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Thursday, December 06, 2018, 15:25
Outside the box
By Peter Liang
Thursday, December 06, 2018, 15:25 By Peter Liang

Hong Kong stock prices crashed on Thursday as investors’ confidence, badly battered by the trade war between the United States and China and growing fear of a property market meltdown, continued to slide.

The latest annual survey by US investment bank J.P. Morgan shows that investors’ confidence has sunk to the lowest level since the outbreak of the global financial crisis in 2008. Some stock analysts predicted that the benchmark index of Hong Kong stocks will fall to below 24,000 from the current 26,000 early next year.

Hope for a deescalation of the trade war raised by the 90-day truce was quickly dashed by Washington’s non-conciliatory rhetoric. Manufacturers who have factories on the mainland said that the uncertainties have made it impossible for them to take longer-term orders. They also reported that it has become increasingly difficult for them to secure bank loans.

Talks of a milder than earlier expected increase in interest rates hasn’t helped bolster confidence in the property market. The decline in home prices, which began in August, is gathering momentum while demand continues to contract.

Property developers are painting a much gloomier picture, predicting a decline of up to 30 percent in average home prices in 2019, a much sharper fall than their earlier estimates of 10 percent of less. Sales of apartments in all market segments have remained sluggish despite price cuts.

Property analysts are convinced that the market has slipped into a down cycle and the best they can hope for is a gradual decline in prices over the next several years to allow the property bubble to deflate. In a high interest rate environment, property prices have to fall an average of more than 30 percent before buyers will return.

Some high-net-worth investors may choose to follow their US counterparts in shifting at least part of their investments to the security of long-term bonds. The choices for the less wealthy investors are the so-called defensive stocks, such as utilities, that have a record of high dividend payouts.

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