Odd Lots - One of Hong Kong's Most Famous Investors Gives His Vision of the City's Future

Episode Date: June 24, 2019

There's been a series of historic marches in Hong Kong, with millions of people taking to the streets to protest against an extradition bill that they think will give China more power over the city. On this episode of Odd Lots, we talk to David Webb, one of Hong Kong's most unusual and well-known investors. Webb has amassed a fortune by investing in local stocks but he also advocates for change in Hong Kong's volatile market, where big swings and lackluster corporate governance are often the norm. Here, he talks about how he sees the future of Asia's biggest financial center in the wake of the protests. He also gives his thoughts on U.S.-China relations.See omnystudio.com/listener for privacy information.

Thanks for listening to Oddlots. Follow the show on Amazon Music for more future episodes or just ask Alexa play the podcast, Oddlots on Amazon music. Hello and welcome to another episode of the Odd Lots podcast. I'm Tracy Alloway. And I'm Joe Weizenthal. So, Joe, did I tell you that I got a tear gasped recently? Oh my God. No, I think I saw a tweet from you that kind of hinted at that, but I couldn't totally tell whether you actually did. did or whether you were just at risk of it or whether it was just in theory or you or your colleagues were. So I wasn't sure. So I, you actually got to your guest. Yeah. So just to clarify, this is not the norm in financial journalism, but for those who haven't been following international

news recently, there have been a series of very big and historic events in Hong Kong. We've had these massive protests now, two of which were very, very peaceful. and very big. And then on one occasion, we had a protest that descended into, I don't want to say violence, but a little bit of chaos. There was a lot of police pushback, which I personally witnessed. And the police also fired rubber bullets, and they also fired tear gas canisters. And it was sort of a surreal experience, because all of this was taking place in an area of Hong Kong

called Admiralty, which is sort of like a midtown Manhattan or maybe a Wall Street equivalent to New York. And so among all these big office buildings, including the Bank of America Merrill Lynch office building, which was very, very close to where all this was happening, you had these tear gas canisters being fired in the air as commuters were trying to get home. It was pretty crazy. Yeah, I was pretty struck by the images and obviously exactly that fact, because, of course, I was just visiting you in Hong Kong last November, I think it was, and realizing that, you know, this is just a normal business district that was utterly transformed and looking at those roads and saying, hey, I was walking on those roads, probably looking for

roast duck at one point, and then seeing the scenes that they had become was pretty extraordinary. I think you did actually wander down that area looking. I'm pretty sure it was chicken wings, and you told me about it. No, I literally did. Yeah. I'm not exactly. That's literally what, yeah, that's literally what I was there for. All right.

Well, the reason all of this was happening was because of a proposed piece of legislature that was working its way through the legal system in Hong Kong. People refer to it as the extradition bill. And it was a new law that would basically allow Hong Kong residents or citizens to be extradited to China. And that was something that wasn't allowed before. And Joe, I don't know how much you know about the history of Hong Kong, but you're familiar with the one country, two systems principle, yes?

Right. So after the British handoff of Hong Kong back to China, the stipulation was that for several years, I think maybe it was 50. Hong Kong would get to operate as it generally does as something more or less like a liberal democracy with free speech. and protest and free trade and all that. And so that even though on some level it's politically now China, it is completely separate from a legalistic standpoint than the mainland. Yeah, that's a good summation. And I guess the thing to be aware of is there's a sort of deadline hovering over this idea of one country, two systems. And that is the year 2047.

And that's basically the date when that agreement sort of lapses. no one really knows what comes after that, but most people assumed that they have a few more decades, at least, of sort of having their own legal identity separate to China. And when the legislature in Hong Kong proposed this extradition change, people were suddenly very worried, very up in arms, saying that this would bring that era to a close even sooner than they had expected. There's one more thing to note about this whole drama, and that is the chief executive of Hong Kong is a woman called Carrie Lamb. She's not elected in a democratic process, and she's become something of a controversial figure. She was pushing the extradition bill,

and on the day that we're recording this, she's actually just apologized for pushing it through. She's also paused the bill, so it's no longer winding its way through the Hong Kong legislature, but it's still very unclear exactly what is going to happen to it. Is it actually dead and gone for good? And needless to say, a lot of people are still very, very upset about the events of recent weeks, and in particular the violence and the pushback that we've seen from the police. No, I appreciate this because I didn't even know, for example, that she wasn't elected. So I appreciate all of this setup because otherwise I'd be completely ignorant.

