The behaviour of Hong Kong stock prices

The primary function of a stock market is to allocate resources to the most profitable investment opportunities. If stock prices provide accurate signals for resource allocation, firms are able to make correct production–investment decisions, and investors are able to choose the most suitable stocks for investment. These choices are only possible if the market is efficient, that is, if stock prices ‘fully reflect’ all available information.

Hong Kong is now an international financial centre. Although Hong Kong's stock market is ranked as one of the five largest in the world in terms of turnover, little research has been devoted to the behaviour of its stock prices. This is a study of the efficiency of Hong Kong's stock market. It is based upon two widely accepted statistical tests, namely, serial correlation analysis and runs tests. Data used cover the daily prices of 28 major Hong Kong stocks over a period of four years from 1977 to 1980. The evidence is mixed; it does not provide clear support for the efficient market hypothesis.     

Dynamic linkages between exchange rates and stock prices: Evidence from East Asian markets

This study examines dynamic linkages between exchange rates and stock prices for seven East Asian countries, including Hong Kong, Japan, Korea, Malaysia, Singapore, Taiwan, and Thailand, for the period January 1988 to October 1998. Our empirical results show a significant causal relation from exchange rates to stock prices for Hong Kong, Japan, Malaysia, and Thailand before the 1997 Asian financial crisis. We also find a causal relation from the equity market to the foreign exchange market for Hong Kong, Korea, and Singapore. Further, while no country shows a significant causality from stock prices to exchange rates during the Asian crisis, a causal relation from exchange rates to stock prices is found for all countries except Malaysia. Our findings are robust with respect to various testing methods used, including Granger causality tests, a variance decomposition analysis, and an impulse response analysis. Our findings also indicate that the linkages vary across economies with respect to exchange rate regimes, the trade size, the degree of capital control, and the size of equity market.     

额外印花税与房价变动：基于香港的实证

房地产业在香港经济运行中占有不可忽视的地位。近年来,香港房价不断上涨引起了香港特区政府及香港社会各界的广泛关注,为保证香港房地产市场的平稳发展,特区政府实施了额外印花税等调控房地产市场的政策。本文分析了额外印花税影响房价变动的理论路径,并以香港2009—2012年房价变动的时间序列数据进行了实证检验。结果显示：额外印花税对香港房价的抑制作用不显著,额外印花税的实施并没有扭转房价持续走高的局面。     

债务融资、成长性与企业投资行为——对A股和香港上市公司的比较研究

本文以A股和香港上市公司为研究对象,考察债务融资和成长性对企业投资行为的影响。实证结果表明,企业债务与投资支出显著负相关,在低成长性公司中这一关系尤为显著。在低成长性公司中,A股上市公司的债务融资与投资支出的负相关关系比香港上市公司显著,香港中资上市公司的债务融资与投资支出的负相关关系比香港本地上市公司显著。     

Which is a better investment choice in the Hong Kong residential property market: a big or small property?

The relationship between property size and property investment yield is an interesting issue in the real estate market. Previous studies usually use the mean–variance criterion to compare the return-risk profiles of the yields of different property sizes in the United States. However, this criterion has a few shortcomings. This article provides the first attempt to use a stochastic dominance approach to analyse this issue. We adopt two powerful stochastic dominance tests to compare the yields of five property size classes in the Hong Kong residential property market. In our study, we analyse two possible investment outcomes: (1) investors could not rent out their properties, and thus they would gain/lose from the appreciation/depreciation of residential property prices; (2) investors could also gain from rental incomes. Our empirical results provide strong evidence to show that the yields of smaller property classes stochastically dominate the yields of bigger property classes, suggesting that buying smaller properties is a better investment choice in the Hong Kong residential property market.     

Exchange rates change,asset-denominated currency difference and stock price fluctuation

This paper examines differences in the connectedness between exchange rates and stock prices for companies with different asset currencies on the Hong Kong stock market, and it seeks to explain those differences by proposing a hypothesis on asset-denominated currency difference. Under a framework of investor heterogeneity, we establish a dynamic, discrete theoretical model to analyse the connectedness between exchange rates, the stocks of local Hong Kong companies, the stocks of companies from the mainland and foreign exchange interventions. Using monthly data from January 2000 to August 2018, we adopt the time-varying parameter vector auto-regression (TVP-VAR) model to empirically study the dynamic relationships between exchange rates and the prices of both Hong Kong-based and mainland-based stocks. The results show significant differences in the ways that exchange rates and prices for the two types of stocks are linked. The exchange rates are positively correlated with mainland stocks and negatively correlated with Hong Kong stocks. Moreover, foreign exchange intervention is found to be an effective means for stabilising exchange rates, although such intervention tends to increase stock volatility.

