In February 2016 I wrote on Hong Kong and said then I’d probably not write anything more about the place for some time. Eight-plus years is enough time to have left the subject alone, so I’m back with an update.
In that 2016 note I flagged most of what has come to to pass, ex a pandemic and the precise nature of Beijing’s actions to tame the then increasingly fractious town. Numbskulls pulling Beijing’s tail at the time brought about the very thing they claimed to most want to avoid, and have become nonentities as a result. This was an entirely predicable outcome.
I’ve no interest in the he-said, they-did, she-could-have arguments on all that’s taken place. The bottom line is that noisy malcontents have been silenced, many of the unhappy have left and those who remain have to make a choice: stay, endlessly kvetch and live a life of perpetual regret or, as I believe the bulk of the population are now prepared to, get on with whatever the next chapter may be.
Perma-kvetchers need reminding, the Hong Kong of their flawed recollection never existed. We were never a democracy or anything close, the rich (colonials and the local well to do) never thought much about social welfare, corruption was endemic for much of the past under the British, housing has always been expensive and so on.
The unhappy may not want to hear it, but it’s true nonetheless, Hong Kong today is, in fact, its very best self.
[The chart is a flawed guide to progress, but I believe one of the most honest]
More on present benefits; Hong Kong is the most agreeable tax environment in the developed world, the police are honest, the law courts efficient and fair, the arts scene is flourishing, residential property prices just went down 30% (how much more affordable is that?), office space is abundant and competitively priced, our government believes in fiscal prudence, emergency and medical services are available to all and are first rate, and the population is again rising.
I almost forgot, the streets are safe, day and night, crime is practically non-existent, all of Asia connects through one of the best airports in the world, Southern China is mostly now a short train ride away, inflation is tame, country parks are literally a walk away for most, locals are friendly (and most all can help in excellent English), restaurant options are unequaled in Asia (Tokyo-ites may quibble), education is world class, the administration is courteous, efficient and stable, and I think that’ll do for now.
Look closely enough at any Paradise and you’ll find an unemptied trash can somewhere. Ditto Hong Kong, many things could be and should be improved, but the basic fabric of life here today is very agreeable. Sure, don’t dis. the flag, the anthem or the CCP or you’ll have a problem; but for most remembering this is neither hard nor an imposition.
Reports of Hong Kong’s demise have been greatly exaggerated before.
This cover was a famous 1995 contribution. After this Hong Kong weathered the Asian Financial Crisis, a stock market collapse, the implosion of the dot.com boom, a six-year property bear market and up to that point the scariest pandemic the world had ever experienced, SARS.
The city changes, it adapts, it rolls with the punches, it rebuilds, it refocuses, it finds new paths to relevance and I’ve no doubt this process will continue. As I write I don’t know what that future is; but I’m pretty sure an unhappy recent chapter has at last come to a close.
Investors are now presented with bombed out asset prices, a repriced infrastructure, an influx of can-do youngsters from the North, the extirpation of unhelpful curmudgeons and a government, in a world of vexatious geopolitical alternatives, that offers an oasis of stability.
For value-investors this is about as fertile terrain as I believe one gets to plant cash in and, as a consequence, I’m unhesitatingly increasing exposure.
Nial Gooding CFA
Wednesday, June 12th 2024
[An important aside on the future progress of more plural representation in Hong Kong. Missed by the mainstream media (ignored more like) was an important White Paper promulgated by China in December 2021. It sets out a clear path to what was originally promised in the Basic Law which a cabal of nitwits turned down in 2014. In short, in time we will adopt a system to directly elect our Chief Executive on precisely the terms that were originally promised. This will give Hong Kong a more democratic system than any city or province in China has, or will have. Please, take some time to read the document and be better informed on this.]