Well, I know you know this part, but Hong Kong is a very, very large financial center. And it's really the only international financial center within China or close to China. And that makes it very special. And its market, as I can attest to, having been here for seven or eight months now, is very, very unusual in many. So I thought given recent events, we could have someone who not only is an expert on that market, but also has been pushing to change it in various ways. And someone who also has some very, very strong opinions on the future direction of Hong Kong and what the recent spate of protests might mean for that future. Like I said, there's so much I have to learn about this. So I'm very excited about this episode. I might get in a few questions, but I think a big part of me will just be sort of sitting back and hearing our guests speak because of how little I know. I'm very looking forward to it. Oh, I'm sure you'll come up with questions, Joe. You'll like this one, I promise. So our guest for this particular episode is David Webb. He's a former banker. He's now an independent. I suppose you describe him as an activist investor. He runs a website where he sort of researches various companies in Hong Kong and also writes down,

his thoughts on politics as well. So David Webb, thanks so much for coming on. Thanks for having me. David, when I was prepping for this episode, there are a lot of people in the Bloomberg Hong Kong office who already know you and are familiar with your work. And I was sort of going around and asking people to tell me things about you. And I heard so many varied things. I heard that you used to be the chairman of Hong Kong Mensa. Yes. I heard that you used to design. video games in the 1980s? I was a programmer, yes. So, okay, walk us through your sort of like early development.

You were a video game programmer at one point, and eventually you ended up in Hong Kong. How'd that happen? Well, I was writing books and games for the first generation of home computers in the early 1980s while I was still at school and university, and I did mathematics at Oxford for three years. and then after graduation I stopped coding and went into the city of London in 1986 to start corporate finance, working in a small merchant bank. That was the year before something, that was the year of Big Bang, which was when stockbrokers and jobbers,

or what you would call market makers, perhaps in New York they'd be called specialists. And merchant banks were all brought together under a regulatory reform. So that was a big year. And then in 1987, of course, we had the crash, the Wall Street, crash, global crash. I carried on doing corporate finance in London for two more banks. And then the third one, Barclay, sent me out to Hong Kong in 1991 to do IPOs and mergers and acquisitions in Asia, which I did for them for three years,

doing an awful lot of travel on the company, Dime, Indonesia, Thailand, Philippine, South Korea and so on. and one of the first B shares in mainland China, which was a B share then was a share for foreign investors that was listed in Shanghai. And I left that firm in 94 and went to work for a local conglomerate for four years for a local family controlling shareholder, basically,

to advise them on their corporate structuring and transactions and investments. And then in 1998, as the Asian financial crows, RIS rolled through to Hong Kong, having started a year earlier in 97. I retired. I haven't worked for anyone since then. And I set up website.com, which made use of some forward planning with my surname. And that was a way of giving something back to Hong Kong in terms of the expertise I'd built up in the regulatory system for companies here, particularly listed companies.

And since I was free of any conflicts, I no longer had any employer. I was able to write quite critically about the appalling corporate governance that we have in many parts of Hong Kong. And at the same time, I was pursuing my hobby investing in small caps on the Hong Kong Stock Exchange because they were then and still are largely overlooked, and it's very hard to filter them for the value and for good governance. If you just filter for one and not the other, you won't get decent returns. So the website is not for profit. I've never made any revenue, and I subsidize it quite heavily to keep it going, and it has a big database of who's who in Hong Kong and increasingly elsewhere. And I've been writing content for it, looking at sort of corporate horror stories, because as I filter through the stock market here, I can find occasionally good companies, but an awful lot of rubbish as well.

