A year ago, Hong Kong’s finance industry was hoping that a China reopening would unleash pent-up consumer demand and bring deals and prosperity to the city. There is no such illusion left.
As the Hang Seng Index selloff deepens, bankers and traders are preparing for the worst. This does not feel like 2008 when the Global Financial Crisis hit but 1998 — in the midst of the Asia Financial Crisis — a few people who have been around long enough lamented to me recently. The late 1990s crisis started with Thailand. But if another one erupts, China will be its root cause and Hong Kong the epicenter.
After the collapse of Lehman Brothers Holdings, Hong Kong was relatively shielded by a rising Chinese economy. The finance industry lost only 7.7% of its workforce, faring much better than a decade earlier, when job losses amounted to over 13%, according to census data. Between August 1997 and 1998, the city’s blue-chip index lost as much as 60% of its value.