Financial hub crippled as COVID case numbers hit new record

Key financial institutions in Hong Kong are devising plans to avoid operational interruptions caused by new COVID-19 restrictions imposed on the city.

The fresh restrictions have been announced after 1,161 new infections were recorded on Wednesday.

Although the figures, which are a daily record for Hong Kong, are significantly lower than many other major cities, the new containment measures are some of toughest since the onset of the virus.

The Government, intent on sticking with its controversial zero-COVID policy, has ordered a two-person limit on public gatherings, while for the first time a restriction on private group gatherings has been introduced.

Multi-household gatherings in private premises are now limited to two families.

There has also been an expansion of the list of “scheduled premises” in which only vaccinated residents can attend. The expanded list now includes; shopping malls, department stores, supermarkets, hair and beauty salons, and religious premises.

In addition, the financial penalty for non-compliance has been doubled from HK$5000 to $10,000.

“I hope we all realise that the time has come for Hong Kong to take some tough measures. And every measure that we now introduce has been undertaken in other jurisdictions, including some places and countries which are very proud of their human rights, their democracy and so on. They are doing all these sorts of things because this is about life,” said Chief Executive of Hong Kong, Carrie Lam at a media conference.

“Public health prevails, very often, over individual freedoms, but we will not put any individual in Hong Kong in a situation where they simply could not live their life. So, there will be exemptions. There will be compassionate treatment for this and that.”

Contingency plans

Asia Markets understands leading financial institutions in Hong Kong including Bank of America, JP Morgan, Goldman Sachs and Credit Suisse are currently devising plans to allow key Hong Kong-based staff to work from offices in other cities in the Asia Pacific, including Singapore and Sydney.

In January it was confirmed many large banking and financial institutions have also been covering thousands of dollars worth of quarantine expenses for Hong Kong-based staff.

Many business leaders in the city are now calling for the development of an “exit strategy” from restrictions to avoid further economic pain.

In December, Goldman’s CEO, David Solomon said the ongoing restrictions in Hong Kong are “not a great dynamic for talent” and would be a “headwind for attracting global talent to that part of the world.”

While today, respected economist and commodities trader, Steve Hanke, questioned the effectiveness of Hong Kong’s containment policies.

“Lockdowns are killing HK’s businesses while having virtually no effect on mortality rates,” said Hanke.

Other business leaders have also hit out.

“How long can someone cry? Think many Hong Kong companies just want to figure out how to plan and know an exit strategy as apposed to the can continuously being kicked down the road in this never ending tunnel,” said Michael Maddess, Director of Action Asia Events.

GDP forecast downgrade

Just hours after the new restrictions were announced, Fitch halved its estimate for Hong Kong’s 2022 GDP growth to 1.5% (down from 3.0%).

“Our revised projections assume Hong Kong will pursue a so-called ‘dynamic zero infection’ strategy until 2023, in line with the current approach adopted in mainland China,” said Andrew Fennell, Fitch Head of Greater China Sovereigns.

“Even after the current outbreak subsides, this approach will likely require the authorities to sporadically tighten and loosen restrictions on public gatherings and entertainment venues in response to infection levels, with associated disruptions to consumption and services.”

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