And some of those are bad enough to use for case studies on the need for regulatory reform. When you talk about the appalling state of governance in listed Hong Kong companies, what are the common themes that you see? What are the characteristics that people perhaps in other markets would be horrified to see or the things that people get away with until you uncover them? Well, one of the underlying themes is that because most companies do have a controlling shareholder, and there used to be families mainly, but since we started listing mainland China, companies, it's also government control. But because of that, the so-called independent directors aren't really independent because they're all elected by the controlling shareholders, so they're only as independent as the king wants them to be. And that causes problems because a lot of them are just rubber stamps and are looking the wrong way, or they're hired for their ability to look the wrong way. So there aren't really the checks and balances that you

might expect. There's also fairly low levels of financial disclosure. We only get full financial statements once a year and we get a condensed set of half-yearly statements and for the main board of Hong Kong we don't get any quarterly financial statements except for a few companies on a voluntary basis and ironically for mainland companies that have if they're listed in Shanghai or Shenzhen then they must also report quarterly and that gets reflected into Hong Kong. There's lots of insider related party transactions and sometimes they are not disclosed as such so if an acquisition looks ridiculously overpriced or a disposal looks ridiculously underpriced. And it's with a BVI company, the owners of which are not disclosed, British Virgin Islands,

that means, then you have no way of knowing who's really behind it, because offshore jurisdictions don't have to disclose in the BVI, particularly shareholders. So there's quite a bit of that. Also, you find that when companies go public here, they may have skimped and saved on the controlling shareholders' salaries as directors, but once they go public, they suddenly deserve a tenfold pay increase, and so they can extract money that way. So there's probably, if there are a hundred ways to leave your lover, there's at least that many ways to rip off your shareholders, and I've written about most of them over the years. So I'm curious, given that lack of information

and disclosure, how do you actually go about researching Hong Kong companies? Because judging by everything that I've read, you've been quite successful in doing this. So Bloomberg had a profile of you a few months ago, and I think we valued your portfolio at something like $170 million and also described how it had been outperforming the general market for some time. So clearly something is working in your research process. How are you going about that? Well, you can thank Janet Yellen's husband, George Akeloff, for the theory behind this, but it's fairly obvious that he wrote a paper on the lemon problem and won a Nobel Prize for it. And basically, if you are an expert mechanic walking around a second-hand car lot,

then you generally, you don't get warranties. You have to look carefully. And if you do, and you're an expert, you can find carefully maintained cars. that are underpriced because they're all discounted for the risk of being lemons. And most of the good cars would never be there in the first place.

So in company terms, I look closely at the corporate governance of all the small companies and find a few of them that are actually well governed. And I get in the back seat usually because the driver in the front is a controlling shareholder.

So I have to be confident that they will be able to deliver honest returns and give me my fair share of the returns. but they're all discounted for the risk of being lemons. Occasionally, one of them does actually crash badly, but more often than not, I've been able to avoid most of the crooks most of the time, as it were. And that means that I can help perform the general market by doing that.

It's weird because when I think of Hong Kong, you know, I think of it as one of the main, obviously, financial centers of the entire world. So I would think New York, London, Singapore, Hong Kong. That's kind of about it, typically. Why are the standards so bad? So why is there this sort of corporate governance discount and an inability to essentially bring the listing requirements or the listing oversight in line with other markets where people don't have this overriding negative perception? Well, there's a number of issues in there. First of all, Hong Kong is a very small geographic place with a population of 7 million or about 0.5% of China.

So for all of the Chinese-listed managed companies that are listing in Hong Kong, they are in a different jurisdiction, which means cross-border enforcement is fairly difficult. Whereas in America, it's such a vast economy and place that most of the companies that list in America are managed in America as well. And so it's probably a bit easier to hold people to account, although not, I would add, in the case of Chinese companies that are sitting in listed in America. That's another problem as well. And I never held out America as a bastion of corporate governance. It's got its own set of problems that derive from the race to the bottom that has basically ended in Delaware with very management-friendly company laws that tend to allow entrenchment of managers to start behaving like owners and excessive. pay as a consequence, and also America tends to have fewer opportunities for shareholders to vote on things like related party transactions. Quite often, they're just approved by a board

