Hong Kong: "Where Have the Traders Gone? A $4 Trillion Market Is Stuck in a Rut"

From the Wall Street Journal, October 5:

Hong Kong’s stock market has stalled, trading volumes are slumping and foreign investors are backing away

Hong Kong’s $4 trillion stock market is having liquidity issues.

Trading volumes in the financial hub have slumped over the past three years, reflecting fading investor interest in buying and selling stocks on the city’s exchange. Lower trading activity has also contributed to bigger swings in share prices and has become a sticking point for some Hong Kong-listed companies whose stocks barely trade on some days. That has also made it harder for the exchange to attract listings from global companies. 

Hong Kong’s stock-exchange operator said in August that “the sustained high interest rate environment, continued global economic fragility and weak market sentiment” were among the reasons for the trading declines. 

Market participants say the reasons go much deeper. They say many Western and international investors have pulled money out of Chinese stocks and reduced their exposure to the world’s second-largest economy due to geopolitical and other reasons. That has affected Hong Kong’s stock market—where money flows freely—much more than mainland China’s tightly controlled exchanges.

The Hong Kong exchange’s total market capitalization is down by more than a third from its peak in mid-2021, reflecting a loss of more than $2 trillion in value. Chinese companies make up more than three-quarters of the market’s total value. About a third of Hong Kong’s stock-trading volume now comes from traders and institutions in mainland China via a cross-border link, a much higher proportion than a few years ago.

“Liquidity’s been much less from foreigners,” said James Fletcher, founder of Ethos Investment Management, a Utah-based firm that focuses on small-capitalization stocks in emerging markets....

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If interested see also 2020's:

"The Slow Strangulation of Hong Kong"

Hong Kong's history over the last couple hundred years is very different from Beijing's.

Hong Kong harbour and Victoria Peak ca. 1855 CHINESE SCHOOL, 19TH CENTURY Christie's 2011

From Australia's Quadrant Magazine, June 1:
Peter Rowe is a former senior Australian diplomat whose postings included Beijing and Seoul.

The Chinese Communist Party has no peer when it comes to strategic thinking, even if the thinking is wrong or repellent. Anyone else, anywhere else, would have thought that if the Hong Kong chief executive couldn’t cope, the sensible thing to do would be to replace her with someone who could. But no. The party’s answer is to replace its representative in the territory, someone most people wouldn’t have known existed. It’s the right answer, too, for that’s where the real power lies. The new man, Luo Huining, is one who unlike his predecessor isn’t encumbered with any experience of Hong Kong matters. Luo is a party loyalist long familiar with imposing party discipline and organisation in troublesome regions.

It’s an honest answer, too. Chief executive Carrie Lam can continue to twist ineffectively in the breeze, a fit demonstration of the powerlessness of old colonial mechanisms, while the new order gets on with the real task. And the real task is not to address mass protests or their causes, as one might think. Rather, the party’s new representative has announced that his task will be the further integration of Hong Kong into the surrounding provinces of China, especially Guangdong. That means the people of Hong Kong can just get used to the fact that Beijing is not going to take any notice of their demands for democracy and openness; they can start getting used to the inevitability of being more like the rest of China.

Luo has also asserted the right of Beijing to supervise affairs in Hong Kong. The territory’s autonomy is beginning to resemble the autonomy the party promised Tibet when it took over there.
But why not do the obvious thing and replace the chief executive with someone who could do the job? Since the party’s takeover of Hong Kong, that has proved hard to do. The first appointee, Tung Chee-hwa, a shipping mogul, found his business skills didn’t equip him for the heat of politics and stepped down early. He had the unenviable task of following the popular Chris Patten, Britain’s last governor. The difference showed. Patten had been in control, with full support from London. His political skills, affable personality, and importantly his willingness to take on the CCP and not flinch, endeared him to Hong Kongers. The euphoria of the peaceful and seamless handover of Hong Kong to a one-party dictatorship helped Tung for a while, but gradually it became obvious that he had to contend with the party looking over his shoulder, vetoing anything that might reassure the locals but detract from full party control. Unlike Patten, he was not his own master. Donald Tsang, the next candidate, ended up on corruption charges. Leung Chun-ying, next, survived his term in sullen do-nothing isolation, letting the contradictions of his impossible position mount, a time bomb for his successor, Carrie Lam....

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And back in November 2019's "Hong Kong’s Demise" we noted:

It appears that one of Beijing's options is to let Hong Kong die on the vine and wither away as a business center, with Shenzhen, Shanghai and even Hainan island assuming some of the various roles that Hong Kong has played over the years.

And if HK is no longer an entrepôt and the gateway to China it faces the possibility of becoming a colonial backwater but one that is so overbuilt it ends up as an urban hellscape. Imagine this:

Andy Yeung via DesignBoom: 

but without the money that lubricates social intercourse....MORE