Analysis: China holds the key to Hong Kong's shrinking stock market

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Hong Kong's efforts to revive its shrinking stock market are mere stopgap solutions, as analysts say a reversal in fortunes for Asia's premier financial hub would not be possible without a major improvement in China's economic prospects.

Hong Kong's government has for months tried to boost turnover and revive a torpid stock market, the latest coming on Wednesday when its leader John LeeBut the region's key financial centre and gateway to the world's second largest economy is a shadow of its former self as foreign investors reduce exposure to a China they view as increasingly isolated by its

Dickie Wong, executive director of research at Kingston Securities, said the stamp-duty cut was in line with expectations. "I suspect it is due to the perception of worse prospects in the Chinese economy as well as enhanced political risk. The only solution to this is just a reversal of these trends, i.e. better economy and better foreign relations. There is no easy answer."

That is dampening stock prices, "so we see the Hang Seng Index going from 20,000 to 18,000 to 17,000.”

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