after hiring an advisor to say that they're okay. The UK overall has, in my view, better corporate governance than America and Hong Kong by some margin on its main board, at least, not so much on the newly created things like the alternative investment market aim, which is a lawless kind of regime. And also the control structure has to be mentioned because, you know, continental Europe has the same issues, lots of families controlling most of the companies or governments. And then it's very hard for independent shareholders to have any say, even to elect the independent directors unless there is some sort of proportional representation system in the boards. So if you looked at the Hangsling Index at any point in time in the last 30 years, there's only

been a handful or less of companies that don't have a controlling shareholder, including companies like HSBC, which tend to have better governance just because, well, A, they're regulated as banks in that case, but B, without a controlling shareholder and with good corporate laws that prevent things like poison pills and that you have in America, you tend to get better behavior overall. And the companies constantly, unless they're very, very big, they're constantly looking over their shoulder and making sure that they're delivering shareholder value because otherwise somebody will take them over and do it for them. So, David, you sort of operate in a particular niche in the Hong Kong market, which is small cap stocks. I'd like to get to the big topic in recent weeks,

which is, of course, the extradition bill and the ensuing protests in Hong Kong. I'm wondering, do the events of recent weeks change your perspective on either the future of the Hong Kong market or the future of Hong Kong as a financial center? Well, it's been a fascinating time. What we're seeing is all wrapped up in the overall situation with mainland China vis-a-vis America as well and the trade war. China has become increasingly confident in the last decade as its economy. has grown and it's started to look outwards and has made built, built islands in the South

China Sea, launched an aircraft carrier, has been increasingly assertive over Hong Kong. For the first 10 years after 1997's change of sovereignty here, they largely stayed out of sight, the liaison office on Hong Kong Island, which represents the mainland government. They hardly ever appeared in public at events here. that's all changed and now they are increasingly interfering in Hong Kong affairs. This extradition bill, although it was, we're told, conceived in Hong Kong, the amendment to the extradition bill, it was backed with gusto by the mainland when they realized this would give them the opportunity to basically close what they see as a loophole but what others see as a firewall

and allow them to grab people from Hong Kong and extradite them to face charges in the mainland. That basically drives a tank through the firewall between the two systems and two jurisdictions because Hong Kong has its own courts all the way up to the Court of Final Appeal, which are widely regarded as trustworthy. They include at least one foreign judge on the Court of Final Appeal on any given hearing. And China, on the other hand, has secret closed-door trials, often no access to lawyers, forced confessions, televise confessions, and a system which is very poorly regarded globally and including in Hong Kong.

And the public knows that. The opinion poll that was done at the end of May by the University of Hong Kong found that by a ratio of 4.2 to 1, Hong Kong people don't trust the mainland courts. And what we're seeing is basically given that the legislative council here that makes the laws is now essentially a rubber stamp. The majority of its members are pro-government people elected in often small so-called functional constituencies. I call them dysfunctional constituencies

because they're things like licensed to banks and licensed insurers and so on. Often they don't bother having contested elections because there's only a small 150-odd electorate of companies and they decide amongst themselves. But because of that rubber stamp thing, the only thing that stands between bad laws and unpopular laws and those being passed is the general public where if the issue is big enough

they will come out and protest against it in massive numbers. So that was heartwarming in a way that Hong Kong people still are able to do that and to come between the chief executive and her rubber stamp legislature and stop that proposal at least for now. The bill is still in the legislative council and one of the most appalling things about today's purported apology by the chief executive, which she basically said, I apologize for the fact that you didn't understand this bill and I'm not withdrawing it. She wasn't really apologising for the bill itself. And it's not really sincere if you're going to keep it hanging over people

and just wait for it to expire when the Legislative Council term expires in July 2020. So, you know, in practice, she won't, if she hasn't already entered the terminal stages of her position. She won't commit political suicide by trying to bring it back in July, before July 2020. But the right thing to have done to respond to public opinion would have been to withdraw it. Why can't she? It's because she's also appointed by Beijing. And when you are an authoritarian iron fist regime, you must never admit that you've made a mistake. You have to be seen as infallible. And so Beijing won't let her withdraw the bill even though she could. And I've been advocating that she withdraws it and refers the whole question of extradition and mutual legal

