HONG KONG — The jetliners serving this financial hub arrive with more empty seats these days, and lately it's easier to get a table at Harlan's oyster bar in the International Finance Center.
Across the bay in Kowloon, a salesclerk at Italy Fur & Fashion idles away the afternoon.
"Stocks, stocks, stocks!" she hollers, when asked why there were no customers, despite steep discounts on rack after rack of merchandise.
Hong Kong's stock market has fallen more than 50% this year, and analysts expect the economic slump to continue through at least next year. The Chinese territory is in recession, yet plenty of people here seem to be taking things in stride.
One reason is that Hong Kong has been through worse before; the last downturn lasted seven long years, from the Asian financial crisis in 1997 to the SARS epidemic in 2003. The other is a belief among some, in and outside Hong Kong, that the world economic order is shifting, from the West to the East, pushed by China's rapid growth and now the subprime financial contagion.
With the U.S. and Europe worse off than others, there's little doubt that more capital and talent will swing toward Asia. And few places look as well positioned as Hong Kong to take advantage of that.
In the financial world, "they will all tell you that there are three great listening posts: London, New York and Hong Kong," says Donald Straszheim, vice chairman of Newport Beach-based Roth Capital Partners and former global chief economist at Merrill Lynch in New York.
Although lacking the critical mass of London and New York, "Hong Kong is increasingly becoming globally important," he adds.
Hong Kong has long been Asia's most laissez-faire capitalist economy, with easy access for foreign investors, relatively low taxes and little government intervention. The latest financial crisis has Western governments promising tougher regulation of banks and trading houses, but people here don't think the clampdown in Hong Kong will be as hard. That could give it a competitive edge.
"This time, because of the turmoil, people want government to do more, but not to the extreme of the U.S., where the government takes control of everything," says Man Cheuk Fei, chief editor of Hong Kong Economic Journal. "Hong Kong senior officials argue that this is a golden opportunity to build one or two investment banks. . . . They can compete with the U.S. in the future."
Paul Donovan, global economist for UBS in London, says those who run hedge funds and other investment pools may indeed be attracted by Hong Kong's reputation for a light regulatory touch. On the other hand, he adds, that could work against Hong Kong if big investors who have suffered losses seek the safety of a tightly regulated, more transparent environment.
"It could go either way," he says.
At the moment, Donovan and some other analysts see Hong Kong in the same vein as Singapore, a regional financial hub, not quite up to international snuff.
Some of that has to do with Hong Kong's size: a population of 7 million and an economy no bigger than the state of Washington's. But economists also say Hong Kong trails its rivals in an array of factors, including quality of life (notably air pollution), a smaller finance-industry labor pool and a lack of certain developed markets such as commodities trading.
Yet as Asia drives more of the global growth and wealth, the talent is likely to follow. There won't be as many opportunities in the world's dominant financial centers.
On Wall Street and the City, London's financial district, workers carting boxes from their offices have become familiar scenes. New York City's comptroller recently forecast that 165,000 jobs would be lost over the next two years, including 35,000 in the financial services sector.
Most international financial firms have branches in Hong Kong, and they've had their share of layoffs in recent weeks too.
Hong Kong's banks also sold toxic mortgage-backed securities and exotic derivative products to investors, but on a smaller scale than their New York and London counterparts. Lenders here were generally more cautious about extending credit to risky borrowers. This is one reason Hong Kong's banks remain well-capitalized.
Alisha Ma, a 42-year-old mother of two, is emblematic of the optimistic spirit that seems to persist here in spite of the financial downturn.
Ma was recently laid off from her job as a private banker with Credit Suisse. But two days later, she had lined up interviews with two other banks in the city.
Ma is also hatching plans to start a consulting business catering to rich Chinese who want to go abroad and invest their wealth. The number of Chinese millionaires jumped 20% last year, an increase second only to India, according to a report by Merrill Lynch and Capgemini. The Boston Consulting Group estimates China has 391,000 millionaires.
"The money has to go somewhere," Ma says.
