Cash for Hong Kong’s Boom Bust Economy

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  • Post last modified:December 24, 2018

Another government surplus may indicate that parts of the Hong Kong economy could receive a stimulus package. Ailing sectors, like retail and travel, are expected to receive fiscal support. On the other hand, the booming capital markets sector is expected to also receive some benefits to help continue drive growth.

According to KPMG, Hong Kong is expected to post an $80.7B HKD surplus for fiscal year 2015. More than twice the expected surplus analysts were expecting at the beginning of the year.

Driven by substantial volume in land transactions and stamp duties (a tax on a sale or transfer of an immovable property), Financial Secretary John Tsang Chun-wah is expected to announce a new wave of stimulative efforts.

One-off relief programs might include low income benefits and lower profit taxes. Permanent residents might also see stamp duties waived (if homes are worth less than $4M HKD). These possibilities are all plausible according to KPMG.

A more fiscally responsible alternative to government induced cash injections are stock loans. Custom liquidity considerations can be leveraged in order to provide an optimal stock loan. Ideal for business and personal utility, stock loans provide a variety of advantages to clients. Benefits include, but are not limited to, exposure to the booming capital markets sector.

Bullish market indicators, like commercial real estate volume eclipsing 2013 levels, has recently been counterbalanced by the tourism sector taking a hit year-over-year. The total number of tourists visiting Hong Kong in 2015 tumbled 10% vs. 2014 levels. Softness was mainly due to civil unrest and recent market volatility.

According to the South China Morning Post, Tourism legislator Yiu Si-wing is hoping for financial help. Si-wing is expecting $100M HKD to fund the Hong Kong Tourism Board. Funds are typically used for promotions and advertising to attract tourists. Si-wing is shooting for a 25% increase in funding over last year, indicating challenges ahead for the sector.

While tourism struggles, the capital markets have been booming. Hong Kong was the most popular geography to IPO in for 2015. Capturing the top spot globally, Hong Kong was above New York, Shanghai and London. Local bankers regained their number one spot, not seen since 2011. Despite macroeconomic headwinds, like interest rate uncertainty, 2016 is also expected to be a top grossing year. PricewaterhouseCoopers (PwC) estimates, “that funds raised by IPOs could reach $300B HKD…[and that] this trend will continue from 2015 into 2016.”

Given that Hong Kong’s existing float of shares is increasing, faster than anyone, stock loans will continue to grow. For companies seeking a private sector solution to a cash crunch, stock loans are available to help.