HK budget - Quick comments on a drawn out speech

quick comments: 1) The budget speech is getting way too long - 2 hours 15 minutes... 2) The problem of HK's increasing govt led economy is quite clear from how many fingers are stuck in so many pies, including those pies the city has no competitive advantage in (AI?). 3) deficit spending and multiplication of funds and govt run quangos is the new challenge - HK's debt to GDP is likely to go from 14.4% to a record high of 19.9%. It is a dangerous sense of security to say we are better than the 'developed economies' to borrow like there is no tomorrow, when the global environment is worsening on economic, trade, and geopolitical fronts, while interest rates are exploding from multi-decade lows. Very worrying! 4) small handouts to calm the masses is wearing thin - and complicating the tax return process. Just cut the tax rates already, or abolish income tax like Trump promised will do for the USA...? Below are the more important sections we have extracted for your reference, all text between the [] marks are our comments: Hetao Hong Kong Park 67. We will seek approval from the Legislative Council (the LegCo) to inject a funding of $10billion to the park company to accelerate the development of the Hetao Hong Kong Park by engaging the market to speed up the disposal of the remaining land parcels under Phase 1 development, providing key infrastructure, further strengthening support to start‑ups and establishing a venture fund. [comment: going headlong into tech investment with tax payer money can be a bottomless drain on HK’s limited resources? How can a small city match the US$trns of private money by state scale mega corps with all the expertise? See chart below Also how can a single tiny city of 1100sq km match the collective land resources that big nations can deploy in building (see map below)? Isn’t HK’s advantage in hubbing and spoking rather than competing in brute hardware arms race? There is a case for limited hardware for catering to HK’s unique offshore needs, but most of that can be done by leasing in China – like bonded warehouses? HK simply is not in the league so please do not play the ambulance chasing game? When China is but a fraction of EU/US, how can HK’s tiny footprint even catch up? See chart below: ] Patient Capital 89. Since its full operation, the HKIC has invested in over 190 projects spanning various fields, which mainly include hard and core technology, life technology, new energy and green technology. Ten of the investee companies are already listed in Hong Kong, with a further 20preparing for listing this year. Every dollar invested by the HKIC attracted over eight dollars of long‑term capital investment, effectively drawing "patient capital" from the global market to jointly expedite the development and innovative application of frontier technologies. Considering that the initial capital of the HKIC of $62 billion has been largely allocated, we will arrange for capital injection in a timely manner to further promote I&T development and industry clustering. [comment: again, using tax payer money to fling into speculative early stage investment was the result of zero interest rate days, this is no longer the case, time to stop and privatise the HKIC rather than adding burden to the people] ​ Facilitate Asset Management by Enterprises 103. To enhance the business environment and facilitate internal restructuring by enterprises, we propose to relax the criteria for stamp duty relief in relation to the intra‑group transfer of assets. [comment: this is what HK does best and should focus on, including cutting taxes] ​ Enhance the Regulatory Regime 119. To strengthen the regulation of money lenders, the Government will release the consultation outcome and specific measures next month to address the issue of excessive borrowing and better protect the public. [comment: being too paternalistic is generally bad for HK’s flexibility and entrepreneurial flare, stay away from overarching regulations please!] ​ Attract Enterprises and Investment 128. …Policy tools include land grant arrangements, financial subsidies and tax incentives. The preferential tax rates will be half‑rate or fivepercent. We will introduce an amendment bill this year. [comment: this is what HK does best, just provide the land resources so businesses don’t pay higher taxes through much higher rents than necessary ] ​ High Value‑Added Maritime Services 145. …to enhance tax concession measures for the maritime service industry and provide a half‑rate tax concession to eligible commodities traders. ​ 146. … permitting dual registration arrangement. [comment: why not slash the overall tax rates instead of creating so many pools of ‘favoured’ tax areas that complicates the admin and makes rent seeking?] ​ Attracting Talents 175. …We launched the $3billion Frontier Technology Research Support Scheme last year to align with the country's strategic plan for frontier technology development. [comment: again, govt will always be slow vs private sector – instead of throwing money about, the govt should lower cost (price/rents?) by increasing supply] ​ Sports Industry 192. We will inject $1.2billion into the sports portion of