Air pollution hitting Hong Kong hard: Merrill Lynch

HONG KONG: Global investment bank Merrill Lynch has warned that worsening pollution in Hong Kong will drive out professionals and undercut its competitive edge, especially against rival Singapore.

In an unusually blunt statement, the US investment giant warned that air quality in the territory is now regularly so poor that the city's long-term competitiveness is under threat.

"Skilled professionals are departing Hong Kong because of this. More will follow," it said in a research report released late Tuesday.

"Singapore stands to be a major beneficiary and the investment response is clear: Buy (shares in) Singapore office landlords, sell Hong Kong office landlords."

The report predicted that mass immigration will help double Singapore's population in the next decade with a steady flow of financial service professionals expected to come from Hong Kong.

"Hong Kong's loss is, to a large extent, Singapore's gain," it said.

The warning came as it downgraded the city's largest landlords, cutting the ratings of Hongkong Land and Great Eagle to "sell" from "neutral", while Hysan Development Company was reduced to "sell" from "buy".

"The spectre of new office supply combined with stagnating demand spells an ugly couple of years ahead" for the three companies, it said. "And there will likely be fewer people here to witness the decline."

The report came days after the Council on Sustainable Development issued a report urging the government to reconsider a series of air clean-up measures costing up to 51 billion dollars (6.5 billion US).

With 70 percent of the pollution coming from manufacturing centres in the Pearl River Delta (PRD) in southern China, Merrill Lynch said aggressive, direct action with Beijing is the only solution.

"The government in Hong Kong is relatively powerless to address the true cause (the PRD) until Beijing gets tough," it said. "It could be a long and choking wait that many could choose not to endure."

It also took a swipe at Hong Kong's methodology on calculating the city's pollution index which has been criticised by environmentalists as "outdated".

While the air was getting poorer, it said, the index does not show pollution was getting worse. "But we know that there are lies, damn lies and statistics," it said.

International chambers of commerce in Hong Kong have also issued warnings that their member businesses are pulling out of the city or deciding not to locate here because of the health implications for their families and staff.

Pollution has become a key political issue in Hong Kong as smog levels have risen to often dangerous levels. Poor air quality reduced visibility to less than one kilometre (about half a mile) on more than 50 days last year.

The local government has launched an "Action Blue Sky" campaign to persuade citizens to cut down on air conditioner use and slash energy consumption, but critics say it is not doing enough and more drastic action was needed.

Business leaders in Hong Kong have called on the government to act against rising pollution or risk losing the territory's status as a major finance hub.

- AFP/so>