The last lecture of General Education and Public Affairs Certificate Course (通識及公共事務證書課程) was held on 18 December 2010. I would like to summarize it for sharing.
第十四課 (18 December 2010)
何偉立先生主講 – 天駿資產管理投資總監
Mr. Marko Ho (Chief Investment Officer, Legends Asset Management) presented the topic called “Global Economics of the Post Financial Tsunamis”.
Firstly, Mr. Ho explained the US housing market bubble was started in 2000. The following diagram showed the US housing price index.
Then Mr. Ho briefed the path to financial tsunamis included i) Bubble forming, ii) Weakening fundamentals, iii) Financial system meltdowm and iv) Unprecedented intervention. The more details description was stated in the following diagrams.
After that Mr. Ho explained how USA to counter financial tsunamis. They used Quantitative Easing (QE) like to flow money on helicopter. In theory, Banks with more money would increase lending and stimulate the economy. The traditional equation is PQ (GDP) = M (Money Supply) x V (Vecosity).
Actually, the money was not invested in USA but went to Asia asset market.
The side-effect of QE was US Dollar to be further depreciated.
For China, GDP contracted during crisis but with a turnaround in Q1 2009 by the sharp money supply and fiscal spending. There were two tools used by China Gov.
i) Fiscal policies: RMB 4 Trillion; Quicken the railway network development and Heavy subsidization on auto and white appliance consumption;
ii) Monetary policies: Huge incremental new loan and money supply; Low interest rate to counter deflation; Property market sales booming and Stock market rebounding.
China GDP was able to keep the certain percentage in 2009. It was found that the Gross Capital Formation could cover the loss of Net Export.
Hong Kong was also affected by the crisis. The continuously decrease the GDP in 3 quarters. Impact mostly in financial industry and the unemployment rate was only 5.43% at the peak in 2009, implying that not much painful out of financial industry.
However, property prices soften for a short term during crisis, which reached record high in 2010 and surpassing the level of 1997. The following diagram showed the private housing was under-supply to 2012.
Property value per GDP from now was higher than the level in 1997!
Mr. Ho said Hong Kong government was do nothing for this crisis and QE form USA that resulted housing market bubble in Hong Kong again.