Abbreviations: TVP-VAR - time-varying parameter vector auto-regression model; MCMC - Monte Carlo-Markov Chain method.     

Fertility and housing

Young households in Hong Kong face particularly steep increases in house prices and low fertility despite low gender wage gaps. The model of fertility and housing in this paper explains why fertility decline need not reverse as female wages rise relative to male wages where housing land is scarce. For given house prices, demand for children may rise with female relative wages if housing comprises a sufficiently large share of childrearing. If the user cost of housing falls with rising house prices then fertility also rises. For endogenous house prices, however, growth in wages and a burgeoning working age population raises the market price of housing. In turn, fertility no longer rises with female relative wages. The analysis provides a novel mechanism whereby high population support ratios depress fertility and the results fit recent evidence that house prices affect fertility.     

The Impact of the China Factor on the pre-1997 Hong Kong Economy: a macroeconometric analysis

After the reunification of Hong Kong and China in 1997, Hong Kong is assured of a high degree of autonomy by the Basic Law. However, there remains some worry about the territory's economic viability and financial stability. Whether Chinese policies and China's remarkable growth momentum could continue to boost Hong Kong's prosperity has become an issue of concern. As the Chinese economic reform proceeds, the ‘China factor’ has been generating an increasing influence on the performance of the Hong Kong economy. Unfortunately, there have been very few rigorous quantitative analyses of this rapidly evolving development. To fill the gap, we have constructed a macroeconometric model of Hong Kong which takes into detailed account the linkages of the two economies including trade and capital flows. Estimation of the model incorporates error correction techniques to establish short-run dynamics and long-run equilibria. Our findings have identified crucial channels through which the ‘China factor’ has exerted impact on the Hong Kong economy. It is shown that the factor was not overwhelming up to the recent past, in terms of its stabilizing effects in the financial market and its stimulation on growth, although its influence may rise in the post-1997 era.     

证券分析师评级报告的投资价值研究——来自香港股市的经验证据

伴随着证券市场的产生和繁荣,证券分析师队伍也日益壮大并日趋专业。以港股为例,通过跟踪经纪行数百名分析师自2003年以来对香港上市公司的评级结果,以及重点考察不同评级结果投资组合的收益率情况后,发现尽管分析师的专业判断具有显著的投资价值,并以此确定投资标的或重点研究跟踪对象具有良好的可操作性。但由于其评级结果具有较为明显的实效性,对市场的影响力也会发生变化,因此需要时刻密切注意分析师的最新评级成果并及时更新。     

NEXUS BETWEEN HOUSING AND THE MACRO ECONOMY: THE HONG KONG CASE

Abstract.  This paper shows that, consistent with the 'economic base' theory, exports drive domestic consumption and domestic investment, but housing appears to serve as an important link between exports and domestic expenditures. Focusing on the Hong Kong economy, which is a small open economy with a big population, we found that exports and interest rates drive housing prices over a long period, while housing prices in turn drive domestic expenditures.     

WAGE–PRICE DYNAMICS AND DEFLATION IN HONG KONG

Abstract. We provide empirical evidence on the dynamics of prices and wages in Hong Kong. The results suggest that the post‐1997 deflation can be understood using a conventional macroeconomic framework wherein foreign influences constitute the basic underlying shocks, and adjustment processes in domestic wages and prices determine the details of the transmission mechanism. We find that the decline in local nominal prices owes much to declining prices of imported intermediate goods. The negative output gap and increase in unemployment during the deflation period also have their origin in foreign shocks, but the domestic wage adjustment process is an important contributing factor.     

Trading imbalances and the law of one price

We study trading and prices of Chinese (mainland)/Hong Kong dual-listed shares. Relative prices can diverge by a factor of two and exhibit significant variation over time. Order imbalances explain contemporaneous changes in relative prices at daily and weekly frequencies.     

An Intertemporal Currency Board

The paper shows that the traditional wisdom of raising interest rates to defend a currency enriches rather than punishes the speculators. Furthermore, using high interest rates as a currency defense tool often produces the opposite effect in times of crisis. A new approach is proposed of using Hong Kong dollar "put" options as an explicit commitment by the government. The put option itself acts like an intertemporal currency board in keeping the linked exchange rate over time. This costly signaling produces a separating equilibrium that distinguishes the strength of the Hong Kong dollar from the other Asian currencies that were under pressure in 1997.     