the Arts and Sport Development Fund to further promote sports development, …and developing sports as an industry through the "M" Mark System. [comment: lack of population and training grounds will not make it easy… is this too grand an ambition for a city?] Cultural and Creative Industries 194. …A total of over $9billion has been injected into the CreateSmart Initiative and the Film Development Fund. [comment: it is good to see some good movies, but should this be coming from the private sector? Is tax payer money best spent at their own discretion?] ​ Achieving the Dual Carbon Targets 198. We are actively implementing the Hong Kong's Climate Action Plan 2050, as we strive to reduce our carbon emissions by half from the 2005 levels before 2035 and achieve carbon neutrality before 2050. [comment: this is a dangerous bureaucratic driven initiative which the USA is walking away from, HK should also abandon this expensive and life-standard lowering ‘ideal’] ​ Electric Vehicles 207. …The first registration tax (FRT) …concession arrangement for electric private cars will not be extended beyond its expiry at the end of March this year. [comment: good to remove the visible hand from the market of cars ] ​ Land Development and Infrastructure 211. …seek funding approval from the LegCo for injecting an initial capital of $10billion to support its initial operation and development needs, thereby facilitating its operation to commence by the middle of this year. [comment: will this be another science park, cyberport, or cruise terminal? Ensure it is not led by civil servants who have no experience in running businesses in their lives?] ​ Land Supply 216. In view of the vacancy rate in the non-residential property market, the supply and demand, the Government will not put up general commercial sites for sale in the coming year. In addition, the HKIC will collaborate with regional and international long-term capital to channel funds into high-quality commercial property projects that align with Hong Kong's industrial positioning and match them with enterprises from target industries. [comment: no more land for private market, all the land for govt driven … dare one say… ‘white elephant’ projects?] ​ Promote Application of Innovation and Technology 227. The Construction Innovation and Technology Fund serves to promote the industry‑wide application of I&T, thereby enhancing productivity and site safety as well as reducing construction costs. We will inject $1billion into the fund to continue supporting industry development. [comment: hmm… ] ​ 235. DEVB is conducting a comprehensive review of the Operation Building Bright 2.0 to draw up a new subsidy scheme. We will earmark $3billion accordingly. Moreover, we will allocate $1billion to extend the Lift Modernisation Subsidy Scheme to provide subsidies to property owners. [comment: everyone will welcome some free money – but govt subsidies usually cause prices to rise where private sector would save before… ] ​ Public Finance 252. …As a result of the robust stock market and an accelerated economic growth, revenue from stamp duties and profits tax has increased by nearly $50billion in total compared to the original estimate. In 2025‑26, the Operating Account will return to a surplus ahead of schedule, while the Consolidated Account will be broadly balanced after taking into account the net proceeds from bond issuance. [comment: sadly no tax cuts… which benefits HK’s international competitiveness on all fronts?] 253. …The Capital Account will nevertheless still record a deficit annually, mainly due to a high level of capital works expenditure. …we will meet the financing needs by suitably increasing bond issuance. During the period, fiscal reserves are expected to gradually increase to over $700 billion. [comment: higher reserve but funded by debt issuance? ] ​ Strictly Containing the Growth of Operating Expenditure 258. We will take forward the Productivity Enhancement Programme as planned. …the Government's recurrent expenditure will be cut by two per cent in both 2026‑27 and 2027‑28, delivering further savings of about $7.8 billion and $15.6billion respectively over 2025‑26. ​ 259. The civil service establishment will be reduced by twopercent in each of the coming two financial years to an estimated level of about 188000posts by 1 April 2026, resulting in a cumulative deletion of over 10000posts within this term of Government. [comment: much needed public sector reduction most welcome ] ​ Increasing Revenue 261. On increasing revenue, …: (a) The rates of stamp duty on residential property transactions valued above $100million will be raised from 4.25percent to 6.5percent, affecting about 0.3percent of residential property transactions. It is estimated that revenue will increase by about $1billion per annum. …; and (b) Last year, we …imposing the global minimum tax and implementing the Hong Kong minimum top‑up tax on large multinational enterprise groups with an annual consolidated revenue of or above EUR750million. This measure is expected to bring in an additional tax revenue of about $15billion for the Government annually starting from 2027‑28. [comment: is there any way we do not follow the high tax suicidal EU