HK GDP Expected to Grow 1.4 Percent in 2002

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Last updated at: (Beijing Time) Friday, January 04, 2002

HK GDP Expected to Grow 1.4 Percent in 2002

Hong Kong's real GDP (gross domestic product) 2002 is expected to grow 1.4 percent year on year, according to Herber Lau, director of research of CASH Financial Services Group Ltd. The Hong Kong economy would be able to follow the recovery of the U.S. economy, taking place in the third quarter of 2002.

In a report on Hong Kong Market Outlook 2002, CASH Financial, aHong Kong-based financial services provider, said the Hong Kong economy would be able to follow the recovery of the U.S. economy taking place in the third quarter of 2002, with Hong Kong expectedto turn around as of the fourth quarter this year.

Stock and property

At the current stage, the rebound in the stock market and some initial signs of stabilization in the property market could revitalize domestic sentiment, the report said.

Lau said the trading volume of Hong Kong stocks would not be greatly affected by the application of Chinese Depositary Receipt (CDR) by Hong Kong companies.

"The number of Hong Kong companies meeting the requirements to apply CDR is small and this is not a concern. On the other hand, it might even have a hedging effect," he said.

On the property sector, Lau said there will not be a rise in property prices in the short term although prices have bottomed-out. Property developers have changed their tactics by selling more while gaining less profits.

Unemployment cycle would end

"The unemployment cycle would end soon as it has already reached its peak, so we need not be too pessimistic," Lau said, adding that he expected an unemployment rate of about 5.5 percent to 5.7 percent in 2002.

He said with the present low interest rate, there is a chance that cash flow will be going back to the Hong Kong stock market.

Hang Seng Index

Lau projected that the Hang Seng Index will reach as high as 14,500 points during the fourth quarter of 2002 under improved market sentiment on the back of the recovery of the U.S. economy.

"The Hang Seng Index will gain support at the level of 10,200 points. As there are some unfavorable factors, people still adopt a wait-and-see attitude. But once the banks release their results, people will gain confidence," Lau said.

Technology sector

On the technology sector, Lau said investors should be careful when investing in those stocks. "Some technology companies showed good performance in Nasdaq. Technology companies in Hong Kong might benefit even though they did not gain profits. This is a bittricky," Lau said.

Lau also said China shares currently command an average of 6.5 times earnings multiple and a good discount to net asset value, which should allow room for improved share performance.

Forecast of HK economy in the year 2002

Nomura Expects HK Economic Growth to Stabilize in 2002

Nomura expected Hong Kong's economic growth to stabilize in the second quarter of 2002 after the Hong Kong government released Friday the 0.3 percent drop in the GDP on a year-on-year basis in the third quarter of 2001.

Nomura maintained its GDP forecast -0.2 percent for 2001, and 2.3 percent for 2002, having forecast a 1.2 percent decline for the third quarter of 2001, against a market expectation of 2.2 percent.

Hong Kong GDP Growth (1997-2001)

Nomura Expects HK Economic Growth to Stabilize in 2002

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