Hong Kong’s economy has been one of the most impacted amid the Coronavirus crisis. However, opportunities remain in place to start new businesses in the city-state, with strong chances of success.
Amid fraught political tension and now a global pandemic, Hong Kong may not seem an obvious spot to make an investment, but its strong ecommerce foundations and trading opportunities can be capitalised on by savvy entrepreneurs.
We will explore the impact Coronavirus has had on Hong Kong, as well as how it may open up money-making opportunities for the right investors.
How has Hong Kong been affected by the Coronavirus?
Hong Kong’s economy had started to shrink before the Coronavirus swept the world. The city’s streets became a battleground in 2019 as groups protested forcefully against government proposals to allow the extradition of wanted criminals to mainland China – a move seen as eroding Hong Kong’s autonomy from its colossal near neighbour.
The protests saw tourism into Hong Kong drastically cut as some travellers were caught up in violence at the city’s international airport, while the use of tear gas and rubber bullets became commonplace in the authorities’ heavy-handed tactics to quell the unrest. Visitor numbers had been cut in half by the end of 2019 and have understandably crashed further as the world has increasingly shutdown amid the Coronavirus pandemic in 2020.
The disease was first recorded in China last December and reached Hong Kong a little over a month later.
Hong Kong’s response to the virus was swift, tracing those who had travelled to and from the affected areas in China, as well as closing many border points. A little over 1,000 cases, and just four deaths, have been attributed to Covid-19 among Hong Kong’s 7 million+ population at the time of writing, with new cases having slowed significantly.
The economic impact in Hong Kong
Hong Kong may have avoided the same scale of human damage as many other nations around the world, but economically it has been scarred significantly.
Hong Kong’s economy shrunk by a record 8.9% in the first quarter of 2020, compared to the same period the year before as confidence in the region that had been dented by the anti-government protests was hit further by the global contraction brought on by the Coronavirus.
Hong Kong went into recession last year and the latest figures represent the city-state’s steepest monthly economical drop on record.
“The threat of Covid-19 seriously disrupted a wide range of local economic activities and supply chains in the region,” a government statement read. “With the disease evolving into a pandemic in March, the economic fallout became even more severe.”
The Hong Kong Monetary Authority has injected $2.7 billion into the economy to try and ride out the storm. But the HK Dollar’s peg to its American equivalent is now under examination amid slumping interest rates.
Where do the opportunities lie?
This shifting of interest rates could lead to significant opportunities on the forex market, which presents rarely seen profit-making potential when trading the US and Hong Kong Dollars.
The typical pitfall of using interest rates to inform trades is currency fluctuations – a factor negated by the HK Dollar peg, for as long as it remains in place.
Potential investors may have time on their side when it comes to looking into the money markets. Global uncertainty will, after all, continue while the Coronavirus remains a significant threat until a vaccine is found.
Carie Li, an economist at OCBC Wing Hang Bank Ltd. in Hong Kong, is quoted by Bloomberg: “For the interest-rate gap to narrow significantly enough, Hong Kong needs to see strong capital inflows from overseas funds. But investor confidence won’t return until the pandemic is over, and that won’t happen in the near term.”
Aside from commodity trading, Hong Kong remains a strong foundation upon which to build an ecommerce portfolio.
Pre-Coronavirus, Hong Kong’s online shopping market had been expected to grow by 10.2% to 2021 by JP Morgan, a figure which could move in either direction as a result of the pandemic.
As Coronavirus has confided much of the world’s population to their home, ordering goods and services online has boomed. Online fashion is up 21% year on year, while commerce titan Amazon has recorded a global sales boost of 26% as the world has turned to its delivery service for convenience and security.
While Hong Kong’s tightly packed urban landscape has previously negated the need for online ordering and delivery, a new global future of tentative public interaction and a population highly in sync with technology could well see ecommerce in the city-state boom in the very near future.