madness?] ​ Consolidating Funds Established Outside the Government's Accounts 262. …we have brought back $61.5 billion from six seed capital funds with a relatively large unspent balance to the Government's accounts for optimising the use of government financial resources. I have also instructed various policy bureaux to conduct a full review of the remaining 36 purpose‑specific funds established outside the Government's accounts. After carefully assessing the individual circumstances of the funds, we propose: (a) revising the financial arrangements of four funds to bring back their unspent balances, on the premise of supporting their operations in the next five years; (b) closing a fund which has accomplished its policy objectives and two funds for which objectives can be met more effectively under the established funding mechanism, and bringing back their unspent balances; (c) consolidating six funds into three for enhanced efficiency in the use of resources; and …The above measures are expected to bring back about $15.8 billion to the Government's accounts in 2026‑27. [comment: in future all ‘funds’ should have sunset clauses as a basic condition, and subject to regular audits ] ​ Bond Issuance 266. …The Government's capital works expenditure is estimated to be about $128billion for 2026‑27. Capital works expenditure will remain at a similar level during the Medium Range Forecast (MRF) period. 268. …the NM and other public works projects [means] we plan to raise the total borrowing ceiling of the two bond programmes from $700billion announced last year to $900billion. About $160billion to $220billion worth of bonds will be issued in each of the next five years, … 269. …government debt to GDP will rise from 14.4 per cent to 19.9 per cent [comment: OUCH! ] ​ 275. 二零二六／二七年度政府整體開支將上升約百分之六點九至八千四百三十四億元，相當於名義本地生產總值的百分之二十四點二。 [comment: ] Supporting People and Enterprises 279. (a) …rates concession for domestic properties for the first two quarters of 2026/27, subject to a ceiling of $500 for each rateable property. This measure is estimated to involve about 3.15million domestic properties and reduce government revenue by about $3.1billion; (b) …rates concession for non‑domestic properties for the first two quarters of 2026/27, subject to a ceiling of $500 for each rateable property. This measure is estimated to involve about 440000 non‑domestic properties and reduce government revenue by about $400million; (c) reduce salaries tax and tax under personal assessment for the year of assessment 2025/26 by 100percent, subject to a ceiling of $3,000. The reduction will be reflected in the final tax payable for the year of assessment 2025/26. This measure will benefit about 2.12million taxpayers and reduce government revenue by about $5.3billion; (d) reduce profits tax for the year of assessment 2025/26 by 100percent, subject to a ceiling of $3,000. The reduction will be reflected in the final tax payable for the year of assessment 2025/26. This measure will benefit about 171000businesses and reduce government revenue by about $500million; and (e) provide an allowance for eligible social security recipients, equal to one month of the standard rate CSSA payments, Old Age Allowance, Old Age Living Allowance or Disability Allowance, while similar arrangements will also apply to recipients of the Working Family Allowance, altogether involving an additional expenditure of about $6.5billion. [comment: small favours intended to overshadow the debt explosion? ] ​ 280. (a) increasing the basic allowance and single parent allowance from $132,000 to $145,000, and the married person's allowance from $264,000 to $290,000. This measure will benefit about 2.09million taxpayers and reduce tax revenue by about $3.56billion a year; (b) increasing the child allowance and additional child allowance from $130,000 to $140,000. This measure will benefit about 360000 taxpayers and reduce tax revenue by about $680million a year; and (c) increasing the allowance for maintaining a dependent parent or grandparent and raising the deduction ceiling for elderly residential care expenses. These measures will benefit about 830000taxpayers and reduce tax revenue by about $970million a year. I will make the following three adjustments: · increasing the allowance for maintaining a dependent parent or grandparent aged 60 or above from $50,000 to $55,000. The same increase applies to the additional allowance for taxpayers residing with these parents or grandparents; ​ · increasing the allowance for maintaining a dependent parent or grandparent aged 55 to 59 from $25,000 to $27,500. The same increase applies to the additional allowance for taxpayers residing with these parents or grandparents; and ​ · raising the deduction ceiling for elderly residential care expenses from $100,000 to $110,000 for taxpayers whose parents or grandparents are admitted to eligible residential care homes. [comment: more complications designed to give more jobs to tax consultants? The temptation to increase complexity by govt is always there, the challenge is to remove as many tiers and rates and thresholds rather than adding more of them… ] ​ Details can be found here: https://www.budget.gov.hk/2026/eng/index.html​

