WEAK fundamentals and poor quality management feature prominently in any assessment of Hong Kong smaller companies or small cap stocks.
This is the view of brokerage Crosby Securities after doing a regional survey of smaller companies. Hong Kong was one of only two places in the survey where smaller companies overall under-performed their blue chip counterparts.
Outside Hong Kong, the two biggest smaller-cap markets in the region are Malaysia and Singapore.
In Malaysia the small-cap sector flourishes on the back of strong retail investor support. Construction and building materials companies have done very well.
Singapore has the best small-cap sector in Asia. Crosby says strong Gross Domestic Product has fuelled, and has been fuelled, by booming manufacturing growth. Many small caps are evolving from low value into high value-added concerns. In particular, electronics and companies in high-end computer technology businesses are growing.
The brokerage says Singapore has a real technology sector and the government is actively promoting technology and research along with development activities.