Identifier
Created
Classification
Origin
08HONGKONG1688
2008-09-10 10:46:00
UNCLASSIFIED
Consulate Hong Kong
Cable title:  

HONG KONG FINANCIAL SECRETARY PRAISES USG'S

Tags:  ECON EFIN EINV HK CH 
pdf how-to read a cable
VZCZCXRO9387
RR RUEHCHI RUEHCN RUEHDT RUEHGH RUEHHM RUEHVC
DE RUEHHK #1688/01 2541046
ZNR UUUUU ZZH
R 101046Z SEP 08
FM AMCONSUL HONG KONG
TO RUEHC/SECSTATE WASHDC 5755
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHOO/CHINA POSTS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
UNCLAS SECTION 01 OF 02 HONG KONG 001688 

SIPDIS

STATE FOR EAP/CM AND EEB/OMA, TREASURY FOR OASIA

E.O. 12958: N/A
TAGS: ECON EFIN EINV HK CH
SUBJECT: HONG KONG FINANCIAL SECRETARY PRAISES USG'S
FANNIE/FREDDIE MOVES, FORECASTS SLOWER GROWTH

REF: HONG KONG 1679

UNCLAS SECTION 01 OF 02 HONG KONG 001688

SIPDIS

STATE FOR EAP/CM AND EEB/OMA, TREASURY FOR OASIA

E.O. 12958: N/A
TAGS: ECON EFIN EINV HK CH
SUBJECT: HONG KONG FINANCIAL SECRETARY PRAISES USG'S
FANNIE/FREDDIE MOVES, FORECASTS SLOWER GROWTH

REF: HONG KONG 1679


1. Summary: Hong Kong's Financial Secretary John Tsang told
local Chinese bankers on September 9 that he supports the
USG's assumption of control over Freddie Mac and Fannie Mae.
He said the move calmed the concerns of global investors
holding debt instruments issued by Fannie/Freddie, but he
forecast that global financial market turmoil would continue.
Tsang expects global economic growth to slow, in part due to
elevated commodity prices. Local financial media and market
analysts also opined that Hong Kong's economic prospects will
suffer from deteriorating global economies. At a CG-hosted
meeting with AmCham officials on September 10, leading U.S.
businessmen based in Hong Kong described "tough" market
conditions, and the head of Hong Kong corporate banking at a
large U.S. investment bank said companies in Hong Kong expect
no material improvement in the local economy in 2009. The
Hang Seng Index closed down today (September 10) by 2.4
percent, breaking the psychologically important barrier of
20,000. End summary.

============================================= ===========
HKG's Primary Finance Official Sees Troubled Times Ahead
============================================= ===========


2. Speaking at a September 9 dinner hosted by the Chi Tung
Association (a long-standing group of local Chinese bankers),
Hong Kong's Financial Secretary John Tsang said the USG
decision to assume control over the operations of Fannie Mae
and Freddie Mac and stand behind their debt would "help calm
market concerns" about the solvency and scale of losses at
the two mortgage giants. He said the move would also
"restore the confidence of various central banks" with regard
to debt issued by Fannie/Freddie. According to the Hong Kong
Economic Journal (HKEJ),an independent daily Chinese
language newspaper, Tsang reassured the Hong Kong bankers
that the HKG would closely monitor the latest developments in
global financial markets, while also assessing the impact on
Hong Kong from the Mainland's macroeconomic adjustment
measures. Tsang forecast that the worldwide turmoil in
financial markets would persist, with global economic growth

continuing to slow. He also said elevated commodity prices
would remain a drain on global purchasing power, thereby
resulting in decreased demand for Hong Kong's export products.

============================================= ==
Market Analysts Not Optimistic About HK Economy
============================================= ==


3. An editorial published in the HKEJ on September 10 warned
investors to restrain their optimism about the USG's
placement of Fannie/Freddie under government control.
Mirroring recent comments by local economist Andy Xie
(reftel),the editorial said that while the USG's action
helped avoid a near term "financial disaster,"
Fannie/Freddie's ultimate losses and the after-effects of the
USG takeover are currently inestimable. The editorial stated
that the combination of inflation pressures and "enormous
levels of bad debt" in the United States would exacerbate an
economic recession there. Although the USG's decision to
backstop the debt of Fannie/Freddie has dissipated local
concerns with regard to Fannie/Freddie debt held by Mainland
Chinese banks, the HKEJ used the Fannie/Freddie turbulence to
urge Mainland banks to boost their transparency with regard
to their individual holdings of foreign financial assets.


4. In an interview with the Oriental Daily News (Chinese
language daily newspaper) published on September 10, Hong
Kong-based Union Bank of Switzerland (UBS) economist Jonathan
Anderson stated that he expects the U.S. and European Union
economies to slow. He said global stock markets would likely
continue to perform poorly over the next six months.
Anderson also said he is "not optimistic" about economic
prospects in Asia for the remainder of 2008.

============================================= ==========
HK AmCham Leaders Brief CG on "Tough" Market Conditions
============================================= ==========


5. At a September 10 meeting the Consul General hosted with
AmCham officials, the head of HK corporate banking at a large
U.S. investment bank said that companies in Hong Kong don't
expect business conditions in 2009 to be much better than in

2008. Corporate staffing in HK would likely be flat to
slightly down through next year. The regional head of a
large U.S. express delivery company referred to current
market conditions as "tough," while the president of a major

HONG KONG 00001688 002 OF 002


international shipping firm said the sea freight business has
been "heavily impacted by the U.S. (economic) slowdown."


6. The Hang Seng Index (HSI) continued to lose ground on
September 10, closing down 2.4 percent at 19,999.8. The
market was influenced by the substantial decline in U.S.
stock market indices overnight, as well as concerns about
U.S. investment bank Lehman Brothers' ability to raise
capital.
DONOVAN