Fund Managers Bullish on Hong Kong

LONDON -- Despite the noise about China rolling back civil rights in Hong Kong, international fund managers are convinced the British colony is a good bet after the handover to Beijing.

They believe China needs Hong Kong as a vital gateway to the world for its fast-expanding economy and 1.1 billion consumers.

"There are very good reasons for believing the Chinese will do nothing to upset the apple cart," said Richard Farrell of Guinness Flight Global Asset Management.

Hong Kong, a capitalist beehive buzzing with 6 million potential entrepreneurs, offers an ultra-modern infrastructure, 21st century financial expertise and one of the world's finest ports.

Combine that with southern China's manufacturing industries that boast low wage and real estate costs and Beijing is being offered a formula it will be reluctant to tamper with July 1.

"You can find low wages in Vietnam and Indonesia, but you don't have the advantages of sitting right next to a city state with all Hong Kong's attractions," Farrell said.

Hong Kong governor Chris Patten has locked horns with Beijing over the democratic reforms the Chinese have now vowed to overturn. China's newly appointed provisional legislature has vowed to repeal laws protecting civil rights in Hong Kong.

Amid all the political turbulence, investors are standing back to take a hard look at the long-term prospects.

Richard Murckart, investment director at Edinburgh Fund Managers, was upbeat but warned about the unexpected.

"I think external factors will determine its attractiveness. What happens in the United States over U.S. interest rate policy could have greater effect," Murckart said.

"There is a goodwill factor that has crept into the market over the past few months. Provided not too many outspoken political figures are imprisoned, things will be fine."

Investors are treading warily on the sensitive issue of human rights and just how much they are under threat in Hong Kong.