Correction or crash? (2)

In early October of 2018 when the HSI saw a 7100 points plunge from its historic peak of 33484 I wrote a post with the same title Correction or crash? as this one putting forward the idea that the HSI was at a critical moment. Luckily at the end of the same month, after further falling of 2000 points, the HSI found its support and saw a rally in the following six months up to the April in 2019. Therefore the plunge was proven to be a correction only. However unfortunately the peak of this rally is still lower than the historic peak. What's more, the subsequent trend in the prior eleven months from now has developed a descending channel. Today the HSI is again at another critical moment when it fell below the valley in the end October in 2018. Not only it has broken a support level of 24000 which was formed after two testings in October of 2018 and August of 2019, today's falling below of this supportive level could signal the descending channel  that formed eleven months ago is very likely to continue.

Apart from the established downward corridor, the HSI also fell below the neckline of the head and shoulders formation formed from last October to this March. The head and shoulders pattern is believed to be one of the most reliable trend reversal patterns.

The diving below supportive line, the established descending channel and the falling below of the neckline of the head and shoulders pattern all posted a southward trend to the HSI. These technical analysis revealed a pessimistic future of the HSI from a rather short time horizon though. When we take a look of the past 15 years chart. Thing is even more daunting.

By referring to my first post with the same title as mentioned earlier, you know what I am talking about. If the valley in 2009 is seen as the departure of wave 1 and the historic peak is the top of the wave 5 then this dip is lower than the previous one in 2019 which could mean this dip is indeed the wave C on the go.

I recap the last paragraph in my previous post as below.

However, if base on my view that the two debt crisis are big correction only then the departure point should be the valley after the suspension of HK stock through train followed by Lehman Brothers at 11345 in 2009 when QE began. Therefore the total hike is 22,139 points. With usual 80% adjustment it means a fall of 17,700 points so the valley of this crash, if really it is one, will be around 15700 level!
Hold tight, man!

A sad sad story

There is a saying here in Hong Kong that life is in analogy of movie and the other way round as well meaning sometimes what happen to us is really as dramatic as the episodes in a movie and sometimes the episodes do reflect what happen on us. There are nothing more sought after than face masks in this moment in this island. There is nothing more than it which is able to catch everyone's attention here in Hong Kong. The humble face masks are even more valuable than money to people in need. People even stayed overnight in the street queuing for it. There is nothing more ridiculous than these scenarios of queuing whenever there is news about sales of face mask in a shop. Sadly this is not the episode in Steven Chow's comedy movies but is what really happening everyday on the common folk here in Hong Kong.

With inventory of face masks running out in most households so undoubtedly many people's life in this island is heavily disrupted. Classes are suspended, many social activities are cancelled, some bank branches are closed and even some government services are stopped. All but just for the sake of minimizing virus transmission due to the lack of face masks. Naturally people complain on all these inconveniences. Luckily the mortality rate remains as a single case only so the public's panic is somehow in check.

However, what is happening in Hubei province and its capital, Wuhan City, the origin of this pandemic, is far more desperate. The whole province is sealed and outbound traffic is blocked at all for more than two weeks now. Intra-cities traffic within Hubei as well as that inside each major cities are also restricted. Residents are demanded to stay at homes to avoid community spreading. Pedestrian is rarely seen on the streets so these cities are just like a ghost town as seen in the episode of Hollywood horror movies.

What even more horrible is that despite of the strict control of human traffic but in fact new infection cases as well as death toll are still coming up everyday in these cities. Along with the restriction on human traffic within the cities, all public services are literally suspended. The RTHK TV's documentary production, Hong Kong Connection, managed to interviewed two Hong Kong families got stuck in Wuhan City and in a smaller city near the provincial border, Zaoyang, respectively both said medical services are suspended due to the human traffic restriction amid the Coronavirius outbreak in the community within their cities. Hospitals denied admission for consultation disregard the patient's symptoms but just sent them back home for residential quarantine only. Their real life experience suggest that the scale of the infection in the Hebei province is so large that it goes beyond the government's capability and literally the local medical facilities just fail to cope with. The government cannot do nothing but just compulsorily quarantine all residents at home.

