After months of occasional violent protests, investors must be undoubtedly concerned about investing in Hong Kong, Asia’s top financial hub. In 2019, the protests culminated with its first death in early November and unfortunately, more are expected. Foreign students are leaving the city1, retail outlets are reporting double-digit sales decline2 and the number of visitors have plunged by nearly 40% year-on-year in August3.
Yet Hong Kong’s stock market is not down and out. After raising about US$5 billion on the Hong Kong Stock Exchange in late September, Budweiser Brewing Company APAC Ltd became the world’s second largest IPO for the year4. Alibaba, the Chinese e-commerce giant, who listed in November, is likely to be the year’s biggest public share sale5. These IPOs reflect Hong Kong’s unique status as a gateway for global capital moving in and out of China.
While protest have weighed down the Hang Seng Index, it has historically shown to have rebounded strongly. One example is the “Umbrella Revolution” in 2014 when the benchmark index fell by 4.8% only to rebound back to 26%6.
But what about a possible recession given the city’s weak tourism and retail sector? Although this is possible, Hong Kong’s equity market shows signs of resilience mainly because of its proximity to China’s stock markets. This is why the value of listed Hong Kong entities with a growing presence in China has little to no correlation to the ongoing protest.
The investing case for China, the world’s second-largest economy is still solid despite its long simmering trade war with the US. China’s economy is still growing and Chinese technology giants have pervaded the global economy in this era of rapid change and advance innovation.
This is why many fund managers continue to recommend Hong Kong equities, citing the adage ‘every crisis is an opportunity’. As Alibaba’s chairman, Daniel Zhang, notes “During this time of ongoing change, we continue to believe that the future of Hong Kong remains bright.”7
Mainland Chinese investors seem to share his Zhang’s sentiment and have invested nearly US$20 billion into the Hong Kong stock market in less than six months from June 2019. These factors imply that investors should stay invested and/or consider acquiring Hong Kong equities. To navigate this opportunity, speak to your RHB relationship manager and ask about the many investment products that invest in Hong Kong and/or Chinese equities. Note that there are different investment products for different risk profiles.
To navigate this opportunity, speak to your RHB Relationship Manager and ask about the many investment products that you can invest in Hong Kong and/or Chinese equities.
There are different investment products for different risk profiles, do consider below:
Consider:
Also consider:
Sources : 1 https://www.scmp.com/week-asia/politics/article/3037599/stay-or-go-hong-kongs-international-students-pack-their-bags 2 https://www.reuters.com/article/us-hongkong-economy-salesfigures/hong-kong-september-retail-sales-fall-18-3-as-protests-take-toll-idUSKBN1XB3RB3 https://www.scmp.com/news/hong-kong/hong-kong-economy/article/3030999/hong-kongs-tourism-industry-endures-worst-august 4 https://www.bloomberg.com/news/articles/2019-09-24/ab-inbev-said-to-price-asian-unit-s-hong-kong-ipo-at-bottom5 https://www.bbc.com/news/business-50498790 6 https://www.scmp.com/business/investor-relations/article/3024301/hong-kongs-stock-market-has-always-bounced-back 7https://www.bbc.com/news/business-50498790 8https://www.wsj.com/articles/mainland-chinese-investors-pile-into-hong-kong-despite-unrest-11574252677?ns=prod/accounts-wsj