A Brief History of HK’s Building Names 20231108

In a flash of curiosity, your correspondent developed an urge to look back into Hong Kong’s history through how the city has named its buildings over the past 70 years, and the handy tool with which to undertake this flight of fancy is none other than “Names of Buildings”, a regularly updated report published by the Rating and Valuations Department (RVD).

The analysis focused on the residential and commercial buildings of the private sector only¹, covering some 12,000 structures. Since all buildings completed before 1945 were not identified by their years of completion, we will just put them under the “Pre1950s” group for our analysis. Also worth noting is that since we are still early in the 2020s, this category will have much smaller sample population than other decades:

Chart 1: by decade of completion, 1970s was the peak of Hong Kong, constructions

It is clear from above that the 1970s was the height of Hong Kong’s population growth, with 3,165 completions, followed by the 80s (3,070), just these two decades constituted around 50% of all buildings constructed in the territory.

Let’s now delve into the wondrous world of names used to describe these thousands of structures:

Chart 2, Most buildings have bilingual names, very few were purely known in Chinese, even in the early years

It is interesting to note that a substantial portion of buildings (38%) had only English names on the register in the pre-1950s era! This phenomenon receded in the subsequent decades but is now making a comeback with the 2020s now seeing 1/5 buildings with English only names again – is it increased education standards of the population, or is it more residential sale marketing gimmicks?

Below, your correspondent has generated word clouds of descriptions of building names to better visualize what dominated each era².

Transliteration very common in the pre-50s

The early days of Hong Kong, it was common to have names that identified with the property per se, with no need to call it a building or a house, such as: Westcrag, Bethanie. The other very popular way to describe a building is use straight Chinese transliteration of the description of the structure, where Yuen means Garden, and Tong means Hall, while Wan means Bay, for example – these are all prevalent names of the time:

Chart 3, Pre-1950s buildings – no description is good description

Functional 50s – all residential

After the defeat of the Nationalists in the mainland in late 1940s, there was a wave of immigrants coming to Hong Kong which drove a massive need for new residential housing to accommodate the new arrivals. This explains the dominance of residential themed building descriptions as shown here:

Chart 4, The 1950s focused mainly on residential building

1960s saw emergence of HK’s industrial base

The continued high growth in population, coupled with the government initiative to clear out the squatter housing by hill sides meant the 1960s continuing the trend started a decade before – more residential buildings:

Chart 5, Continued dominance of the most common descriptions in the 1960s

But as Hong Kong started to grow and take on a manufacturing role, we started to see industrial themed descriptions come to prominence (factory) and commercial buildings related to overseas visitors (hotel) also came to the fore. In fact, the export weighting of GDP rose from 30%s in the 60s to over 50% in the next two decades, until service sector took off from the 1980s onwards:

Chart 6, Share of Exports reached a high in the 60s

Large estates becoming common in 1970s

The most common descriptions of the last two decades continued to dominate in the 1970s – Building, Mansion, House remained the top 3 monikers, but a new trend started emerging – the popularizing of larger housing estates, as seen in the names Centre, Tower, and City during this period:

Chart 7, Most common description of building name in Hong Kong,1970s

Godown and Factory also rose to the top, suggesting the popularity of industrial and import/export related buildings were increasing, and pointing to the strong rise in HK’s manufacturing prowess in the 70s. But this decade will also be remembered as the peak of the long reign of the term ‘Building’, when it was used in at least 3x as many buildings as the next popular construction description:

Chart 8, ‘Building’ was the most popular description in building names, during 1960-80s

Emergence of lifestyle names in the 1980s

Perhaps due to more large estates being built, the frequency of the description ‘House’ fell in prominence in the 1980s. Also interesting, although not seen in the word cloud below is the emergence of lifestyle related words such as Chalet, Ridge, Beach, Castle, Lookout, Walk, Cliff, Grove, Cove, Monte, Summit… largely of the holiday and nature variety in their aspirations.

Chart 9, Most common description of building name in Hong Kong, 1980s

Interesting enough, some of the transliteration type descriptions popular from the pre-1950s era were still being used, such as Yuen, Lau, Chuen, Tsuen, Tong, although the last three did no appear in the word cloud above.

Big is beautiful in the 1990s

As large estates and mega commercial complexes became the new favourite type of construction projects, coupled with big developers celebrating the peak of the property bubble in early/mid 1990s that accompanied Hong Kong’s brimming economic/cultural confidence and conspicuous consumption, it is no surprise that the term Centre became the top description in building names:

Chart 10, large estate descriptions rose in prominence in 1990s

Other descriptions associated with large projects were also more commonly seen, such as Plaza, Square, and City. Another factor that helped the theme could be the strong last burst in population growth in the 90s, providing the needed fuel in demand as well as strong price gains:

Chart 11, 1990s saw the last strong burst in immigration and thus population growth in HK

Necessity – the mother of all creativity in the 2000s

The Asian Financial Crisis and the subsequent long property crash in Hong Kong might have been the needed trigger to get developers working hard on both quality and ingenuity in naming their products – we saw some very exciting trends emerging in this period in how projects were named:

‘No Description’ returns – that is, projects not ending in a description such as building or house, but boldly go by names alone, eg. Oscar by the Sea, Noah’s Ark, Aqua Blue, Elements;

Numbers as descriptions, such as SOHO 88, 99 Hennessy, One Silversea;

Definite articles (The/ La/ Le) everywhere, and in their own sub genres! Here are some quick categories of interest:

·        Paradise islands – The Capri, The Aegean, The Giverny, and The Monet!