Quarantine perhaps is effective in preventing social contacts among households but the key point is that they do not just quarantine healthy households but those infected ones as well. Most of all, these families with infected patients are quarantined without any medical treatment or medicines. They are basically rest their lives on luck with fingers crossed that they can get well on their own, or in the worst case to die in isolation. Strictly speaking apart from the Wuhan City where the central government has dispatched a task force team to help, the patients in the other cities in Hubei province is just abandoned. Wuhan City gets the salvation due to its economic importance but less fortunate for the rest. The central government's tactic seems to be natural selection, ie, when all the sicked died then the survivors are proven to be healthy.

Apparently the strike of this virus outbreak is a setback in China's advocate of the rise of a big nation. The myth of an almighty country is broken with its vulnerability against the attack of a tiny creature. By pulling all effort from the whole nation it can save one city only but at the expenses of all the life in other cities in Hubei province.

The outbreak of this virus also revealed one of the institutional flaw in China that the whistle blower, a doctor in Wuhan City, at the preliminary stage of the outbreak was even suppressed and criticized by the local police bureau as a trouble maker and rumormonger when he alerted his acquaintance over the social media. In fact this is a typical and common reaction of the local authorities all over China that they all tend to suppress everything that might invoke vast social concern which could reveal their deficiency in public governance thus undermining their chances of career promotion. It could be a much different scenario had timely precaution and necessary preparation been in place. Unfortunately in China very often it is the common folks whom are suffered from the misbehaviour of the officials.

The underlying cause of this phenomenon revealed an even greater flaw in China's institutional structure. The bottom line is that the government as well as the ruling party is lack of people's recognition and delegation through a proper mechanism. The CCP got into power by expelling GMT regime to Taiwan through civil war but since then it runs the country with totalitarianism. Therefore the CCP regime is in dire need of social stability to avoid any social event that might rock its ruling. Their instinct is to suppress them at infancy or to cover up at the preliminary stage in the hope to avoid the public's awareness. This is exactly why the Wuhan police bureau suppressed the whistle blower whom just wanted to alert his own acquaintance only.

Unfortunately they unknowingly seeded a nightmare which they cannot contain this time out of their expectation.

So, what's next?

Despite of the multiple rounds of quantitative easing in the U.S. and in other economies like Japan, U.K., E.U. and China ....etc since the financial crisis in 2008, trillions of dollar flooded the world, however, the world economy in the past decade did not exhibit a corresponding growth relative to the scale of the money injected in the financial system. Except the first round of the Q.E. which aimed to ease the liquidity resulting from the panic of the financial market, most of the following Q.E. were actually for the sake of boosting the sluggish economic growth in the related economies. Yet, in fact the performance of all countries which exercised Q.E. are far from satisfactory. So what's wrong on the world economy?

Economic growth can be a result of one or the combination of the increase in productivity, population and natural resources. Productivity is mainly consisted of technological breakthrough and human capital, ie., how things are done and the skillfulness of the work force. Population is not only about the numbers of people but most of all the numbers of people with productivity and/or consumption needs. Natural resources define the range and level of tangible raw materials a country or the whole world can utilize. Simply speaking, when a country enjoys a growing work force with increasing skill competence and there are abundance of natural resources available as well as innovation on production then it is bound to have a robust economy.

One may argue that capital plays a vital importance in an economy especially the capitalism countries. It is absolutely true the more advance and modern an economy is, greater the capital plays its role as money is the carrier of all transactions in capital oriented economy. Capital is the lubricant facilitates the economic activities in all capitalism economies. However, it is a must but not the dominating driver.

When the financial crisis broke out in 2008, liquidity problem happened because of the counterparty risk surged when uncertainty and panic dominated the market. The first round of Q.E. originated by the FED aimed to solve this liquidity shortage and it did save the U.S. economy as well as the world economy from the brink of collapse. Not only the salvation on the liquidity crisis but the U.S. economy recovered steadily since then. Unknowingly the FED is hooked on this economic opium so following rounds of Q.E.s were implemented whenever signs of economic sluggish surfaced.

By injecting trillions of dollar into the economy while the money got stranded in the financial system though due to weak borrowing or more specific speaking the lack of qualified borrowing as the real economy is still suffered from the deep-seated problems. The world economy faces a strange sort of scenario that money floods the financial world but some businesses in the real world are hungry for lending because they cannot show a healthy balance sheet to the banks.

