Hang Seng Bank (00011) explores 3 major HK economic issues

    Hang Seng Bank (00011) in its latest issue of economic research addressed what it believes are some of the most important questions in
assessing the outlook for the HK economy over the next 12 months.
  The bank believes the impact of a stronger HKD on the HK economy will be noticeable but not overwhelming. A 10% rise in the real HKD exchange rate will, on average, suppress service exports by about 4.4 percentage points and take about 0.4 percentage points off HK GDP over the course of a year.
  In addition, it said the impact of recent equity rally on the economy is not as significant as some observers might think, given the distribution of the associated
wealth gains. In short, wealthier households that hold more stocks tend to have a lower
marginal propensity to consume.
  Hang Seng estimated the recent equity rally could potentially raise GDP growth by 0.8
percentage points this year.
  Lastly, it expect to see a 1% expansion in the retail sector this year. Although the
Mainland government has announced new limits on cross-border visits, multiple-entry permit
holders are likely to lift their spending per visit to partly compensate for the more limited number of visits.
  The bank said it is also important to not lose sight of the still-robust growth in overnight tourism. It believes the slack created by a slowdown of Chinese tourist flows will be picked up by stronger local spending.