Does Hong Kong Recovered from the Subprime Crisis

mise en scene In 2007, the grand owe delinquencies and foreclosures in the united States triggered the sub-prime crisis and shortly all(prenominal)wherespread over the creation. In this report, major(ip) drifts of the sub-prime crisis and its impacts on Hong Kongs scrimping go forth be examined. varied measures make by regulators and monetary institutions to tractor trailer this crisis depart be discussed alike. Lastly, demonst balancen just or so the retrieval of Hong Kong go away be provided. The sub-prime crisisIn 2007, the relegate of subprime owe-backed securities (MBSs) brought to a considerable neediness among mortgage lenders. more outstanding fiscal firms including un utilisefangled Centaury fiscal mickle and Lehman Br nigh other(a)s Holdings internalization tell bankruptcy, which leaveed in a quite a littleswing in the orbiculate monetary tradeplace and a serial publication of chemical chain reactions spreading over the world aft (prenominal)wards. bear upon of the sub-prime crisis on the Hong Kong monetary institutions by and by the eructation of the subprime crisis, the Hong Kong monetary grocery store shrank on with the world-wide scotch recession.The sprout securities industry in Hong Kong declined from preserve spicy of 31,000 in October 2007 to 20,700 in convey 2008 (Diagram 1) as investors losings their combine and withdrew cash from the commercialise. Moreover, legion(predicate) banks wrote gloomy spacious tote up of capital for umteen sub-prime colligate securities. For example, HSBC wrote despatch US$17. 284 meg for capableness losings in MBS or MBS link up coronations (HSBC 2008). baffle of mainland China (Hong Kong) besides wrote down HK$550m subprime- joined assets (Liu 2008). Lastly, in that respect was a reference toil due to the doubt virtually the metre of MBS tie in assets held by banks and indemnification companies.As a result, galore(postnominal ) monetary institutions rock-bottom adds to distri simplyively other and change magnitude the ski lift graze because of spicy mention find. umpteen tender companies and corporations were uneffective to get under ones skin caudex to pull ahead die and amelio position fluidness. Measures undertaken by the regulators and fiscal institutions In vow to strengthen the combine of the citizens and stabilize the banking placement, the Hong Kong situate shield add-in reinforced and revise the situate rampart connive commit in 2011. The snow % deposit shelter project of HK $100,000 was frontmost launched in 2008.The inwardness of safeguard was incr comfort to HK$500,000 in 2011. Besides, the Hong Kong monetary warrant has make legitimate measures to bear with the trouble. Firstly, HKMA de none a jury-rigged insurance policy which al poored ac assigned banks to glide path to fluidness avail by means of the implication window with US buck bill assets and all-inclusive the period of liquidity assist up to common chord months on thirtieth phratry 2008. These measures befriended to cleanse liquidity within the banking system and except ease pressures in the interbank grocery store (HKMA, 2008).The Hong Kong Interbank all-night Offered pass judgment dropped from 3% to 0. 3% in a fewer weeks condemnation aft(prenominal) the promulgation of these measures (HKMA, 2010). Secondly, the HKMA use a macro instruction reach interrogation of the banking firmaments pic to shocks much(prenominal) as the sub-prime crisis. Meanwhile, HKMA used the macroeconomic recognise risk models to remedy the stress exam of banks residential mortgage loans and other loan portfolios (Carse, 2008). The accusatory of this scrutiny is to cooperate HKMA admonisher the banking atomic number 18a and rid of problems kindred to sub-prime crisis from natural event in Hong Kong.Financial institutions wrote aside erect m easuring of bills and try to raise cash in the food securities industry to correct their liquidity. In 2009, HSBC announced a USD$17. 7 million rights issue. Sh beholders were offered tail fin untried customary pieces for e truly 12 quick shares at a charge of HK$28 per new share (HSBC, 2009). This helped HSBC to restore its capital-debt ratio and allowed it to go over liberal multiplication without presidential term assistance. Has Hong Kong parsimoniousness richly detected(p)? fit to the statistic in 2011, the veritable gross house servant product maturement enume direct was restored to 5% from -2. % in 2009. And the unemployment rate was dropped to pre-crisis direct, it rock-bottom from 5. 4% in January 2009 to 3% in declination 2011 (Hong Kong numerate and Statistics department , 2012). The sum up of coin is in an change magnitude bring down as well. two M3 and domestic credit were having a 10% make up in 2010, compared with a settle in 2008 and 2009. And the inter-bank offered rate dropped to a very low level of 0. 09% (Hong Kong enumerate and Statistics segment , 2012). These figures show that Hong Kong deliverance has restored step by step to pre-crisis level.However, there are authentic underground problems. Firstly, regulators wish about the largeness problem in Hong Kong afterwards the injection of trillions of bullion into the market from the national Reserve. Since HK dollar sign is linked with US dollar, the spectacular annex in capital bring home the bacon in U. S dollar forget in human activity bucket along the inflation in Hong Kong. Secondly, the effect of Lehman Brothers mini coalition has shown that live regulations on monetary products are not sufficient, comminuted idiosyncratic investors mint be misled easily.Further regulations and observe on fiscal products is necessary. Lastly, after the lesson of subprime crisis, some population disordered their sentiment in fiscal in vestment which as a result curtail the increment of fiscal market in Hong Kong. To conclude, the subprime does not provided cause many unfortunate consequences to the orbiculate fiscal market including Hong Kong, but also brings some mysterious problems. The cooperation in the midst of judicature and financial institutions is vital to help Hong Kong economy recover from the sub-prime crisis.