The deep-seated problems the real world economy are facing are back to the square, ie., productivity, population and natural resources. The world's productivity experienced a few leaps in human's history during the industrial revolution, liberation of women into work force and universal education. The baby boom after the WWII and the following decades of peace time led to a surge of world population. On the other hand in the natural resources, the development of the petrochemistry industry provided the world a much more efficient fuel and the all-round magical material, plastic, apart from the naturally limited supply of iron, wood and natural fibres. Except the industrial revolution, all the goodies happened after the WWII and they were the significant driving force behind the world's economic growth in the past few decades. On the contrary when one looks forward what lies ahead in terms of these old goodies? Things are less promising.

While forecast on the world population is still a positive figure but the ageing population not only in the developed countries but the world's second largest economy, China, is evidenced. That gives rise of two problems, diminishing work force as well as products demand, but both leads to a sluggish economic growth.

After enjoying the fun time with plastic in the past few decades, people started to face the dark side of this magical material. It just stays there in our environment for centuries once people made it. Now all the five oceans are flooded with plastic waste. Some is even broken down into micro plastic which sneaks into the food chain. While human is trapped into the dilemma of the usage of plastic but another magical material that can give another dramatic impact on the economic growth is not yet in sight.

Among the three dominant driving forces, productivity is the only one seems to be the silver lining. Despite of the shrinking work force, leaping technology on robots combined with A.I. perhaps can just fill the gap. Some people put a high expectation on the 5G telecommunication technology which is supposed to increase the Internet speed by 20 folds. 5G plus IoT perhaps is another wave of the increment on productivity after the invention of steam engine.

Technology is no doubt a drive in the productivity which in turn steams the economy but after all, productivity is just about making products more efficiently but at the end of the day there must be a corresponding demand on these products then the growth on economy can be materialized. According to the information in the website (https://www.worldometers.info/demographics/world-demographics/) that more than 24% of the world population is 50+ years old. At the first glance it does not sound too bad but when we take a closer look into the demographic on the most advanced economies like the U.S., E.U. and Japan and the self-claimed developing country but the second largest economy, China, where they represent the most significant demand on consumption then the outlook is rather pessimistic because the chunk of the people with the strongest consumption is ageing and most of all, there are a contracting demographic meaning a negative population growth across the board.

One can imagine after the batch of the strongest buying power in the most affluent countries died then the consumption demand in the whole world will just shrink significantly. Despite of the increase in the productivity or possibly the emergence of another magical material but if there is less demand as a whole, so what's the next drive on the global economic growth for the future decades to come?

Collapse of public governance

Three days ago Moody's downgraded Hong Kong's sovereign credit rating on the ground that Hong Kong government's governance is lower than previously estimated mainly due to its inability to resolve the already seven months long yet on-going civil unrest. Probably it is a coincidence or may be not, however, Carrie Lam's administration demonstrates another governance crisis amid the brink of an outbreak of pandemic, the Wuhan coronavirus.

Apparently the Hong Kong government lags behind in coping with the ever-evolving possible pandemic. In his speech two days ago, the Chief Secretary, Matthew Cheung, explained why health declaration is not implemented upon the passengers from the Express Rail trains coming from China that the process could build up blocks of people in the arrival hall while the gathering of people could even facilitate the transmission of virus, if there is any asymptomatic vector among the crowd. It is really unbelievable that the second to Chief Executive in the Hong Kong government would say such nonsense as the explanation on the public health policy.

Cheung's nonsense logic lies on when there is no asymptomatic carrier among the crowds then the worry on the possible virus transmission is unnecessary. However, if there is really one, Cheung seems to  prefer avoiding the infection among the people from the train but to release the patient to the public without any clue to trace his/her whereabout which will cause a much wider scale of spreading in the community.

Fallacy, especially from such a high ranking official, does undermine confidence not only from Hong Kong citizen to the Administration's governance but also that from the stake holders including foreign investors. This nonsense logic just further strengthens the justification on Moody's downgrading.

