Nicholas Spiro

Hong Kong’s extradition turmoil won’t dampen the property market greatly – but China’s economy might

The city’s property market is correlated to the stock market, which remains robust. Moreover, demand from mainland investors continues to be strong while supply of residential and commercial space is limited

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Protesters march from Causeway Bay to the government headquarters in Tamar, Admiralty, on June 16, against the extradition bill, calling on Hong Kong’s leader to resign and to drop the categorisation of the events of June 13 as a riot. Photo: Robert Ng

Nicholas Spiro

Published: 9:00am, 18 Jun 2019Updated: 9:26am, 18 Jun 2019

As a keen observer of global markets, I have learned not to be dismissive of political risks, especially those that are downplayed by investors yet have the potential to affect sentiment significantly, and may even pose a systemic threat.

In the past decade, the influence of politics on asset prices has not only increased dramatically – the rise of populism, which led to Britain’s decision to leave the European Union and the election of Donald Trump as America’s president, is the best example – but has also made the world a lot more unpredictable.

Over the past week, political uncertainty has been nowhere more acute than in Hong Kong. The mass protests against the controversial extradition bill proposed by Chief Executive Carrie Lam Cheng Yuet-ngor – which for the first time would allow Hong Kong to extradite to mainland China Hongkongers, foreign residents and even those simply passing through the territory who Beijing accuses of serious crimes – have thrown the severity of the threat to the city’s prized judicial independence into sharp relief.

By further undermining the “one country, two systems” arrangement, which allows Hong Kong to maintain its own administrative and economic regime, the bill has imperilled the city’s status as Asia’s leading financial hub. While Lam was forced to suspend the legislation on Saturday, the damage has been done.

Not only have the underpinnings of Hong Kong’s freedoms and autonomy been severely compromised, posing a threat to the city’s business and investment environment, the government and protesters remain at daggers drawn, increasing the scope for a prolonged (and potentially more bloody) confrontation. What is more, the crisis inflames tensions between Washington and Beijing at a time when the trade war has escalated sharply.