Hong Kong’s identity quandary

Its financial sector has rebounded, with a high-flying Hang Seng Index and a return to the top spot in the global IPO rankings, but the city is still a diminished version of itself

- STEPHEN S ROACH Faculty Member, Yale University, and former Chairman, Morgan Stanley Asia

THE SIGN AT Hong Kong International Airport still says, “Welcome to Asia’s World City’ Normally worth nothing more than a sideways glance, this time the sign gave me pause for thought as I disembarked from the plane on a recent visit.

On the surface, Hong Kong seems to have bounced back in the year and a half since I wrote my controversial article in the Financial Times, titled “It pains me to say Hong Kong is over.’ Never mind that the property market hasn’t recovered. The all-important financial sector is booming again; a high-flying Hang Seng Index and a return to the top spot in the global IPO rankings recall the days of yore.

But while Hong Kong’s vastly oversold market has benefitted from the strong performance of frothy global equity markets, the true test of the city’s resilience will come with the inevitable correction. Such a pullback maybe close at hand, especially if widespread fears of an AI bubble are realised—though, as always, market timing is a guessing game.

Of course, the point I was making in my February 2024 FT article was that outward appearances are often deceiving. I argued that the Hong Kong of old had been replaced by a new version that more closely resembled a China-centric administrative region, with Deng Xiaoping’s model of “one country, two systems” morphing into “one country, one system”.