On the other hand people can't help but just wonder why these once elites now turn out to be idiots. Apparently there is nothing wrong in their brains but just in their mentality. They just tuned their gesture in-line with what the Mainland China is posing. When Cheung said the nonsense the Mainland China's related authority was still trying to tone-down the situation. These elite officials are just too smart to play safe by keeping the same tune with that from the north or even avoid the possible perception of offend perceived by the Mainland counterpart.

Amid the ever-growing integration with China, it seems the Hong Kong administration is in a kind of self-dwarfed position when dealing with their counterpart in the Mainland China. This kind of self-imposed limitation is literally a castration on the doctrine of Hong Kong People ruling Hong Kong and just showcases the deterioration on the another doctrine of One Country, Two Systems.

Deng Xiaoping once made his prophecy saying that there is possibility that the main culprit of undermining the One Country, Two Systems comes within Hong Kong. It seems his prediction really came true but sadly, Deng might has never expected that it is the Hong Kong government itself!

Life without hope is no different from a salted fish

The title of this post came from the line in one of the productions by the once very popular Hong Kong comedian actor, Stephen Chow. Chow's most famous films are seen as the classical comedy during his heyday era. Unfortunately most of the people, especially among the youth, here in Hong Kong could experience what this expression is all about now.

Finally the once raged social turmoil arising from the extradition bill has subsided much now. Livelihood started to resume to normal despite of the on and off activities in different forms. However, lives of most Hong Kong people are never the same again. Apart from that the society is further divided, to many of the residents in this island Hong Kong has changed much. Police became brutality, white fear lingering in the air, the once friends became opponents, a travel city became a forbidden city, last but not least the "one country two systems" has proven to be a failure here in Hong Kong. The idea of this advocate is once the hope of the seven millions plus islander's hope on the exemption of the life style across the border, at least till 2047. The six months long social activity has poked this balloon of hope.

At the beginning of this social movement some people attributed the wealth gap between the haves and the don't and the housing shortage. It is true that these are the deep-seated problems bothering Hong Kong in this decade but this is not uncommon in neigbouring countries or even in some developed ones. The participants of this movement are consisted of young people or even teenage, especially at the middle to the latest stages. As and when the confrontation develops, this young segment of the population suddenly realized that the once baby step eroding promise on the two systems came to the brink of the bursting. Changing from rule by law to rule of will is just one step away. They anticipated what life will be like after, or even just approaching 2047 when is going to be their prime time if things keep going like what it is now. So they rose to fight. They fought for their future. A future free from fear.

There were also pro-government or Beijing rallies amid the much larger scale counterpart. The interesting thing was that the participants of these pro-government activities were mainly middle to old aged who are most probably the haves of the wealth gap spectrum or those who will enter into their elderly stage when 2047 arrives. The whether or not on the existence of hope does not matter much comparing to their youth counterpart. The result of the recent Taiwan presidential election tallies the preference of the expectation on hope in life between the old and young. Taiwanese young people voted Tsai to demonstrate their resistance to China and her ambition of imposing the One Country Two Systems onto Taiwan. Young people across the strait did the different things but for the same motive.

They want a life with hope, but not a salted fish.

Her days are numbered(3)

Following the District Council election in last weekend and the pan-democratic camp's overwhelming success, Hong Kong finally enjoys a few days of calmness so far. The outcome of the polling was out of expectation and also as expected in the sense that the result was actually a big No to the government which was expected, the victory was much better than expectation though.

However, things happened before the election were really nasty. Hong Kong has literally turned into a war zone especially at the Chinese University and Polytechnics University. Days of battle between the riot police and the defenders made Hong Kong "famous" again. The island is an international city and renowned for many things like good food, shopping or fun land of money adventurers ...etc. People around the world at least heard about Hong Kong's name even if he/she knows nothing about it. Thanks to Carrie Lam, the CE of HKSAR com most "successful" disservice salesperson for Hong Kong, that this island is getting more and more well known in the international community but unfortunately against its reputation.

