Chinese investors buy the dips even as Hang Seng Index ends August as world’s worst performer

Mainland investors are unfazed by the downbeat mood clouding Hong Kong’s stocks – the worst performer among the world’s major markets this month.

While the Hang Seng Index dropped 7.4 per cent in August amid civic unrest rattling the city and escalating US-China trade tension, mainland traders have been buying the stocks for 31 straight days through Friday. The buying binge matched the last such stretch in February last year.

Over the past six weeks, Chinese investors have spent a total of HK$70 billion (US$8.9 billion) buying shares through the exchange link programmes, according to Bloomberg data.

While the bearish camp says Hong Kong stocks may still have more downside room to run, with ongoing protests dimming the economic outlook by curbing consume spending and deterring tourists, the bulls argue the city’s equities were already the cheapest among the world’s major markets based on the price-to-earnings ratio, mostly pricing in the pessimistic scenario.

The Hang Seng Index was valued at 10.4 projected earnings for this year, compared with 17.4 times for the Dow Jones Industrial Average and 11.2 times for the Shanghai Composite Index, Bloomberg data showed.