Starting this week, each permanent resident of Hong Kong will be eligible to receive HK$10,000 (US$1,290) in a one-time cash payout, part of the government’s HK$55 billion financial stimulus to help the city survive its worst recession on record.

Hong Kong’s Financial Secretary Paul Chan Mo-po, the architect of the financial disbursement, would prefer the city’s residents to spend that money dining out, shopping, travel locally or pay for their utility bills. Chances are that Hongkongers will redirect that money towards the stock market, where they can put it to better use in one of Asia’s cheapest bourses, and to subscribe for two dozen initial public offerings (IPOs) in the pipeline.

“I will use it to invest in the stock market at the right time,” said Irene Chan, a white-collar professional working in the Central business district. “HK$10,000 is not a large sum of money. My aim is to double it to HK$20,000, which can be more useful.”

Chan’s investment plan underscores the shortcomings in the unprecedented US$6 trillion that the world’s central banks and monetary authorities are unleashing to bolster the global economy. She is one of the 5.5 million people who have registered with their banks to receive the payout starting on Monday, two days earlier than scheduled, in a process that stays open until the end of next year.

Chan would be spoilt for choice. The city of 7.5 million people is served by nearly 28,000 licensed traders in 594 brokerage firms, making Asia’s third-largest capital market one of the best-served cities.

“Many Hongkongers already have stock trading accounts,” said Tom Chan Pak-lam, chairman of Hong Kong Institute of Securities Dealers. “The recent surge in the stock market’s turnover may reflect the optimism that the cash handout is encouraging investment sentiment in the stock market.”

At least 13 of the 50 stocks that make up Hong Kong’s benchmark index are within reach. There’s New World Development, one of the city’s largest property developers and an operator of the biggest bus service, available for HK$9,800 for a round lot of 250 shares. There’s also the Industrial and Commercial Bank of China (ICBC), one of the country’s largest banks, which can be had for HK$4,920 for 1,000 shares of minimum order. Bank of China, the country’s oldest lender and the nation’s biggest overseas bank, is even cheaper at HK$3.02 per share, allowing the investor to buy three round lots of 1,000 shares each.

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Hong Kong is hardly alone in letting financial payouts spill over to speculation. Robinhood, the discount brokerage based in Menlo Park, California, that serves mostly millennial investors, said 3 million new accounts were opened in the first four months of the year. Half of them were first-time investors. Punters have used the US$1,200 cash handout given to each American adult as part of the US$2 trillion emergency package passed at the end of March to play the stock market.

A resident fills in a form for the government’s HK$10,000 cash payout at an HSBC branch in Kwun Tong, on June 21. Photo: Winson Wong alt=A resident fills in a form for the government’s HK$10,000 cash payout at an HSBC branch in Kwun Tong, on June 21. Photo: Winson Wong

In South Korea, the country’s leading brokerage, Mirae Asset Daewoo, said that some 650,000 new accounts have been opened between March and June, more than triple the number in the same period last year. In June alone around 330,000 accounts were opened. This came after the South Korean government in April announced cash handouts of up to 1 million Korean won (US$816) to every household. It has since disbursed more than 13.59 trillion won to 21.6 million households.

Similarly in Japan, individuals opened more than 820,000 online brokerage accounts between February and April after the government announced a cash handout of 100,000 yen (US$930) to all citizens.

Even in the Philippines and India, where the citizens have received no handouts, a lot more people have been dabbling in trading stocks as a result of the extensive lockdown.

In the Philippines, online brokerage accounts openings at AAA Southeast Equities have increased rapidly after the lockdown was imposed in March, said the company’s president William Matthew Cabangon.

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“Many retail investors are seeing the Covid-19 stock crash as a ‘once in a lifetime’ opportunity of sorts to get into the market at cheap valuations,” Cabangon said.

But not everyone is keen on investing in stocks. Some are looking at alternative assets like wine.

“Stock prices can do down, but wine prices tend to go up,” said a teacher who only wanted to be identified as Louis. “I’d better use the HK$10,000 to invest in some good wine,” he said.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP’s Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2020. South China Morning Post Publishers Ltd. All rights reserved.

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