Stephen Roach Highlights Volatility in Hong Kong Property Market Amid Economic and Political Challenges

Stephen Roach, former chairman of Morgan Stanley Asia and known as "China's good friend," recently expressed concerns over the cyclical nature of Hong Kong's property market. In a tweet that included a repost of a Financial Times article, Roach pointed out that the current downturn in Hong Kong is distinct due to impacts from what he calls "the China shock."

According to Roach, this "China shock" encompasses both economic and political dimensions, exacerbating the post-Covid challenges that Hong Kong shares with other regions. His observations follow a previous commentary in a Financial Times column where he lamented the decline of Hong Kong, stating, "it pains me to admit it, but Hong Kong is now over." He cited the deteriorating stock market as a symbol of the end of Hong Kong's economic prosperity, influenced by increased control from Beijing and escalating tensions between the U.S. and China.

Despite these challenges, the Hang Seng Index managed a rebound, rising over 20 percent to enter a technical bull market after falling to a 15-month low below the 15,000 level in January. This was spurred by a series of supportive measures from China intended to revitalize the local capital market.

Roach's critical views have sparked heated debates among local officials, including Financial Secretary Paul Chan Mo-po, who have disputed his bleak assessment.

On the real estate front, the primary market in Hong Kong continues to show resilience. Following the removal of all housing restrictions at the end of February, market momentum has been sustained. CK Asset (1113) recently increased the prices of four three-bedroom units at their Blue Coast project above Wong Chuk Hang MTR station by 3 to 5 percent. The developer considers these adjustments moderate and maintains that the revised prices are still below cost, with plans to adjust prices for the remaining units soon.

The Blue Coast project, a joint venture with MTR Corp (0066), has successfully sold 562 flats, generating over HK$10.6 billion. Additionally, CK Asset's El Futuro in Kau To Shan has completed 11 transactions this month, accumulating over HK$213 million.

However, not all developments are faring well; China Overseas' (0688) One Victoria in Kai Tak experienced the cancellation of nine deals, highlighting the market's variability amidst ongoing economic and political pressures.