Hong Kong GDP expected to edge up by a measly 0.7%

Exports slowed and domestic demand moderated.

Hong Kong's 4Q14 GDP will be announced along with the budget for the year soon, and it has been forecast that, amid an unfavorable base, that the 4Q14 GDP will have a weak 0.7% yoy increase.

According to a research note from Bank of America Merrill Lynch, this is much slower than +2.7% in 3Q14.

The reasons for the forecast are exports having slown down at a faster rate than imports while the domestic demand moderated amid recent deterioration in retail spending and investment confidence.

Here's more from Bank of America Merrill Lynch:

Looking ahead, HK’s GDP and macro conditions remain highly sensitive to China and US growth prospects, as well as the US Fed’s upcoming policy tightening.

In our view, housing risks will likely remain the top concern when the US rates begin climbing in 2015E.

Despite relatively tight housing demand-supply and the 11.2% property price increase in 2014, the eventual real rates hike will likely dampen the dynamics of Hong Kong’s property price inflation or possibly even cause a downward property price adjustment, in our view.

Our property team expects HK’s residential property prices to remain relatively stable in the range of -5% to +5% in 2015, and prices will likely decline by 5-10% in 2016 when interest rate rise becomes more apparent.