The social unrest, originated from Lam's stupidity and arrogance on the maneuver of the extradition bill proposal. This social movement not only directly led to the total failure of the pro-establishment camp in the district council election but literally rendered Hong Kong as a bargaining chip for Trump in the trade deal negotiation with China. This mistake out-weight all those mistakes made by any of her predecessors. People has been gossiping if Lam can survive till the end of her first term. It seems the CE of HKSAR are cursed so her all three predecessors could not complete their appointments. Therefore people speculate Lam will end up the same as them and people did that for good reason. All the three former CEs have done something different but the common point were extremely unwelcome by the public. Despite the things they did were different but all yielded the massive protests among the public. At the end of the day they all stepped down with different excuses, and apparently under Beijing's idea.

Some may still argue that the state chairman, Xi Jinping, has just openly recognized the work by Lam and her administration recently. It seems Beijing is still supportive to her but people should not forget all the three former CEs also received this kind of recognition from Beijing amid the overwhelming pubic criticism prior to their stepping down. The mess created by Lam now is way bigger than those by her predecessors so her punishment in more or less the same pattern seems to be unavoidable.

For people who know the practice of the sacking of any senior management member understand that unless the one is involved in criminal offense, the replacement will not happen right away despite very serious mistake is committed. Most of the cases it takes time to find the suitable candidate. On the other hand, a smooth transition is sought after for the sake of operation. Indeed finding one who is willing to shoulder the responsibility amid the chaos is extremely difficult, if not possible. If the recent calmness can last finally then it could be somehow easier to find the white knight to take up the challenge.

Everyone here in Hong Kong is longing for the calmness not only for the peaceful livelihood but hoping to see the end of the sinner of the chaos. In fact, it became quite clear, after the polling result, to the sinner's master that they can either put an even stronger suppression on the people's opinion or resort to a policy adjustment fine-tuned to the reality happening here in Hong Kong. Apparently the former is not the option available to Beijing considering the current situation so the sacrifice of a stooge is out of question.

Is it gonna work?(2)

It is more than one month since my last post with the same heading and the answer to the question became quite clear now. Meanwhile today the social unrest just went into a new milestone following the death of an university student who mysteriously fell from height in a car park building during a police-protestors confrontation a week ago. The news of the student's death three days ago triggered a new round of mayhem throughout Hong Kong territory. However, the situation in today turned much sour than it was in the past few days when a police officer shot down a protestor live fire with his pistol and another traffic police officer charged into protestors three times with his motorbike.

Today's shooting is the second incidence following the shooting in last month. Unlike the last shooting that the protestor was engaging in action towards the police officer, the victim in today's shooting just followed and watched about two meters away from the police officer while some other protestors were having bodily contact with that officer. Apparently that officer has burst into loss of control while being confronted and under stress. Compounded with the traffic police's reckless charging with his motorbike, it will unavoidably tear further apart the police force with the public as live round footage went viral in the Internet. The public's condemnation on the police's violence puts Carrie Lam, the so far CE of the HKSAR, into a dilemma. The police force is Lam's sole reliance on the armed force backing but it seems the Force is going to be out of her control.

It seems there is a delicate shift of dominance between Lam's administration and the police force. As and when the social unrest goes more and more furious Lam's administration is getting more and more dependent on the police force to deal with the mayhem. Every seasoned business owner knows that when a particular staff became indispensable that it will be a big headache of office governance. This is the exact situation that Lam is trapped into particularly when Beijing openly expressed it's recognition on the HK police force's work. This puts Lam in a more vulnerable position in term of office politics. It seems both parties are aware of this situation well or at least the front line police officers do so therefore they enjoy much freedom and leeway on the exercising excessive force while Lam is quite cautious and refrained on commenting the situation.

Some people may say the stationed PLA is Lam's last resort so she is not that hindered in under dog. However, the PLA is not under her command so the deployment is solely up to Beijing's decision while the latter has a big concern of the use of PLA on HK soil especially amid the closing negotiation on a deal with the U.S. on the trade talk. On the other hand, Beijing has a much bigger concern on the deployment of PLA at this moment when the police force is under condemnation. The latter may interpret the action is a distrust on them or even a disposal after ordeal. They are in their some thirty thousands and most of all, armed. Their grievance is the least thing Beijing does not want to see.

There is a Chinese saying to describe someone is in a dilemma as the riding on a tiger's back, it is not easy to keep on riding in one hand but dangerous to cast off on the other hand. Where is the tiger? Who is riding?  Hm....