HK Economy Next Year

HK is not only undergoing a recession, next year, we are seeing price rises coming in at all angles.

Price rises coupled with recession, what do you call it - STAGFLATION, right？

WRONG, currently we have inflation below nominal interest rates and that's known as DEFLATION, it will

dampen consumption and capital investment like property investment.

When you have DEFLATION and STAGFLATION together, consumption will fall off the cliff and lead to serious unemployment and fiscal deficits.

If not for the outflow of labor, unemployment likely is much higher and more noises against the government covid stand.

Brace yourself for a real rough ride next year in HK.

FAAG

Check out the FAAG charts above.

Almost all of them have fallen 50% except Apple and FB now Meta has seen drastic drop in prices.

If you think HSI has dropped a lot, take a look at these key stocks in the US.

We might not have reached a bottom yet if there's no major global incident happening before inflation comes back down below 2%.

Brace yourself for a major correction of the securities market or another global incident like Lehman whichever may come first.

Pension funds in trouble

Back in 2000 when the dot-com bubble bursted, Fed quickly lowered interest rates thus creating another bubble waiting to be bursted in just a few years time ie 2007, stock market peaking out, 2008, the Lehman crisis.

During these times, pension funds (esp defined benefits type) become underfunded because of stock market performance and low rates of return from the bond market, many have resorted to leverage to make returns better so pensioners can receive full amounts as promised.

This round of rate hikes by the Fed is fast and furious.

Such pension funds do not yet have time to adjust their portfolio as well as their leverage, many are now suffering heavy losses and likely cannot commit to paying their promised benefits if interest rate environment remains elevated.  Some might even be forced to liquidate certain positions to reduce leverage which means severe fund shortage in the years ahead.

Many such happenings are below the radar and rarely reported in the media.