Falling stocks alarm

Hong Kong's Hang Seng index (HSI) slumped over 500 points on Tuesday, the biggest single-day decline in seven months, after worries about the debt crisis intensifying again in the euro zone triggered falls across Western markets the day before. Hot money has been flooding emerging markets around the world since mid-2012 as major development countries resorted to quantitative easing monetary policies to jolt their economies out of recession. Hong Kong's property and financial markets have experienced repeated surges that are pushing an asset bubble ever closer to bursting. Meanwhile the US and European debt crises remain unresolved and their economies in a slump.

Always susceptible to mood swings in other major markets, Hong Kong-listed stocks sneeze every time their overseas counterparts catch a cold with or without a good reason. The remarkable drop of the HSI on Tuesday served a timely reminder to local individual investors that they should not be overly optimistic about the financial market at this moment; they are better off keeping their risk management in high gear.

The HSI has gained more than 5,000 points since last June while the Dow Jones Industrial Average has topped 14,000 points, prompting more hot money pouring into markets to make some quick profit and pushing stocks to new highs one after another. However, the dazzling picture of stock market rebounds around the world has been painted merely by excessive liquidity, as the real economy remains weak. The sudden dive of Western markets on Monday took its toll on Hong Kong the next day as expected. It can be interpreted as profit-taking by investors or a sign the US and European economies are out of gas again.

Major Western governments are well aware that their economies are far from fully recovered and quantitative easing simply cannot last much longer, because its stimulating effect will fade away while its bad mojo grows stronger. The US Federal Reserve has already let it slip that QE4 may end sooner rather than later. There is no doubt hot money will pull out as soon as that happens, leaving stock markets with little steam to keep rising.

Hong Kong's financial market is fully open and very sensitive to jitters in Western markets. It overreacts more often than not. That is why local small investors should be extra wary of the current political as well as economic situation in the West and avoid falling victim to a market crash when it happens.

This is an excerpted translation of a Wen Wei Po editorial published on Feb 6.

Tips for HK travelers

As the Year of the Dragon roars to a close and the Year of the Snake slithers near, many Hong Kong residents are heading northward for family reunions or holiday fun on the mainland. Thanks to a longer than usual Chinese New Year holiday, more people will be crossing the border in the next few days compared to recent years. Not to be anticlimactic, however, there are some things that mainland-bound Hongkongers should consider before they hit the road, lest some unexpected "glitches" spoil their festive moods.

Holiday travelers should be sure that luggage falls within weight limitations and must not contain any banned/restricted items. The size and weight of luggage was not a major issue on mainland-bound trains until now, as the Mass Transit Railway Corp has set a maximum weight on each piece of luggage at 23kg, along with measurement limits, to prevent parallel trading of baby formula. Local residents planning a trip to the mainland should make sure their luggage is not over-sized and/or overweight so that they won't have to give up some of their belongings and repack at the last minute.

Holiday travelers intending to ride the newly opened Beijing-Guangzhou High-speed Railway should also take note. The train takes only nine hours to go from Longhua in Shenzhen to Beijing, but because of its popularity, this transport option is already overbooked. All day-time departures from Longhua and Guangzhou up till the lunar New Year's Eve have been sold out and only a small number of night departures were still available on Tuesday.

As for those who have bought the high-speed rail tickets, they must keep in mind the weather is colder than usual in much of the mainland these days, thanks to a blast of chilly air from Siberia. Heavy smog could be another grave threat to their health once they arrive in Beijing. Also, the high-speed trains could become "slow" trains if low visibility warrants such a cautionary measure, as weather conditions delayed several by 45 minutes to an hour recently.

Finally, Hongkongers taking the high-speed rail are advised to bring their own food for the trip so that they don't have to suffer the box meal sold onboard, which tends to be unappetizing if not downright disgusting, usually costing 50 yuan apiece, according to some who have had the bad luck of eating the "punishment" already.

This is an excerpted translation of a Ta Kung Pao editorial published on Feb 6.

(HK Edition 02/07/2013 page10)