Hong Kong’s China risks aren’t disappearing soon: analysts

Risk appetite has been rising since 2Q.

There may have been a calm on Hong Kong’s China woes for the past quarters, but analysts say concerns about the big red dragon could still come back.

According to a report by UBS, the market has gotten more comfortable about China versus early this year.

“It is partly because the concerns about China have been overshadowed by a number of other major global risk events, in particular the UK referendum,” the report noted.

Also, investors have also been at ease with the Chinese government’s ability to manage its economy, the report noted.

However, China's underlying problems, such as excess capacity and excessive leverage, remain unresolved, UBS explained.

“And cyclically, we expect Chinese growth to slow modestly in 2H16 after a relatively stable 1H, as the lift from earlier stimulus fade. So the concerns about China could still come back,” the report added.