Hong Kong to give cash handouts to back economy

A man wearing a protective face mask, amid concerns over the spread of the COVID-19 novel coronavirus, walks past a mural in Hong Kong. (AFP)
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Updated 27 February 2020

Hong Kong to give cash handouts to back economy

  • 7 million adult permanent residents to benefit from the move

HONG KONG: Hong Kong’s government said on Wednesday it will give a HK$10,000 ($1,280) handout to every permanent resident in a bid to jump-start an economy in recession after months of protests and hit further by the coronavirus outbreak.

Financial Secretary Paul Chan unveiled the cash gift in the annual budget, committing a colossal HK$120 billion to help alleviate the worst economic downturn the international financial hub has faced in a decade.

Hong Kong boasts significant fiscal reserves of more than HK$1 trillion built up over the boom years, a stockpile that the government is now tapping into.

The cash handout to around 7 million permanent residents will cost HK$71 billion, but officials hope consumers will plough much of the money back into local businesses.

“Making good use of fiscal reserves to support enterprises and relieve people’s hardship is certainly in line with our people’s expectations,” he said, adding the cash handout was for permanent residents aged 18 or above, including those residing overseas.

Chan said the stimulus and lower revenues would push government coffers into the red by a record HK$139.1 billion in the coming fiscal year, the first deficit in 15 years.

Hong Kong’s economy is reeling from the US-China trade war, months of pro-democracy protests last year and now the coronavirus: A triple whammy Chan described as “exceptionally austere.”

Other measures announced in the budget included profits and salary tax breaks, as well as low-interest loans for businesses struggling to pay staff wages.

The tourist, restaurant and retail sectors have been hit especially hard with bankruptcies soaring and traditionally low unemployment rising.

“Hong Kong’s economy is facing enormous challenges this year,” Chan said, predicting a range of 0.5 percent growth to a 1.5 percent contraction this year.

The recession is a major headache for the city’s pro-Beijing leader Carrie Lam, who currently boasts record-low approval ratings after facing down huge democracy protests.

The massive rallies and regular clashes with police that became a weekly fixture last year were dying down before the virus outbreak began. But the virus has comprehensively ended mass gatherings.

Yet public anger still simmers in a city where neither its leadership nor Beijing have addressed the issues fueling years of rising resentment. In Wednesday’s budget, the police received a 25 percent bump to HK$25.8 billion.

Neighboring Macau often announces universal cash handouts to residents in its annual budget, while Hong Kong has historically been more reticent.

The last one for all residents was in 2011, three years after the global crash sparked the city’s last recession.

Last week, Hong Kong’s government announced a HK$30 billion relief fund for those hit hardest by the virus outbreak, including cash handouts for businesses such as restaurants and travel companies.


S&P 500 inches closer to record high

Updated 12 August 2020

S&P 500 inches closer to record high

  • US stock market index returns to levels last seen before the onset of coronavirus crisis

NEW YORK: The S&P 500 on Tuesday closed in on its February record high, returning to levels last seen before the onset of the coronavirus crisis that caused one of Wall Street’s most dramatic crashes in history.

The benchmark index was about half a percent below its peak hit on Feb. 19, when investors started dumping shares in anticipation of what proved to be the biggest slump in the US economy since the Great Depression.

Ultra-low interest rates, trillions of dollars in stimulus and, more recently, a better-than-feared second quarter earnings season have allowed all three of Wall Street’s main indexes to recover.

The tech-heavy Nasdaq has led the charge, boosted by “stay-at-home winners” Amazon.com Inc., Netflix Inc. and Apple Inc. The index was down about 0.4 percent.

The blue chip Dow surged 1.2 percent, coming within 5 percent of its February peak.

“You’ve got to admit that this is a market that wants to go up, despite tensions between US-China, despite news of the coronavirus not being particularly encouraging,” said Andrea Cicione, a strategist at TS Lombard.

“We’re facing an emergency from the health, economy and employment point of view — the outlook is a lot less rosy. There’s a disconnect between valuation and the actual outlook even though lower rates to some degree justify high valuation.”

Aiding sentiment, President Vladimir Putin claimed Russia had become the first country in the world to grant regulatory approval to a COVID-19 vaccine. But the approval’s speed has concerned some experts as the vaccine still must complete final trials.

Investors are now hoping Republicans and Democrats will resolve their differences and agree on another relief program to support about 30 million unemployed Americans, as the battle with the virus outbreak was far from over with US cases surpassing 5 million last week.

Also in focus are Sino-US tensions ahead of high-stakes trade talks in the coming weekend.

“Certainly the rhetoric from Washington has been negative with regards to China ... there’s plenty of things to worry about, but markets are really focused more on the very easy fiscal and monetary policies at this point,” said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.

Financials, energy and industrial sectors, that have lagged the benchmark index this year, provided the biggest boost to the S&P 500 on Tuesday.

The S&P 500 was set to rise for the eighth straight session, its longest streak of gains since April 2019.

The S&P 500 was up 15.39 points, or 0.46 percent, at 3,375.86, about 18 points shy of its high of 3,393.52. The Dow Jones Industrial Average was up 341.41 points, or 1.23 percent, at 28,132.85, and the Nasdaq Composite was down 48.37 points, or 0.44 percent, at 10,919.99.

Royal Caribbean Group jumped 4.6 percent after it hinted at new safety measures aimed at getting sailing going again after months of cancellations. Peers Norwegian Cruise Line Holdings Ltd. and Carnival Corp. also rose.

US mall owner Simon Property Group Inc. gained 4.1 percent despite posting a disappointing second quarter profit, as its CEO expressed some hope over a recovery in retail as lockdown measures in some regions eased.

Advancing issues outnumbered decliners 3.44-to-1 on the NYSE and 1.44-to-1 on the Nasdaq.

The S&P index recorded 35 new 52-week highs and no new low, while the Nasdaq recorded 50 new highs and four new lows.