The Tough Year Head has lived through more market crashes than anyone else in Hong Kong

THE STOCK EXCHANGE was a very different place in 1945, as The Tough Year Head remembers well. Tung started trading securities that year – at the age of 14. Tung still wears the red trader vest numbered 6280, as he has for 63 years. “I’ve been here a long time,” he says almost wistfully. “I make more time for pleasure now, you have to at my age. But my health is still good and I still remember everything.” These days, some of his starkest memories are the crashes of 1973, 1987, 1997 and 2000. And in the current meltdown, Tung is still trading. “I’m not stopping anytime soon.”

In your 63-year career, what was the moment of your greatest crisis?
March 15, 1973 without a doubt. I’ve never seen such a crash. There were crashes in 1987, 1997 and 2000, but none as serious, and not nearly as many people got hurt. But the 1973 crash, it hurt a lot of people in Hong Kong. Everybody had stock, even just ordinary people. It was a crazy, bullish market.

What triggered the crash?
The oil crisis. And the Hong Kong stock market was way too high, too volatile. From 1972 to 1974, the price of oil quadrupled [from US$3 to $12 a barrel]. The Hang Seng Index went from 1755 points down to 150 [from March 1973 to December 1974]. It was a very, very bad when it crashed.

How did people react?
Some people committed suicide, others had to be sent to mental hospitals for help.

Did you know anyone personally?
Oh yeah. For those who went to the hospital, it took them a couple of years to get over everything. One person I know lost HK$1 million or $2 million in one day and all the property he had. That was a lot of money back then. Back then, for $200,000 you could get two nice apartments up on the Peak. The cheapest apartment back then was about $45,000.

What happened to you personally?
I’d sold my stock ahead of the crash, so personally I didn’t lose money. But my company, Chung Lee & Co, did. Also at that time I had clients on margin accounts of about $100 million and they couldn’t pay me back because the market went down so quickly. I had to pay it all back to the bank myself. All told, I lost about $20 million – I could buy a piece of land in Central for $20 million. Luckily, I had made more than $20 million in the previous three years. There were no more margin accounts after that. I’m never doing margin accounts again.

Could this happen again?
Hong Kong investors are much more experienced now. Before 1970, Hong Kong’s market was very quiet and the daily turnover was between $5 million to $10 million. In 1970, the Far East Stock Exchange opened, which brought in a lot of new customers and investors.

The market started booming. Hong Kong people were just crazy, they’d never had this experience before and people on the street were only talking about stocks. People buying stock were making money, never losing, so they all wanted a stockbroker, and we had very good income almost every day. So everyone kept buying in 1973. Do you know what happened in China last year?

Tell me.
The exact same thing.

There were also crashes in Hong Kong in 1987, 1997 and 2000. The 1987 crash was international because the US market crashed. In 1997, it was the Asian financial crisis and the collapse of housing prices. And in 2000, it was because of dotcom collapse.

What about the current meltdown? Is it as bad as 1973?
In terms of the stock market, it’s just about the same.

How is Hong Kong handling the financial crisis?
In general, the situation in Hong Kong is not very favorable, as the economic tsunami has affected the economy worldwide. Both the government and the currency in Hong Kong are doing fine, but I think the best thing the government has implemented is the deposit guarantee scheme because as problems arise people feel insecure putting their money in banks. Take the US as an example, even the big and long-established private banks and insurance companies went bankrupt. Hong Kong has followed the UK’s policy in guaranteeing deposits, which is a very good move. People have regained confidence.

It may take longer to recover from this crisis, as compared to the ones in the past. As I see, the situation has almost reached its lowest, I cannot imagine it getting worse. The foremost thing now is to figure how to recover from the economic breakdown, and the approach the governments takes should be very different. All the governments in the world should come together and gather their energy to help with the economic recession.

The best advantage that Hong Kong has is support from China. Whenever Hong Kong gets into trouble, the mainland will provide help and support. With this situation, the unemployment rate will definitely go up and purchasing power will be weakened. The groups most affected are the middle class, professionals, such as doctors and lawyers, and there is also a crash in properties.

The capitalist market works in a cycle, so when it drops to a certain point it will eventually go up again. Of course, I am not saying that if you buy the stock today you will earn a fortune tomorrow, there might be fluctuations still, but in the mid- or long-term there is a chance that you will be able to reap a fortune. By mid-term I mean two to three years, and long-term I mean around five years, and you will definitely earn a fortune.

The problem with the US and even Europe is that their governments have a lot of debts, while Hong Kong is not heavily indebted, so it is easier and faster for Hong Kong to recover. Although Hong Kong is not doing very well, the situation will improve in the third quarter, as the mainland has given us a lot of support.

Is Asia or China or Hong Kong sheltered in the current situation?
Hong Kong is in a favorable advantage as it has a good foundation, and we have accumulated a lot of experience from the crises we encountered before. The supervision is very strict here and the financial institutions are well established. The biggest devastation within the US is in real estate, and in Hong Kong the supervision in this respect is very strict. That’s why up to this day, the financial system in Hong Kong is still functioning well.

Which is the stock exchange to be watching right now?
China and Hong Kong. In the future, they will definitely be better than the US. The Asia market is definitely better than the US.

Globally?
Globally, I will still be looking at the Asian stock exchanges. Especially China. If you have spare money, you should try to invest at this time as it is good timing, especially in China stocks.

Will it surpass the US markets?
Not at the moment, but definitely in time, the Asia market will surpass the US and the UK market. It will be harder for the US than the Asia market to recover. The unemployment rate in the US is higher, and the unemployed are dependent on the help of the government. The government would have a great social burden on top of the debts, so it would definitely take a longer time than Asia to recover.

What percentage would of your clients’ portfolios is invested in mainland exchanges?
I think more around 50 to 60. My clients now have more than 70 percent H stock and 30 percent local shares. America is not my business, and at this moment I would not consider investing in the American market.