H.K. economy predicted to grow significantly

Asian Economic News, Feb 7, 2005

HONG KONG, Feb. 1 Kyodo

Hong Kong's economy is expected to grow significantly due to a bloom in the property, finance and manufacturing sectors in 2005, investment house Credit Lyonnaise SA said Tuesday.

The Hang Seng Index, Hong Kong's benchmark for its stock market, is expected to end at around 15,000 in 2005 despite a bumpy ride in the first six months, CLSA investment analyst Chris Zee said. The Hang Seng Index closed above 14,200 in 2004, up 29 percent from 2003.

''Fire, gold and earth are the key elements for the year of the rooster (2005), posing a roller-coast ride in the first six months as fire will dominate during this period,'' Zee said, based on CLSA's 14th annual Feng Shui Index.

Zee also said the year of the rooster, which will begin Feb. 9, will bring special fortune to the property, finance, manufacturing and textiles and garment sectors.

He predicts the prices for luxury flats to go up by 25 percent to more than HK$20,000 (about US$2,600) per square foot (0.09 square meter).

The Feng Shui Index for the current year of the monkey correctly forecast prices for luxury flats to rise to more than HK$10,000 per square foot.

A prime site in Admiralty, near Central, known as the Tamar site that is expected to be auctioned this year will open 50 percent above the initial price, the index suggests.

Hong Kong Disneyland, which has been scheduled to open in September, will also bring fortune to the territory, the index predicts.

''(It is) because rat is a good collaborator with Hong Kong. It fits well with how Hong Kong people work. Mickey Mouse fits perfectly well with Hong Kong,'' Zee said.

CLSA expects the Hong KOng economy to expand by 6.4 percent in real terms in 2005, but it will continue to experience inflation.

A mild increase in the consumer price index, the broadest measure of price moves, was seen in July 2004, the first in 68 months after a protracted period of deflation due to the Asian financial crisis in 1997 and 1998 and the SARS outbreak in the spring of 2003.

CLSA also predicts the unemployment rate to go down to around 5 percent by the end of 2005. The latest jobless rate was 6.5 percent.

Zee said he does not expect China to revalue its currency in 2005, saying ''the earth and gold elements will kick in. These elements do not favor foreign exchange to move.''

The Feng Shui Index for the year of the monkey was also accurate about stronger prices for oil and gold and that the territory's Chief Executive Tung Chee-hwa would have a relatively smooth year politically and financially.

The share price of Tung's family's Orient Overseas International Ltd., a container transportation, logistics and terminal company group, rose 37 percent in 2004.

CLSA said its index is composed after intense consultations with leading Feng Shui masters, but when their predictions and economic principles are in contradiction, the latter prevail.