Just for a moment, if you squinted your eyes and blocked out memories of the past three years, it all felt blessedly normal.
The event – a three-day Global Financial Leaders’ Investment Summit sponsored by the Hong Kong Monetary Authority (HKMA), the city’s de-facto central bank – certainly looked the part. It bore all the trappings of normality, from the venue – a bland conference hall in Hong Kong’s Exchange Square – to the attendees: top-tier global banking, private equity and asset management chief executives, most of whom had flown in specially from New York and London.
But nothing is normal in Hong Kong these days.
Take the event itself, a kind of ‘coming in’ party – a way of reminding global investors that the city is still open for business. Delegates were happy enough to play the role of booster. In a pre-recorded speech, People’s Bank of China governor Yi Gang pointed to its “great potential” as a bridge to the mainland, and in areas such as fintech and green finance.
UBS chair Colm Kelleher insisted global bankers were all “very pro-China”. Hong Kong chief executive John Lee extolled the city as the “only place [where] global advantages and the China advantage come together” and pledged to continue to ease quarantine restrictions.
[Hong Kong is] losing its lustre. The role of Asia’s chief financial centre – a mantle it once wore with insouciant ease – is being usurped by Singapore
Plenty of people couldn’t make it. Citigroup chief executive Jane Fraser pulled out after testing positive for Covid. So did Blackstone president Jonathan Gray. The city’s financial secretary Paul Chan delayed his arrival after catching coronavirus in the Middle East.
But that was to be expected. The world has grown to accommodate Covid as it shifts to its endemic stage. Only China has not. It shows no sign of opening its borders or of abandoning a draconian zero-Covid policy that’s sucking the life out of Asia’s largest economy.
And where mainland China goes, so goes its offshore financial hub.
Which is what made the event so odd. Garlanded delegates pretended that everything was normal, or was at least headed in that direction. Yet they had to take tests on arrival, before departure and every day in between. They stayed at designated hotels and ate in private rooms, separating them from residents. It had echoes of the closed-loop system Beijing used to segregate participants at February’s Winter Olympics.
Bridge to what?
Outside, it wasn’t hard to find reasons to fret about the city’s future. Since 2021, around 300,000 mostly white-collar workers have fled the city. The Hang Seng Index has lost more than a third of its value this year and is trading at its lowest level since early 2009.
In his keynote speech on Thursday, Chan praised Hong Kong’s “small but open” economy.
He’s half-right. GDP is small and getting smaller. Output has contracted for three quarters in a row, shrinking 4.5% year-on-year in the three months to the end of September. A weak external environment, depressed spending and China’s woes make that unlikely to change.
Chan tried to put on a brave face. “I hope you all feel recharged and energized,” he beamed, as the camera panned back to reveal a row of weary-looking men all wearing face masks.
Opinion on the sidelines was mixed. “It was very impactful to have so many [blue-chip] financial firms here,” said the head of Asia investment banking at a Western lender. “There were some good discussions and interesting sharing of views.”
Another delegate said Hong Kong’s problem was it couldn’t return to normality until its big brother did. “This place is all about China, and in private the mood is incredibly bearish. Though no one would say it in public, China is uninvestible.”
Disappointing answers
The final day’s first panel was overseen by Weijian Shan, the trim and straight-talking head of Asia-focused alternative investment firm PAG. To kick things off, Shan asked a simple question: in which of the four big economic nations and blocs – China, the European Union, Japan, the US – would panellists put their money to work.
Their answers surely disappointed any Hong Kong/China boosters in the crowd. William Conway, co-chairman of Carlyle, opted for Japan, largely because the yen was so weak and “everything is on sale for people who have dollars”.
Man Group chief executive Luke Ellis said that for equity investors, Japan was the “most attractive” option. Jim Zelter, co-president of Apollo Global Management, which oversees $550 billion in assets, added: “Unabashedly, the most interesting opportunity right now is US credit.”
None of them mentioned China.
Hong Kong still offers a lot of positives. The rule of law is just about clinging on. Chan pointed to the city’s excellent regulators and well-capitalized banks. There’s no better venue to buy and sell mainland-listed and registered assets and securities.
But it’s losing its lustre. The role of Asia’s chief financial centre – a mantle it once wore with insouciant ease – is being usurped by Singapore. Global investment dollars and euros are fleeing China, not flocking to it.
Everyone sees this fragility; some seek to benefit from it. Earlier last week in Doha, the chief executive of Commercial Bank of Qatar Joseph Abraham made a point of comparing stability between the Gulf state and parts of east Asia.
“There are opportunities from Asia given the uncertainties in Hong Kong [and] Taiwan,” he told Euromoney. “All these high-net-worth people need alternative safe-haven locations, and Qatar ticks that box.”
This week, Hong Kong’s financial leaders took great pains to remind the financial world the city was still open for business. You had to wonder how many of them really cared.
