Hong Kong 2001 GDP growth forecast revised to 3.3 pct from 3.8 by CSFB

HONG KONG (AFX-ASIA) - Credit Suisse First Boston said it has revised downward its 2001 GDP growth forecast for Hong Kong to 3.3 pct from 3.8 pct.	    It has also revised its forecast for Hong Kong GDP growth to 4.0 pct from 4.3 pct in 2002.	    In a research report, it said it made the revision as investors may withhold investment decisions due to an uncertain U.S. economic outlook.	    "Until such fears are lifted, wealth effects caused by falling property and equity markets are likely to still bite," it said.	    Exports and transportation volumes are expected to weaken further in a prolonged global slump, it said.	    "Such a preponderance of negative wealth effects and the cautious consumption culture are expected to prolong deflationary pressure. However, the turning point for the rental cycle in late third quarter and fourth quarter of 2001 should bring local CPI into positive territory," it said.	    "Our year-end CPI target is still 0.5 pct," it said.	    The investment house said it expects the FOMC will further cut interest rates by 50 basis points by the end of the first half of 2001.	    On the other hand, residential prices in Hong Kong have softened since the beginning of 2000 with a cumulative fall of 16 pct on average, it said. 	    But the report said the property market should be able to stabilize at current levels with the medium-term potential indicating a 10 pct upside.	    It said the reason for its optimism is the convergence of rental yields with mortgage payments.	    "Despite recent falls in property prices, average rents have been firm with a marginal upward trend with yields currently standing at 5.4 pct.	    "Continued reduction in the prime rate should result in the mortgage rate falling below the rental yield for the first time in more than a decade," it said.	    Other technical factors are also in favour of a pick-up in the residential property market, it said. 	    The real prime rate has fallen a long way and it is expected to come down to 6.5 pct by the end of 2001, it said.	    "The affordability ratio is already approaching its best in the past fifteen years and further rate cuts should soon push affordability to 30-year lows," it said. 

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