Korean financial firms keep close watch on HK unrest

03-Jun-2020 Intellasia | KoreaTimes | 6:02 AM Print This Post

With US President Donald Trump threatening to revoke Hong Kong’s special trade status with the world’s largest economy, financial companies here are keeping a close eye on how the escalating political feud will unfold.

The dispute is widely seen as part of an extension of the US-China trade dispute, as Trump’s decision came shortly after China’s “parliament” approved plans to impose a security law on Hong Kong.

Up until now, the chances have remained slim for Trump to actually turn his message of warning into a reality, as the move will bring bigger-than-expected economic chaos across the globe, economists argue.

They said, however, the escalating political tension, in itself, would come as a clear anxiety factor to non-Hong Kong-based firms operating business there, even if their actual damages from the political tension will likely remain minimal for the time being.

A number of Korean financial companies ? represented by securities firms, such as Mirae Asset Daewoo ? have set up branches there, but most players are taking a wait-and-see approach and have not viewed the Hong Kong unrest as a very serious external risk.

“For now, the Hong Kong issue is casting a limited impact on most Seoul-based brokerage firms doing business in the city-state,” an official from one of the major securities firms here said.

“Major Korean financial companies there have not changed their business strategies due to the single issue, but are keeping a close tab on how the situation escalates further and plan to take action in the event that the feud develops to a worrying level,” the official said.

Amid the heightened political tension between the world’s two largest economic powerhouses, there have been rumours that Chinese authorities will raise taxes on overseas firms in Hong Kong from the current 5 percent profit tax to 30 percent, which turned out to be false.

“But we are closely watching the unceasing political unrest in Hong Kong,” the official noted.

Korea Capital Market Institute economist Kim Han-soo said Korean financial firms in Hong Kong would not be exposed to potential damages from the political uncertainty there.

“The Hong Kong unrest will unlikely cause a lot of damage to Korean and non-Hong Kong-based companies there, as Trump will definitely be aware of lingering concerns that such an action may end up deteriorating the global money flow,” he said.

“Against the same backdrop, Korean financial companies in Hong Kong will not suffer from any serious near-term damages due to the ongoing power struggle between the US and China,” he said.

Losing luster as financial hub

But he pointed out that Hong Kong may end up losing its leading status as Asia’s financial hub in the long term.

“China is strategically developing Shanghai with the aim of turning the city into the next financial centre in Asia,” he said.

“But my view is that Trump will continue exchanging a war of words against the Chinese authorities for a longer period of time, but is unlikely to take any specific actions against Hong Kong,” the economist said.

Despite the outlook, financial players there have to keep a close watch on the political dispute, even if the issue, in itself, will not be a serious risk factor in determining the survival of Korean firms there, he added.



Category: Korea

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