assistance, which also could freeze people's money while they're being investigated, to refer all that to the Hong Kong Law Reform Commission, which would be able to apply their minds, including the Chief Justice of Hong Kong, our highest judge and others, to actually focus on the issues and decide whether there's a need to reform these laws, and if so, how. Can I ask a sort of a very big picture question? When you see these images and these extraordinary protests essentially trying to push back the tide of greater integration. And as Tracy noted in the intro, the sort of one country, two systems framework that's only scheduled to last until 2047, so 50 years after the handoff, is the goal to make? maximize the freedom of Hong Kong up until 2047, or is there a longer vision of hopefully maintaining some pressure and somehow after that year still maintaining some sort of notion of separateness?

Right. So the joint declaration and the basic law only says that there will be no change for the first 50 years. It doesn't say that there must be change after that. And this, of course, will become an increasingly important question in many areas of the economy and society as we get closer to 204-7. We've got 28 years left, but I can imagine in about 10 years time with 18 years to go, people will get quite nervous about things like mortgages and also simply about whether they want to, after they graduate, stay in Hong Kong

to build their careers, will move overseas. And after all, if, for example, you want to be a lawyer, you'd like to know whether you're going to be practicing under the common law legal system that we've inherited from the British, or whether we'll be practicing in the Guangzhou people's intermediate court under mainland law. And so if China has not substantially reformed on its own in the next 10 years and started to open up into a pluralistic and democratic society, which I don't think is on the near-term agenda, then people are going to get quite nervous here. I have to say I'm an optimist in the long run. I'll be 82 in 2047. I hope I'm still here. and I think that there's no way that China can continue to deliver prosperity to its people,

which they will demand, without significant liberalisation in terms of removing the various restrictions on the movement of capital, on the movement of people, on what they can read on the internet, and giving them some accountability at the ballot box as well. I just think that if you look at history and all experiments at central planning of large-scale economies, they simply don't work, whether it's outright communism as they tried from 49 to 79, or the current form of Marxism with Chinese characteristics, as they call it. It simply doesn't deliver the prosperity because it assumes that someone at the top knows best for everything and allocates resources by Fiat.

Whether that reform process happens smoothly, which I obviously hope it does, I hope there's some sort of Gorbachev-type figure that emerges or a group of them, take China towards the sunlit uplands of capitalism, or whether we have to have an economic crisis big enough for the people and sudden enough for the people to wake up to this and take their own initiative. I don't know, because when you look at the surveillance tools available in the Internet era to the government there,

they have tools that no previous authoritarian regime has had, at least until about 10 years ago. the facial recognition, the constant surveillance of everything you buy and wherever you are with a mobile phone and so on. So they can spot patterns of potential disturbance very quickly and try to stamp them out. So I don't know quite how that's going to pan out, but I hope I'm right that eventually one way or the other will get that reform, at which case we won't be worrying any more about our freedoms in Hong Kong because there'll be the same freedoms that China will be enjoying too.

You mentioned the technological capability that China has at its disposal now, and we actually saw that on display when it came to how the Hong Kong protests were shown or I should say not shown on the mainland. So, of course, we had the usual censorship, you know, scenes of the protests on CNN and other international news networks were, of course, blacked out and censored. We also had particular words blocked on Weibo. We had, do you hear the people sing, the song from Le Miz, blocked on Tencent's music streaming service.

Winnie the Pooh was banned some time ago as well. Yes, of course. Because cartoonist likened him to Zijin Ping. So I guess I'm curious, how long can China really hold the visuals of an event as big as the Hong Kong protest? at bay, because of course, as part of the liberalization that has been going on so far on the mainland, you do have more Chinese citizens who are traveling abroad, and you do have people who are able to get around the great firewall in one way or another. So are they fighting a losing battle on that front?

