Has Hong Kong reverted to emerg-ing-market status?
A global investment strategies report by Sanford C. Bernstein & Co. Inc., New York, asks the question.
"Of course, there are very different risks in developed and emerging markets," the report notes.
"(I)n the latter, government policies set the stage for company earnings in a way they simply don't in a free-market economy.
"This makes emerging markets a lot less predictable: A single diktat from an authoritarian government can change everything overnight."
"It's especially critical in emerging markets to keep the portfolio diversified to mitigate the risk that things may deteriorate in any one country; at the same time, being diversified means staying open to opportunity whenever it may arise," the report notes.
Hong Kong, which is a component of the MSCI EAFE index -- the major non-North American free markets -- came under Chinese rule in July when the United Kingdom ceded the territory.
The remainder of China is classified as an emerging market.
The money management firm will continue to classify Hong Kong, as it has, as a developed market.
But the Bernstein report notes the uncertainty of China's one country-two systems policy, where Hong Kong has a capitalist economy and the rest of China a "command-from-above economy."
But its report notes, "We can't predict any better than the players themselves how this particular arrangement will work out."