HK still far out of financial danger

CE Tsang is concerned on the impact of the US’ second round of quantitative easing on Asian economies.

Chief Executive Donald Tsang says Hong Kong has been riding on Asian growth and the rise of other emerging economies. Yet it is far out of danger, with asset prices increasingly getting out of line with fundamentals and the US' second round of quantitative easing on Asian economies.

Mr Tsang on Friday addressed the business sector of Member Economies at the Asia Pacific Economic Co-operation CEO Summit in Yokohama. He said he is concerned about the impact of the US’ second round of quantitative easing on Asian economies, adding the macro environment is exceptionally abnormal, where asset prices are increasingly getting out of line with fundamentals, according to a government report.

The extremely low interest rate and strong capital inflows into emerging markets have increased the risk of asset bubbles, which will impact financial stability, and regional and global economic growth. He said while the worst of the global financial crisis may be over, the next wave will hit at the corporate level through massive volatilities in the currency and securities markets.

"We are not out of the woods yet. Far from it."