Hong Kong recovering, says Morgan Stanley

Hong Kong's economy can rebound this quarter and could reach 0.5 percent of economic growth this year, according to a Morgan Stanley forecast.

The investment bank said in a report that the financial hub will recover slowly from a 4 percent year-on-year contraction in the first quarter, and will grow by 0.4 percent in the second quarter from an earlier year. It may accelerate its growth further to 2.6 percent in the second half of the year, and achieve 0.5 percent of economic growth for the whole year, Morgan Stanley noted.

Hong Kong's economy is expected to grow by 4.5 percent next year if it reaches a quarantine-free reopening with the mainland, it further said.

Private consumption is expected to recover from a 5.4 percent year-on-year decline in the first quarter to grow by 1 percent in the second quarter and 0.6 percent in the second half of the year, it added.

However, the report said the pace of economic recovery is likely to remain slow as the mainland is unlikely to change the zero-Covid policy before the middle of the fourth quarter and the Covid measures in the next two quarters may disrupt the supply chain and affect Hong Kong's trade.

The report also said weak global demand amid aggressive interest rate hikes and geopolitical tensions could also weigh on Hong Kong's exports.

Meanwhile, the Hong Kong dollar fell to the weak end of its trading band for the first time since May 2019, as the dollar gains and tightening in the US undermines the appeal of the city's assets.

The move came around the same time as faster-than-expected US inflation data helped buoy the greenback more broadly against various peers.