Growth of Hong Kong Before and After its Reversion to China: The China Factor

The paper focuses on the Hong Kong economy and attempts to measure the contribution of Hong Kong's integration with mainland China to its GDP growth rate. Two linkages have received particular attention, namely, Hong Kong's foreign direct investment (FDI) in China and immigrants from China. While the former is assumed to stimulate capital investment in Hong Kong but at the same time to reduce human capital formation (owing to a shrinkage of its domestic manufacturing sector), the latter is assumed to further reduce Hong Kong's average human capital because immigrants tend to be less educated. By making some assumptions about the future trajectories of Hong Kong direct investment in China and Chinese immigrants into Hong Kong after its reversion to China, the paper offers some predictions about Hong Kong's future economic growth.     

Capital account liberalization and dynamic price discovery: evidence from Chinese cross-listed stocks

We analyse the effects of a recent financial reform (Shanghai-Hong Kong Stock Connect) that enables cross-market investment between Hong Kong and Shanghai stock exchanges. Using a VECM, we find that the reform announcement considerably narrows the equilibrium level of price disparity and strengthens the price comovement of shares that are cross-listed in both markets. The estimated equilibrium relationship is in support of the relative law of one price. We find that both markets adjust in response to a disequilibrium in price disparity, leading to a sizeable error correction activity. The Shanghai market contributes to approximately two-thirds of the price discovery process. Competition and informativeness of trading affect the relative role of price discovery in each market. Finally, the reform implementation reinforces the long-run cointegration relationship and strengthens the short-run price comovements of cross-listed stocks despite the widening price disparity during the period.     

CROSS‐MARKET TRADING IN CHINA'S LARGE STATE‐OWNED COMMERCIAL BANKS, 2006–2011

This paper examines the differential between the share prices of China's large state‐owned commercial banks traded in Shanghai versus prices observed in Hong Kong. We find a significant role for investor sentiment, as reflected in relative price‐earnings ratios, in explaining these price differentials for all four banks. The share price in Shanghai tends to move ahead of the share price in Hong Kong when more positive sentiment in Shanghai makes local investors willing to pay more for the same predicted earnings. We also identify common trends in relative bank price‐earnings ratios and price differentials across the two markets. (JEL G14, G15)     

Pricing in International Markets: a "Small-country" Benchmark

The paper studies export pricing to market (PTM) in a “small‐country” context using a panel of disaggregated exports from Hong Kong since 1992. Conventional wisdom is that PTM is commonplace—except for US exports. This study provides a benchmark by which to interpret the puzzling behavior of US export prices. Empirically, Hong Kong's export price behavior is comparable to that of the US. This similarity reinforces the idea that PTM behavior is also a function of home market conditions and the ability to price discriminate across markets. There is little evidence of differences in PTM across Hong Kong's export destinations.     

Assimilation of Hong Kong Immigrants in Canada

A flood of emigration from Hong Kong to Canada was observed prior to the handover from Britain back to China in 1997. I pool Canadian Census data from 1991 to 2006 to study the labour market assimilation of Hong Kong immigrants. The findings suggest that these immigrants faced a significant negative wage gap upon entry in comparison with Canadian‐born individuals, and this was larger for cohorts arriving closer to 1997, suggesting a decline in cohort quality. The results also indicate that earnings convergence with the Canadian‐born was slow for the majority of these immigrants.     

A comparison of variance ratio tests of random walk: A case of Asian emerging stock markets

This study re-examines the random walk hypothesis for eight emerging equity markets in Asia: Hong Kong, Indonesia, Korea, Malaysia, the Philippines, Singapore, Taiwan, and Thailand. The hypothesis is tested with two new variance ratio tests–Wright's rank and sign and Whang–Kim subsampling tests–as well as the conventional Lo–MacKinlay and Chow–Denning tests. We found that (i) the stock prices of the eight Asian countries do not follow random walk with the possible exceptions of Taiwan and Korea and (ii) the accelerated opening of the eight stock markets to foreign investors following the Asian financial crisis in 1997 has not significantly altered the mean-reversion patterns of stock price vis-à-vis relative market efficiency. Our study affirms that Wright's and Whang–Kim's tests yield far less ambiguous results as compared to Lo–MacKinlay and Chow–Denning tests.     

Daily variation,capital market efficiency and predicting stock returns for the Hong Kong and Tokyo exchanges

Studying capital market efficiency is important because result may infer that there are predictable properties of the time series of prices of traded securities on organized markets. We examine the weak form of the efficient markets hypothesis to indicate its usefulness in terms of the results of this study. Furthermore, this study of individual securities prices of traded securities on the organized markets of Hong Kong and Japan corroborate previous findings of studies of individual stocks and market indexes both in Asian nations, the United States and other stock exchanges in the United Kingdom and Europe. Daily patterns are present in the times series of securities prices. You will note also, that the models identified reflect the returns on individual firms listed on the two of the three largest Asian Stock Exchanges.