to a second spike, and in the summertime instances started to rise once more. The flare-up triggered new restrictions on households and companies and an instantaneous downturn in enterprise exercise.
Final month, the territory’s authorities mentioned GDP within the second quarter of this yr was down 9%, after a 9.1% downturn within the first quarter.
In Might, the Worldwide Financial Fund had mentioned it anticipated Hong Kong to recuperate within the second half of the yr and predicted that its GDP would drop simply four.eight% throughout 2020.
Retail gross sales information due out this week will present a clue about how lengthy the recession will final and whether or not a rebound in buying is probably going, although the widespread reluctance amongst shoppers throughout China to spend in the way in which they did in earlier years is predicted to maintain gross sales figures subdued.
A brighter image has emerged for these concerned within the finance business, which stays Hong Kong’s largest enterprise exercise, because the inventory market has adopted the identical trajectory because the US markets to succeed in all-time highs this yr.
Nonetheless, analysts have turn out to be involved in current weeks that the summer time enhance in infections and the current collapse in income and scandal over suspicious monetary transfers at HSBC, which has a big presence in Hong Kong, might ship the market into reverse. Up to now the Grasp Seng index has fallen to 23,275, having climbed to a excessive of 26,669 in July.