On the morning of August 9, the day after markets in Europe and the US collapsed, the Hong Kong government agreed to sell a plot of land at the minimum asking price to the sole bidding group that bothered to show up. For a property market that has seen prices rising 80 per cent in the past 30 months, the results sent a frisson of shock through the territory. That same day, the Hang Seng stock index dropped 5.7 per cent.
Several days later, Kevin Lai, the local economist for Daiwa Capital Markets, noted that with a 0.5 per cent seasonally adjusted contraction over the second quarter, Hong Kong – the most externally driven economy in the region – is now “halfway into recession”.
Of course, the Hong Kong market always drops more because it is liquid and foreign investors in Asia sell what they can, not just what they wish. But suddenly, the fundamentals have shifted as well.