(Oct 14): Hong Kong’s economy weathers three major typhoon warnings each year. So far, the Occupy Central protests have proved to be just another passing storm.
Like they do when a tropical cyclone closes schools and floods roads, Hong Kong’s 220,000 financial services workers have logged on from home and met with clients over Skype to avoid the rallies blocking streets in key business districts. Twelve of 15 economists surveyed by Bloomberg reaffirmed their 2014 gross domestic product forecasts since protests began Sept. 26, and only one has lowered 2015 estimates.
“While there are issues, we’ve found them fairly easy to cope with,” said Jessica Cutrera, a managing director and head of operations and compliance for investment firm EXS Capital Group, which has more than 20 employees in its Central office near one of the protest sites. “The protests are not nearly the scale of risk that a serious typhoon or terrorist incident would be.”
Student groups and the Occupy Central With Love and Peace movement have blocked roads near government offices and major financial institutions to pressure the Chinese government to withdraw a proposal to limit nominees for Hong Kong’s top office. Both sides have been at a standoff since police failed to clear the streets with tear gas on Sept. 28, plunging Hong Kong into its worst political crisis since the former British colony’s return to China 17 years ago.
Hong Kong’s GDP fell 0.1 percent in the second quarter from the previous three months. Economists forecast a 2.5 percent expansion for 2014 and 3.1 percent in 2015. Two of the economists who haven’t revised their GDP forecasts said they are still monitoring the situation.
Typhoon Warnings
The protests’ effect on the city’s third-quarter GDP was probably comparable to that of a typhoon, Mole Hau, an economist with BNP Paribas SA, wrote in a note.
The drag on fourth quarter growth could be greater if the disruption drags on. “The severity of the overall impact of the protests on tourist spending inevitably hinges largely on how long the protests will last and how large the slowdown in growth of visitor arrival continues to be,” Hau said.
Hong Kong police today used chain saws and sledgehammers to clear barricades in the city’s business district erected by pro- democracy demonstrators, hours after Chief Executive Leung Chun- ying signaled he’s losing patience with the protests.
Skype Meetings
While the protests initially forced some bank branches to shut, the banks, brokerages and financial firms who account for about 6 percent of the city’s workforce have largely carried on. EXS Capital workers have been delayed getting to and from work and clients have been unable to visit, Cutrera said.
“This does hurt our business, although we have been able to do some meetings by Skype and phone,” she said.
Benny Lo, 33, who works in financial services, said he has continued to reach his office in Central on time throughout the demonstrations, even if trains have been more crowded.
“A few of my colleagues worked from home during the first few days of the protests, but now everything is back to normal,” Lo said. “Even if we can’t come into the office, we could go to the back-up site in the New Territories.”
Retailers and tourism-related businesses suffered the most- direct disruption, with protests blocking key shopping districts during the week-long Chinese National Day break, known as Golden Week. Major Hong Kong retail chains saw declines in holiday sales of as much as 50 percent, according to a survey by the Hong Kong Retail Management Association.
Lower Spending
“We believe the main growth impact of the recent large- scale pro-democracy protests in Hong Kong will mostly work through lower tourist spending,” Goldman Sachs Group Inc. economists wrote in an Oct. 10 note. Goldman lowered its forecast for 2014 growth to 2.1 percent, from 2.3 percent.
Hong Kong retailers were already suffering as Chinese President Xi Jinping cracks down on official corruption and the mainland property market cools. Sales of jewelry, watches and other luxury items have fallen for seven straight months and are on pace for their worst year since at least 2004, based on Census and Statistics Department data compiled by Bloomberg.
The three economists that lowered their GDP forecasts for this year -- ABN Amro Bank NV, Banco Bilbao Vizcaya Argentaria SA and Goldman Sachs -- cited a broader slowdown as a contributing factor.
The effect of the protests will grow more severe the longer they persist, said Arjen van Dijkhuizen, senior economist at ABN Amro in Amsterdam. “Should for instance Hong Kong’s status as a global financial and trade hub be really impacted, that could have stronger negative effects, which are yet very hard to quantify,” he said.
David Gaud, a Hong Kong-based fund manager at Edmond de Rothschild Group, which oversees about $179 billion, said the protests have not changed his long-term view on Hong Kong.
“Things can come back very quickly in terms of tourists, in terms of spending,” Gaud said by phone last week. “We may be back to normal in a matter of weeks.”