No home sweet home as protests roil

Editorial | Mary Ma 31 Jul 2019

Anti-government protests over Chief Executive Carrie Lam Cheng Yuet-ngor's fugitive extradition bill are taking a heavy toll on the property sector.

The impact is expected to be short term if the administration is able to adopt the right measures in the near future to address people's boiling concerns over governance, to resolve the worst crisis facing the city since the 1997 handover.

On the first trading day immediately after the fierce clashes between riot police and demonstrators protesting against the gangsters-led mob in Yuen Long a week ago, property stocks suffered a blow harder than the rest of the financial market.

Wharf Real Estate Investment Company was one of the stocks leading the fall. New World Development also suffered, with others coming under various degrees of pressure. The confrontations between police and protesters on Saturday and Sunday were fiercest since mass demonstrations broke out in June.

In the face of social instability, it's only right for investors to exercise greater caution.

Wharf stabilized and recovered some of Monday's loss yesterday, the second trading day after the weekend violence, and so did other property stocks. But some remained sluggish, continuing to edge lower.

Weekend sales in the secondary sector were reported to be much weaker than usual too.

In Yuen Long, the scene of the ugly random attacks by mobsters on demonstrators returning home from a peaceful protest, and on innocent passengers at the Yuen Long MTR station and inside train compartments on July 21, only one secondary flat reportedly changed hands over the Saturday-Sunday period.

Understandably, homebuyers avoided Yuen Long like the plague.

For other successful sales in other areas, homeowners generally had to slash their asking prices to secure a deal. If the government's cooling measures have failed to curb the property market, it's evident that pressure is mounting on home prices due to the violent scenes in recent weeks.

Meanwhile, the US Federal Reserve was meeting this week and is expected to announce the country's first interest rate cut in more than a decade.

There had been some speculation among market watchers the Fed might slice the rate by as much as 50 basis points - more dramatic than predicted. If that ends up to be the case, I'm sure the Hong Kong property market would react with surprise.

However, I doubt the central bankers would lower the interest rate so drastically, even though US President Donald Trump would like Fed chairman Jerome Powell to act aggressively to aid his trade war with China.

Instead, a 25-basis point rate reduction is more likely, in response to a slower economic growth forecast for America.

Will Hong Kong banks follow suit to trim interest rates locally? While property developers and homebuyers would like to see that, the chance for this to happen is low, since SAR banks hadn't followed the Fed in raising rates correspondingly for the past two years or so.

Local banks will likely stay put on interest rates. So, don't bet on corresponding rate cuts here.

 

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