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By Bilal Hafeez 29-08-2019

Hong Kong’s Real Problem Is Inequality (Project Syndicate, 4 min read)

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(You can read the article by clicking here)

The high profile protests in Hong Kong has opened up questions as to the source of unrest in the city, despite the simply cry for greater autonomy and democracy being the most popular narrative. This article from Project Syndicate by a professor at the Peking University suggests that unrest seems to stem from long standing inequality in the city despite it having fiscal reserves of more than HD $1.2 trillion. The gini coefficient is at 0.539 in Hong Kong, the highest for 45 years and particularly remarkable in comparison toan average of 0.411 in major developed states. 45% of Hong Kong’s residents live in public rental or subsidised accommodation. This huge inequality seems to be largely encouraged to some extent by local electoral politics which is too divided to take concrete action.

Why does this matter? Growing inequality has been a recent socio-political trend picking up in developed market. For instance rise of populism in US, UK and EU can partially be attributed to this. Spillover of this trend in other regions is now becoming evident such as in this case – Hong Kong. Few prominent investors such as Ray Dalio have even gone to the extent implying these events replicate how WW II build-up. In these scenarios, it does not pose well for risky asset such as Equities going forward, if true.

(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)