Is Hong Kong finally on its way to a full economic recovery?

Q4 GDP expanded 3.1% on the back of China's stabilisation.

According to Natixis Research, Hong Kong’s Q4 GDP surprised the market on the upside by expanding 3.1%YoY (Q3: 2.0%). As the previous sharp slowdown, also this rebound should be solely attributed to China’s increasingly large influence on the Hong Kong economy.

Here's more from Natixis:

In a way Hong Kong has profited from the best of two worlds. China’s real economy has stabilised (creating demand for Hong Kong goods and services, especially tourism) and China’s capital outflows have contributed to housing and stock price increases.

More specifically, the good GDP data can be attributed to a solid rebound in private consumption and retail sales, uplifted by stabilisation of the tourism industry (mainland-related spending in particular).

Nonetheless, the annual growth of 1.9%YoY last year is still 0.5% percentage point below that of 2015, signifying that the recovery is still not yet complete. Even against the backdrop of stronger growth, local inflation remained subdued in January (1.3%YoY) on the back of solid HKD NEER and soft RMB that should keep import costs in check. However, inflation could accelerate soon as in many other Asian economies, as well as the US.