Hong Kong's brief overview
Hong Kong was a bastion of international trade and investment from the day of its independence back in July year 1997. Since then Hong Kong had been receiving constantly growing attention of international investors and businessmen from different parts of the world. Even despite numerous setbacks and recessions in the time of the Asian Financial Crisis as well as 2008 Global Economic Downturn, Hong Kong has turned into one of the leading global investment and business hotspots, well-known for its liberal and low taxation as well as numerous concluded free trade agreements, making Hong Kong a desirable destination for many entrepreneurs.
Below we shall provide a detailed overview of Hong Kong's economy and business environment, some ways allowing global investors granting access to local market, as well as few quite relevant risk factors to be considered at all times.
Hong Kong and the liberal free market economy
Hong Kong is often described as one of the world's biggest experiments in laissez-faire capitalism, however, there were quite a few new regulations introduced since it all started. Despite legal modernizations and newest requirements, Hong Kong is still being ranked ranked as one the freest states in the world based on the Index of Economic Freedom for every year starting from year 1995 – even before it became actually independent. Country now harbors the seventh biggest stock exchange on the globe, the largest initial public offering market in the world, and offers one of the densest concentrations of corporate office and headquarters in the Asia-Pacific area. Even more surprising is the fact that more than 8% of Hong Kong's households own more than one million United States dollars in net worth.
Based on the 2012 Wealth Report by Knight Frank Research and Citi Private Bank, Hong Kong is going to become the world's second biggest economy based on the GDP per capita by the beginning of year 2050. Simply for comparison, the United States is predicted to be fifth on the list after four largest Asian economies.
Making an investment in Hong Kong using ETFs
One of the easiest ways for global investors to gain gain access to Hong Kong's securities is through exchange-traded funds, also known as ETFs, which gives quick diversification in a security that trades on different international stock exchanges.
One of the most widely used Hong Kong ETFs is the iShares MSCI Hong Kong Index Fund (NYSE: EWH), having a 2.7 billion U.S. dollars in net assets with a grand total of 43 holdings.
Some other well-known Hong Kong ADRs include:
- AIA Group Ltd. (OTC: AAGIY)
- Sun Hung Kai Properties Limited (OTC: SUHJY)
- Hutchison Whampoa Ltd. (OTC: HUWHY)
Advantages and risks of investing in Hong Kong
Hong Kong offers numerous advantages among with a few risks directly associated with investing, which must be carefully evaluated and kept in mind. While Hong Kong clearly represents an attractive business and investment destination, there are various risk factors that could transform it into a quite risky investment object during financial crisis.
Advantages of investing in Hong Kong include:
- Leading Global Economy. Hong Kong is one of the freest states in terms of economy and taxation, and perhaps one of the most relevant global financial hubs.
- Proximity to Asian Growth. Some of the world's biggest economies moving forward will be situated in Asia, which provides Hong Kong a strong geographical advantage.
Risks of investing in Hong Kong include:
- Geopolitical Risks. Hong Kong's ties and proximity to China makes it a possible object of geopolitical issues and disputes, considering the fact that many business leaders originate from China.
- Concentration of Risk. Hong Kong's economy heavily relies on its financial sector of economy, putting it at great risk during economic recessions.
Things to remember when dealing with Hong Kong:
- Hong Kong was a bastion of capitalism in one of the world's fastest growing areas, making it a number one desirable destination for international businessmen.
- The quickest way to gain access to Hong Kong is through ETFs.
- Investors should carefully consider all possible risks associated with Hong Kong prior to committing capital, especially geopolitical risks and a lack of diversification.