·        All that glitter – The Spectacle, The Sparkle, The Cullinan!

·        Top of the world – The Top, The Zenith, The Dynasty, The Centrium!

·        The bizarre – The Loop, The Celebrity, The Masterpiece!

·        The exotic - La Maison Du Nord, Le Bleu Deux (after Le Bleu … naturally!)

Chart 12, the 2000s saw a burst of creativity in building nomenclature

Privileged upbringing brings bold new names – the 2010s

The ‘No Description’ category remains at the top in building names, but WHAT ON EARTH is Double Cove Starview Prime? Other themed names that stand out include those aspiring to exclusive new world destinations, such as: St. Moritz, St. Barts, Gramercy, Malibu. There were even musical themed names as well: Diva, Solo, Aria, Harmony, Crescendo (not in word cloud):

Chart 13: more wacky creativity in the 2010s

Other interesting observations for the 2010s include: continued Latin invasion, such as La Splendeur, Le Prestige; and even more numbers with 2gether, K11, W668, CORE45, etc.

We surmise that these very diverse and interesting new names were perhaps brought on by a new generation of developer scions heading up their family empires, having born with silver spoons and sent to exclusive top universities for education, are full and proper integrated into the world’s best culture and lifestyles had to offer.

Short but good start to the 2020s

We decided to add a 2020s category as well, even though we are only 3 years into the new decade. As such, trends are still emerging, but we continue to see strengthening of trends started in the 2010s: more use of numbers – such as 99 Commons, LP6; and still wackier names in the ‘No Description’ category – including Sugar+ , Sea to Sky, K-Farm, W Mega, and even OMA OMA!

Chart 14, no-description and numbers continue to be the dominant theme in 2020s so far

Looking back, our review of the trends and fashions that shaped how Hong Kong named its buildings shows how the city’s economy constantly transformed, and how we went from small and functional to large and high density, from confident world beater to more nuanced cultural depths… surely the coming years will reveal to us what the world has in hold for us all.

¹ Private sector here means buildings excluding government subsidised flats (PRH & HOS), government and public venues, hospitals and homes, fire and police stations, as well as charities, religious and cultural premises.

² Each building description includes its plural form (e.g. ‘Villa’ includes also ‘Villas’), and ‘8888’ is used to label buildings that have numbers in their names (1, 2, One etc.).

The author would like to thank Lam Chin Ming Matthew from The Chinese University of Hong Kong majoring in Quantitative Finance and Risk Management Science for assisting in data collection, analysis, and drafting of this article.

Is bear market confirmed for HK? 20221031

The observation that HK housing is in a downcycle has become consensus of late, after the CCL reaches a new low last week from the triple top dating as far back as 2019 (see green line in Chart 1). Cumulatively the index is now down 12% from the Aug 2021 high:

Chart 1: Home prices denominated in various currencies

But across the world, investors will always think about returns in their own currencies, and therefore, an 'objective consensus' of a true bear market in any asset price is only formed when the bulk of observers around the world see the same down trend that the base currency investors also sees.

So in order to find out whether the HK home prices are truly in a bear market by consensus (Chart 1 does not seem to suggest that is the case), let's take a look at the index as denominated in a few main jurisdictions:

a) the collective non-USD community (as proxied by DXY);

b) the EU community (as proxied by Euro);

c) the Brits (as proxied by GBP); and

d) gold bugs (as proxied by the price of gold).

HK still in bull market to world at large

From the point of view of the developed world population (as the USD index is represented by six liquid currencies, see Chart 3), however, the drop in HKD (blue line in Chart 2) terms is not corroborated by the price as measured by DXY the USD index:

Chart 2: Home price in non-USD terms still trending up

In fact, the non-USD price index is still very much heading up, from the longer term view (green dotted lines) to medium term view (red dotted lines), to even the shorter term time horizon (blue dotted lines)! What this suggests is that for the average OECD investor, HK property is still a rising asset.

