OREANDA-NEWS. January 23, 2013. The Bank of East Asia (“BEA”) has released the January 2013 issue of its Economic Analysis. According to this latest issue, positive developments in both the US and Europe should translate into stronger demand for imports from Asia, including Hong Kong, this year, reported the press-centre of BEA.

In the US, an increase in hiring by companies, together with rebounding property prices have boosted consumer sentiment. The strong momentum of economic recovery could offset the impact of fiscal tightening policies. In Europe, measures to contain the debt crisis in 2012 should mitigate the potential for downside surprises in 2013. Major creditor countries have also given more breathing space to their overstretched neighbours by showing greater flexibility in the restructuring of sovereign debt.

The Chinese government appears to be committed to economic reform in 2013. Measures to prevent property prices from surging will remain in place. Further reforms on pricing and taxation, including the expansion of the value-added tax and new property taxes to more cities, are expected. Hong Kong can benefit from these reforms, particularly China’s effort to upgrade its service sector.

The Hong Kong employment market remained resilient in 2012, despite the global economic slowdown and increase in labour costs following the introduction of the minimum wage in May 2011. A key factor is the persistent strength of demand from the growing number of Mainland companies and tourists coming to Hong Kong. This development trend should continue in 2013. Hong Kong’s real GDP is projected to grow by 4% in 2013, and inflation is expected to average approximately 4%.

The Hong Kong government introduced a range of new measures to stabilise the property market in October, which appear to have worked – for now. Mainland buyers, in particular, have been deterred by the 15% Buyer’s Stamp Duty (“BSD”) on all transactions not in the name of a Hong Kong Permanent Resident. Singapore also introduced its own BSD at the end of 2011, which proved effective in checking Mainland capital inflow into its property market.

The experience could provide a useful reference point for Hong Kong. Hong Kong’s luxury and primary markets have been most affected by the BSD, as Mainland buyers account for a large share of the total transaction volume in these segments. However, the impact of the measures will be less on small and medium-sized property market. Only an increase in supply could adjust prices to a more reasonable and affordable level.

Published on a quarterly basis, BEA’s Economic Analysis provides investors with an in-depth look into current market and economic issues. Copies of the report can be downloaded via BEA’s homepage: www.hkbea.com / Corporate Information / Economic Research.