Well, I've been impressed at how successful they've been at censoring the Internet in China. I didn't think 20 years ago they'd be able to do it, but they have. But you're right that since they're allowing their people to travel over, overseas in the tens of millions every year and thereby get exposure to foreign media and read about things, then the truth eventually starts to filter in. But you have to remember, though, that there's an awful lot of effective brainwashing going on within the Chinese system. You're brought up not to question the party's infallible judgment. So you start off with a, well, just look at the West, what a mess it's in. They had this global,

financial crisis and then they elected this weird president who's a sort of reality TV guy and you know and then look at Brexit and look at all the euro crisis and surely the mainland leaders the communist party of China is better at this they protected us from all of these things aren't we lucky to have them so that that's the kind of messaging that gets prominence when there isn't any effective alternative messaging coming from the outside into the Chinese intranet. But at the end of the day, I think that money talks louder and people in people's lives in their personal wallets. And so, you know, what in the end brings down authoritarian governments is not great ideals, but the price of bread, effectively. And that's what started

the Tunisian Spring. It was inflation and high unemployment. And I think that you'll potentially see some sort of financial crisis that would trigger. reform in China if, as I say, if the leaders don't start reforming on their own pretty quickly, pretty soon. Because for a long time now, the quality of the GDP growth that you read about has been very poor. It's been building extra roads and airports and exhibition centres that aren't actually economic, but keep people busy and generate GDP while you're doing it. The moment you stop with that, so-called the Austrian economists would call broken windows, then suddenly you find you've got rather low quality of GDP

because you haven't been giving people the freedoms that they need to make their own choices. And there's also been a huge credit bubble building up in the shadow banking system in China, which includes a lot of so-called wealth management products, which are basically repackaged poor-quality loans, sold as investments through banks, and the government has got a sort of growing potential liability there, even though they're not guaranteed by the banks, because they've been sold that way, and because the banks are owned by the government,

you may end up with a massive need for people to swallow those losses or to bail out the banks and let them take those products onto their balance sheets. So there's a number of different ways that China could get into a financial mess of its own making, not even beginning to think about what the US could do in the ongoing trade war, which I think could develop into a broader financial war. So far it's all been about tariffs on imports from. China. But what about the fact that at the same time as America is quite rightly complaining that the Chinese government subsidizes a lot of its economy and distorts the allocation

of capital? Well, guess what? A lot of American investors are financing the same government control companies by investing in things like PetroChina and China Telecom and so on, and Air China, and virtually all the big old economy stocks are listed in Hong Kong or even in New York and are invested by Americans. And it's possible that that could become the next, the powers of the president through the Office of Foreign Assets Control could be weaponized against that by requiring US persons to divest themselves of those stocks. It has been tried against a Russian aluminium company called Roussel and it was very successful

in terms of the devastation it calls the share price because the Treasury basically said that the controlling shareholder was too close to Vladimir Putin. that Americans must stop dealing with the company and sell their stock and bonds within three months. I think it was three months. In the end, the order was reversed after there was a change in the shareholding structure of Roussel, and it was taken off the list. But it was quite devastating for that company, and it could be applied in a more broader way under the guise of protecting the U.S. national security and the economy. Just to bring it back to the recent protests, you told me earlier this.

week that you yourself had attended the protests. I'm just curious, what did you think about them? What did you think about the atmosphere? Two million people on the street, according to the organizers' estimate, on the most recent Sunday's March. What was remarkable to you about it? What did you observe? Well, it was damn hot. 90% humidity and 32, what would be, about 90-something Fahrenheit in American terms. And it took a long, long time to make that walk. But you have to applaud the peaceful nature of Hong Kong protests, generally speaking, and particularly on Sunday when the police were given orders to stay away. And not a single shop window was broken. Some of the protesters at the end were cleaning up their own rubbish. It was very peaceful

and also heartwarming to see people of all ages and all professions, many of whom had never come out before and had their heads counted or voices heard, coming out and saying enough is enough. And as long as they keep doing that, as was said many times, the price of freedom is eternal vigilance. They will stand in the way of draconian laws and hopefully hold Hong Kong together until China itself starts to become a more open and freer place. David Webb It's been a pleasure talking to you Thank you so much for coming on the show

Thanks for having me Thanks David, that was great Joe I hope that wasn't too Hong Kong centric for you But I do think it gets to Some very big developments For the global economy One of which of course is

What is China going to look like As it sort of develops its own economy And its own power And it feels like There's this huge debate about how it could go either way at this point. You know, it could sort of double down on the authoritarianism, or it could, as David pointed out, maybe actually liberalize.

