On April 24, Hong Kong Financial Secretary Chen Maobo wrote in a blog: The epidemic is gradually under control, and the effect of consumer coupons will help support the steady improvement of Hong Kong’s economy this quarter; but he also reminded investors that despite the local inflation rate in Hong Kong It is relatively mild, but potential risks should still be managed prudently, and in particular, it is necessary to always be vigilant against the “surrounding external environment”.

Epidemic-controlled economy gradually stabilizes

Chen Maobo pointed out that the improvement of the epidemic prevention and control situation has given Hong Kong room to relax a little.

He further said that it will take time for some economic indicators to improve, because many enterprises and personnel are still under the economic pressure and blow caused by the past epidemic, and the actual living pressure they face still requires a stable environment and enough time to gradually ease.

According to data released by the Statistics Department of the Hong Kong Special Administrative Region Government on April 21, the seasonally adjusted unemployment rate in Hong Kong from January to March 2022 was 5%, a significant increase of 0.5 percentage points from December 2021 to February 2022. The number of people increased by more than 27,000, and the total number of unemployed increased to 188,000; in terms of different industries, the unemployment rate of the catering industry increased by 2.6 percentage points to 11%; the unemployment rate of the retail industry rose to 7.7%, an increase of 1.4 percentage points; The underemployment rate rose 0.8 percentage points to 3.1 percent.

In response to the above figures, Chen Maobo said that although the economic momentum is starting to improve now, the unemployment rate from February to April published in the middle of next month will still reflect the difficult situation of the fifth wave of the epidemic, so it will take time for the unemployment rate to turn around and fall back.

In fact, as the number of new local cases in Hong Kong continues to decline, the draconian social distancing measures implemented in Hong Kong for several months are beginning to be gradually eased in stages.

According to the unblocking roadmap previously announced by the Hong Kong SAR government, Hong Kong began the first phase of relaxation of social distancing measures on April 21, restaurants and evening markets resumed dine-in, and a series of venues such as gyms, beauty salons, and theme parks reopened.

The main relaxation measures include: extension of dine-in dining in restaurants to 10 p.m., with a maximum of 4 people per table; reopening of most listed premises; it is recommended to relax the gathering restriction order to 4 people; Local tour with more than 30 people; mask order maintained.

Law Chi-kwong, Secretary of the Labour and Welfare Bureau of the Hong Kong Special Administrative Region Government, also previously stated that the labour market will continue to be under pressure in the short term, but the recent easing of the local epidemic and the issuance of a new round of consumer vouchers should gradually improve the business of consumer-related industries, thereby helping employment. In addition, the SAR Government has introduced a number of relief measures to support enterprises and safeguard the employment of employees, including the upcoming “2022 Employment Support” scheme. He called on all sectors of the community to work together to support the fight against the epidemic, with a view to bringing the local epidemic under control as soon as possible.

The entry of the US into the rate hike cycle will not affect Hong Kong’s financial and monetary stability, and prudent management of potential external risks

Chen Maobo said that although Hong Kong’s economy is gradually stabilizing and the local inflation rate is still relatively moderate, it is still necessary to always be vigilant against the turbulent external environment, especially the geopolitical situation and the trend of interest rates.

According to data released by the Census and Statistics Department of the Hong Kong Special Administrative Region Government on April 22, the composite consumer price index in March rose by 1.7% year-on-year, which was higher than the increase of 1.6% in February. Excluding the impact of the government’s one-off relief measures, the underlying inflation rate was the same as 1.7%, higher than the combined average increase of 1.5% in January and February.

Chen Maobo pointed out that the United States is facing an inflation rate as high as about 8%, and the Federal Reserve has raised interest rates by 0.25% in the middle of last month, the first time in more than three years. According to the recent remarks by the Fed officials, the market generally expects that the United States may further raise interest rates sharply this year to cope with high inflation. The impact of the global economy, capital flows, changes in asset prices and financial market volatility.

Chen Maobo said that under the linked exchange rate system, the US interest rate hike will be transmitted to Hong Kong, and the interest rate will inevitably follow up, but the actual speed of Hong Kong interest rate adjustment will also be affected by the local capital stock. He pointed out that most of the 1 trillion yuan of funds that flowed into Hong Kong between the 2008 global financial crisis and 2015 remained in Hong Kong.

He stressed that the entry of the US into the interest rate hike cycle will not affect Hong Kong’s financial and monetary stability. The linked exchange rate system has gone through many economic and interest cycles for nearly four decades, and it has always been effective.

Chen Maobo said that it can be expected that as the US dollar raises interest rates, the Hong Kong-US interest rate gap will widen, triggering arbitrage activities, the Hong Kong dollar exchange rate will reach the 7.85 weak-side exchange guarantee, funds will flow out of the Hong Kong dollar market, and the Hong Kong dollar interest rate may also be based on market conditions. An increase, which is the design of the linked exchange rate system, is a normal phenomenon. Hong Kong has a huge monetary base (2.2 trillion) as a buffer for capital outflows.

The interest rate hike will also have an impact on home buyers and the quality of mortgage loans, but Chen Maobo said that the borrowing ratio of the Hong Kong property market is stable. Citing data from the Hong Kong Monetary Authority, he said that at present, more than half of residential property owners in Hong Kong do not have mortgage loans, and the average contribution-to-income ratio of bank mortgage lenders is at a low level of 36% under the eight rounds of macro-prudential measures. It has also undergone stress tests and has the ability to resist rising interest rates.

As for asset prices, Chen Maobo said that in addition to changes in interest rates, other factors such as supply and demand, market expectations on the macroeconomic outlook and investment sentiment, whether the stock market or the property market, will influence its development. , investors still take the prudent management of potential risks as the best policy.

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