Analysis-China holds the key to Hong Kong's shrinking stock market
By Summer Zhen and Xie Yu
HONG KONG (Reuters) — Hong Kong's efforts to revive its shrinking stock market are mere stopgap solutions, as analysts say a reversal in fortunes for Asia's premier financial hub would not be possible without a major improvement in China's economic prospects.
Hong Kong's government has for months tried to boost turnover and revive a torpid stock market, the latest coming on Wednesday when its leader John Lee announced an immigration plan tied to investments and a cut in the stamp duty on stock trades.
But the region's key financial centre and gateway to the world's second largest economy is a shadow of its former self as foreign investors reduce exposure to a China they view as increasingly isolated by its opaque policies, struggling property sector and crackdowns on private enterprise.
With a market value of around $4.3 trillion, Hong Kong is home to one of the top-ranked stock markets globally just behind those in the United States, Japan, China and Europe.
But it compares poorly on turnover, with a daily average of $11.3 billion between January and June compared with $261 billion for Nasdaq, $27.9 billion for Japan and $77.9 billion for China's Shenzhen exchange. New share offerings in Hong Kong have fizzled.
Dickie Wong, executive director of research at Kingston Securities, said the stamp-duty cut was in line with expectations.
It might spur a «short-lived rebound» in the Hong Kong stock market, he said, but longer-term issues such as the exodus of foreign investors and the tensions between China and the United States would remain an overhang.
The Hang Seng stock index and the Hang Seng China Enterprises Index are down more than 11% each this year.
The HSI hit a 22,700.85 peak in late
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