Many of the world's biggest asset managers plan to pour more money into Hong Kong's stock market in the next three months despite growing economic and policy uncertainties on the mainland, a survey by the South China Morning Post has revealed.
The first South China Morning Post Hong Kong Fund Manager Survey found more than four out of five respondents were already overweight in equities in the first three months of this year. Half were neutral on bonds.
Two-thirds of the fund managers surveyed said they planned to continue to increase their weightings in equities traded in Hong Kong in the next three months, in particular in banking, internet and power stocks.
They are most bearish on Hong Kong-listed telecommunications and steel companies.
Those who took part in the survey, conducted between February 28 and March 7, were asset managers from 10 leading international fund management companies: Allianz Global Investors, Baring Asset Management, BNP Paribas Investment Partners, Henderson Global Investors, HSBC Global Asset Management, Invesco, JPMorgan Asset Management, Manulife, PineBridge and State Street Global Advisors.
Agnes Deng, the head of Hong Kong China equities at Barings in Hong Kong, said: "The global trend for capital to shift from bonds to equities is still very clear. I am feeling more comfortable with the current valuation of the Hang Seng Index after the first-quarter correction. We are likely to have a valuation-supported rebound in April and May."
Three out of four respondents believed global liquidity would continue to flow into Hong Kong's equity market in the coming months. More than seven out of 10 of the fund managers surveyed believed the Hang Seng Index would rise above its 100-day moving average by the end of the next quarter.
That moving average stood at 22,582.91 points yesterday, while the index closed more than 350 points below it, at 22,225.88.
So far this year, the Hang Seng Index has been the worst-performing gauge of any developed market apart from South Korea and Italy.
Paul Chan, the chief investment officer for Asia ex-Japan at Invesco, said that entering the second quarter, there were limited catalysts for the index to catch up with the others.
He suggested the index would fluctuate between 21,000 and 23,000 points over the next three months. "We may pause here, trading in a range and seeing if people can digest the macro uncertainties," Chan said.
The respondents to the survey said the biggest downside risks for the Hang Seng Index in the coming quarter were the potential for disappointing mainland economic figures, worse-than-expected corporate earnings and policy reform initiatives on the mainland that might add more economic uncertainty or disappoint investors in the relevant sectors.
Seven out of 10 fund managers surveyed said they believed economic growth on the mainland would be more than 8 per cent in the second quarter.
Raymond Chan, the Asia-Pacific chief investment officer at Allianz Global Investors, the asset management arm of the German financial services group, said the biggest risks for the Hong Kong market now were "very much external: the policy risks in China and ongoing European concerns".
"What if some of the peripheral countries in the Europe block are going to see problems again? Once you remove the global tail risks, for example, provided that the [European Union] is not going to collapse, then the market will be a bit more normal and focus on fundamentals rather than external risks," Chan said.