Chart 3: make up of the DXY - 6 currencies

Home prices even more bullish for Europeans

For the average person based in Euro, the upward momentum seems even stronger compared to DXY, and HK prices, thanks to the collapse in Euros in the last few months, seem to be accelerating upwards within the red channel:

Chart 4: Euro investors may see HK prices accelerating upwards

Brits also feel the upturn?

Similarly, with the recent precipitous drop in the value of the Pound, the HK home price index will appear to the average Blighty investor to be positively surging even, after HK first started pulling away from a very correlated pairing between the HKD and GBP denominated indices which pretty much shadowed each other since our data started in 1981:

Chart 5: HK prices look strong to the British Pound investor

The much weaker pound post Boris's premiership (botched Brexit plus zealous lockdowns?) ensures that the weak pound has provided a strong platform for HK assets to appear to go from strength to strength.

Gold the only currency beating HK property?

For those who believe in gold, there is good news - In Gold terms, the 1997 peak remains the unsurprised top for HK home prices, meaning that we may still be in a bear market when measured from the perspective of the precious metal:

Chart 6: Gold strong vs HK, but mini breakout underway?

Even though the price index has broken above a near term trading channel, as indicated by the red arrow in Chart 6, if war does flare up more next year, we think gold might reassert its dominance and the break up could reverse. Time will tell.

Strong currency imports deflation, which is not a bad thing now!

In normal disinflationary times such as most of the past 40+ years, being pegged to the USD is good for HK assets during times of weak USD, as Chart 7 illustrates - weakening or weak USD is generally accompanied by bouts of strong home price increases, and the reverse held true (mostly in the mid/late 90s):

Chart 7: weak USD good for home prices, and vice versa - will it be different this time?

However, could we be in a period similar to the early 70s or early 80s, when strong USD will suck liquidity away from HK and produce deflation? How does this contrast the current super high inflationary environment? Is the strong USD a blessing as it reduces the 'cost of living' crisis that would otherwise hit these shores?

A very interesting dynamic, not seen before in our brief monetary history for sure... The above study shows that, whilst we remain somewhat bearish on the outlook of the HK market, more needs to happen in the global currency markets before it is a true foregone conclusion...

The author would like to thank Lee Man Hin Carson from The University of Hong Kong majoring in Accounting and Finance for assisting in data collection, analysis, and drafting of this article.

HK economics - recovery distorted by base effect

Good 2021 growth figures, but...

After the atrocious contractions of 2020 thanks to lockdowns, recent forecasts on 2021 GDP have turned distinctly rosy, ranging from 3.3% to 4.2% and averaging 3.8% growth. 

However, given the traumatic falls of 2020, these growth figures may still not be enough to take us back to pre-lockdown levels, and the chart below demonstrates this disconnect due to base effect:

Chart 1 : YoY economic growth forecasts mask low base in 2020

 

The year-on-year growth in GDP (blue line above, extended by forecasts of 2021 represented by yellow line) may appear strong, but if we were to compare this year's performance to pre-lockdown levels, as represented by 2-year changes (red line) , normalcy will not return until Q1 22. The positive blip in the red line in Q3 21 is the result of a bad comparable Q3 19 when the street protests disrupted economic activities.

In fact, the current recession looks much more like the post-dot-com/SARS one in 2001-3 than the GFC episode in 2009-10, as the latter bounced back much faster. Given the shape of the current recovery, 2021 will remain below 2019 levels for sure, and probably 2022 as well.

Return to 2018 unlikely until 2023 at the earliest

So when is the most likely time we will see the economy return to pre-lockdown days? Perhaps not widely known, HK's economy actually peaked in 2018, and has been on a downtrend in 2019 (protests) and 2020 (lockdowns), this year's recovery is yet uncertain, as it depends on how quickly the govt reopens the economy to normal business.

Even assuming immediate opening, which most market forecasts probably factored in already, we are unlikely to see the economic level return to 2018 peak levels until 2023, as the arrows in the chart below suggest:

Chart 2 - Indexed GDPs suggest return to 2018 peak after 2022

If lockdowns are extended, or global travel opening were delayed, the 2023 recapturing of prior high becomes even less probable. As a reference to the last big recession - the 2000 peak was only recaptured in 2004; we reckon the 2018 peak will most likely be retaken in 2023 at the earliest, if the side effects of lockdowns/money printing/supply chain destruction do not stoke second order economic problems or worse political unrests before we get there.