Yeah. Well, first of all, there's no such thing as to Hong Kong for me because you know how much I love Hong Kong and I wish I live there and I'm jealous that you live there. So that's never an issue. I thought it was interesting that David was an optimist because I feel like the conventional wisdom on the direction that China is going and then ultimately the direction towards which Hong Kong will be dragged,

most people, I would say, are far more pessimistic and only see the pace of authoritarianism accelerating and the surveillance state only getting deeper into people's lives. So I did think it was interesting that he actually had a more optimistic view on it, although it didn't sound like his optimism was based in any trends other than the fact that the current trajectory would be ultimately unsustainable and collapse in some way. Right. And speaking of unsustainability, there was one other thing he mentioned, and he didn't really frame it as a pessimistic thing, but I think it could be interpreted this way. And that's the notion of in order for Hong Kong to avoid having unfavorable laws passed through its local legislature,

basically the people have to mount these massive protests every time because the legislative system itself isn't really up to the task anymore. You have basically a biased set of lawmakers and potentially, well, I think they ended the ability to filibuster a while ago. So it's really up to the general population to stop what they see as bad or unfavorable legislature. And I wonder how realistic is it that people are going to, going to be marching every Sunday. Yeah, it does seem unrealistic. It's interesting because like some of the Hong Kong experts that I follow on Twitter were sort of skeptical that the people

of Hong Kong still had the appetite to come out and protest like this. And I guess there had been a view. And again, I'm speaking as like a real outsider tourist here who is no real information. But I guess there had been some question of like, well, do Hong Kong citizens really want to do what it takes to preserve their existing freedoms and fight for them, or are they resigned to, look, eventually it's all going to be one country, one system anyway. And so, you know, it's still, as you said, it remains to be clear. Will people continue go out on the streets every time something that impugnors on their freedoms pops up in the legislature? At least it's a possibility. I mean, it's hard to replicate, but that will be the, that'll be an interesting thing to watch.

Yeah, and in the meantime, there is this oddity that Hong Kong sort of continues to operate as normal, even though, as David mentioned, there's 28 years to go until 2047 now, the deadline for the one-country two-systems idea. But you can still go into a bank and get a 30-year mortgage. And, of course, people are still signing on to long-term business contracts. So I guess there are explicit assumptions embedded into those types of contracts. So it's interesting. Yeah, it'll be really interesting. And let's definitely record another episode in 10 years from now when there's only 18.

I thought you were going to say in 2047. Well, let's do that too, obviously. Yeah, okay. But, you know, we could do one every five or 10 years as it gets closer to see if some of these financial instruments, if the risks that emerge around the year 247. Well, I wonder, are there any, like, volatility curves that go out that far where we can start to see? That'll be interesting, right? A volatility event.

Yeah, really long-dated options on the Hengseng Stalk Index to see if they start reflecting risks around the year 2047. Anyway. I'll take a look. I'll see if those are available for you. Okay. This has been another episode of the Oddlods podcast. I'm Joe Wisenthal. You can follow me on Twitter at the stalwart.

And I'm Tracy Allaway. You can follow me on Twitter at Tracy Allaway. You can also follow David Webb. He's at Web with the... 2B's HK. His website is web dash site. Again, web with

2Bs. You can find all his research there. And a big thanks to my Bloomberg colleague, Benjamin Robertson, for helping us organize this particular interview. You can follow Benjamin over at

BMM Robertson. And be sure to follow our producer on Twitter, Laura Carlson. She's at Laura M. Carlson and the Bloomberg head of podcasts, Francesco Levy, at Francesca Today. And check out the new home of Bloomberg Podcasts on Twitter at the handle at Podcasts. Thanks for listening.