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Hong Kong 'sinking into recession'

Hong Kong's economy is on the verge of falling into a recession that could last for more than one year, it has been claimed.

Kevin Lai, economist for Daiwa Capital Markets, which is one of the largest brokerage and financial services groups in Japan, said such a downturn could be on the cards after coming closest - out of nine such professionals surveyed by Bloomberg - to predicting a 0.5 per cent contraction over the second quarter of 2011 for the city's economy.

In an interview with the news agency, Mr Lai explained: "Global demand is really weak and we expect the US and Europe will see a sharp slowdown, or near-zero growth, next year. A recession is a reality for Hong Kong."

The weakness of the region has been underlined by the 11 per cent drop in its merchandise exports in quarter two when compared with those recorded in the first three-month period of the year, he added.

By Claire Archer