Strategy Note /

Hong Kong opposition resigns; likely that Biden supports, HK property stagnates

  • "Pro-democracy" lawmakers resign in protest of removal of colleagues under China's law on "unpatriotic" legislators

  • Biden likely reiterates his May 2020 rhetoric of "clear, strong, and consistent on values when it comes to China"

  • Hong Kong property prices likely continue their longest period of stagnation in the last decade

Hong Kong opposition resigns; likely that Biden supports, HK property stagnates
Hasnain Malik
Hasnain Malik

Strategy & Head of Equity Research

Tellimer Research
11 November 2020
Published byTellimer Research

Opposition "pro-democracy" members of Hong Kong's Legislative Council resigned in protest of the removal of some of their colleagues under the recently passed law in China on the removal of sitting legislators deemed "unpatriotic" (ie actions that are deemed a threat to national security, such as promoting independence). This likely prompts US President-Elect Biden to reiterate his rhetorical lecture on "values" to China. Meanwhile, Hong Kong property prices are likely to continue to stagnate.

"Pro-democracy" versus "pro-Beijing"

The resignation of opposition, "pro-democracy" legislators follows:

(1) Pro-democracy protests since 2019, local election success for "pro-democracy" parties in November 2019;

(2) Replacement of senior Chinese national government representatives in Hong Kong (eg head of the Liaison Office) at the start of 2020, the passage of China's national security law (which requires adherence in Hong Kong) in May 2020;

(3) US President Trump's termination of Hong Kong's special status in July; and

(4) Postponement of Hong Kong Legislative Council elections by a year (to September 2021).

Hong Kong Legislative Council

Biden's first post-election comment on China

US President-Elect Biden likely reiterates his rhetoric from May 2020, when he published a comment on President Trump's reaction to the passage of China's national security law. His comments then included the following, "Leaders in Beijing are proposing a law to further erode Hong Kong’s autonomy and the rights of its citizens... We need to be clear, strong, and consistent on values when it comes to China. That’s what I’ll do as president."

We expect Biden's policies on China to reflect the bipartisan consensus, which is suspicious of China but in a manner that is grounded in multilateralism, as opposed to Trump's unilateralism.

This is not to say it will be any more effective from the perspective of China hawks, but it may make dealing with China even more difficult (eg for companies in the Technology sector, investors in Chinese corporates and capital markets, or countries involved in the Belt and Road Initiative).

Hong Kong property stagnation

Hong Kong likely continues to witness friction between those in favour of independence from mainland China and those in favour of closer integration. In the short term, most expatriates are driven by job prospects and a better living environment compared to their place of origin.

Law and order conditions in Hong Kong have not shifted sufficiently to prompt an expat exodus (and political representation and political liberty are usually low on the list of wants for expats globally).

However, the mood of corporates is already gloomy (albeit brighter than at the trough earlier this year, when measured by PMI survey data) and Hong Kong property price are already in the longest period of stagnation seen in the last decade. Developments such as this resignation of opposition lawmakers likely means that these trends persist.

Hong Kong property's longest stagnation in the last decade

HK business mood contractionary but better than early 2020

Related reading

China, Hong Kong, Taiwan: Complacency on political risk

China and Hong Kong: 'One country, two systems' becoming 'one world, two camps'

Biden's US foreign policy would be positive for Emerging Markets