Hong Kong stock market outperforms US peers as top bet, HKIFA research shows

The Hong Kong and US stock markets are the number one choice for investors in the next 12 months as they believe their valuations have become attractive after this year’s setback, a study released by Hong Kong Investment revealed last week. Funds Association (HKIFA).

Investors asked to rate their choices preferred Hong Kong stocks by a wide margin, with 76 percent saying they would invest at home. Half of respondents preferred US stocks, while 41 percent preferred markets in mainland China.

More than 640 residents with a monthly income of more than HK$50,000 (US$6,370) and liquid assets of more than HK$1 million participated in the survey, which was held in June and July.

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“As the stock markets in the US and Hong Kong have fallen significantly, some investors may find these markets attractive from a valuation standpoint,” said Sally Wong, CEO of HKIFA. “They also see opportunities in these markets to capitalize on megatrends, such as new energy sectors, electric vehicles and biotech stocks.”

The city’s Hang Seng index is down 19 percent so far and the S&P 500 is down 16.5 percent. The price-to-earnings ratio of Hong Kong’s main board companies averaged 9.73, compared to 17.2 a year ago. S&P500 companies made it 20.1 times, compared to 24.6 times a year earlier.

Among asset classes, 60 percent of Hong Kong investors preferred equities, with local equities ahead of US equities, followed by Hong Kong dollar deposits and foreign currency deposits at 26 percent due to rising interest rates.

The rate on Hong Kong dollar time deposits is now between 2 and 3 percent, compared to less than 1 percent last year. HSBC offers 10.5 percent interest on one-week deposits in Australian dollars and sterling, but pays only 1.8 percent for one-month maturity for these currencies.

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The survey also found that nearly half of investors have little or no interest in investing in the Wealth Management Connect program due to a lack of knowledge about the mainland markets.

Wong said increased investor education will help encourage investment in products offered under the scheme. The scheme, which was introduced in September last year, will allow Hong Kong investors to trade Mainland fund products through banks, and will allow residents of the Greater Bay Area to invest in Hong Kong fund products.

Hong Kong Exchanges and Clearing Chair Laura Cha Shih May-lung said on Wednesday that opportunities in the Greater Bay Area could help Hong Kong beat Singapore.

Separately, Secretary for Financial Services and the Ministry of Finance Christopher Hui Ching-yu said Hong Kong’s funds sector could benefit from the Greater Bay Area, thanks to the 18 measures announced last Friday between Hong Kong and Qianhai. The measures provide a range of incentives to encourage talent to work across borders and attract more Hong Kong private equity (PE) investment in Qianhai.

A general view of Shenzhen, a major city in the Greater Bay Area.  Top officials from the Hong Kong government and the stock market have said there are plenty of opportunities in the area waiting to be seized.  Photo: Martin Chan

“Given Hong Kong’s position as an international financial center and the cluster of information technology resources in Shenzhen, as well as Qianhai’s policies of early and pilot implementation in cross-border financing, joint development of and reciprocal access to the PE markets of the two places, a achieve great synergy,” Hui said in his blog on Thursday.

Global money managers have about HK$35.5 trillion in assets under management in Hong Kong, which represents about 12 times the city’s gross domestic product, Hui said. Non-Hong Kong investors account for more than 65 percent of these funds, he added.

“Hong Kong is truly a place where global capital comes together,” he said, noting that Hong Kong is now Asia’s second largest PE market with more than $190 billion in assets under management, slightly less than mainland China. China.

Hong Kong introduced a limited partnership fund scheme in 2020, which is popular with PE companies. Hui said more than 510 funds have been established under the new regime since July, paving the way for Hong Kong to develop into a base for world-class PE funds.

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