Outlook ‘significantly brighter’ for Hong Kong stocks, as US$5 trillion market attracts global investors rotating out of US, Japanese shares

Demand for adding back Chinese assets has been rising amid the rebalancing of global assets, HSBC Jintrust strategist says

‘Outlook appears significantly brighter now compared to just a few weeks ago, offering hope for a more robust economic recovery’: SPI Asset Management’s Stephen Innes

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Hong Kong’s Hang Seng Index has risen almost 8 per cent over the past month, beating all other major equity gauges in the world. Photo: Eugene Lee

Published: 3:10pm, 30 Apr 2024Updated: 4:32pm, 30 Apr 2024

Hong Kong stocks are back in favour among global investors, emerging as the best-performing key market globally in April, after funds sought bargains by shifting out of expensive US and Japanese equities and as China’s growth shows more signs of stabilising.

The Hang Seng Index, the 82-member benchmark tracking the city’s US$5 trillion stock market, has risen 7.4 per cent over the past month, beating all other major equity gauges in the world. At one point, it rose 20 per cent from a January low, gains seen by technical traders as entering a bull market.

The turnaround suggests that overseas investors have regained their appetite for Chinese assets, which were being dumped until recently due to scepticism about the growth outlook for the world’s second-largest economy. Hong Kong’s stock market stands out with its depressed valuations, offering safe bets for investors that seek to diversify their portfolios after sizeable gains in markets in the United States, Japan and India.

China’s improving economic data has also dispelled jitters about a slowdown in expansion at least tentatively.

“When it comes to valuations, Hong Kong’s market is among the lowest globally and that boosts the appeal of investment values,” said Shen Chao, a strategist at HSBC Jintrust Fund Management in Shanghai. “Demand for adding back Chinese assets has been rising amid the rebalancing of global assets. Expectations have also improved after a stabilisation in growth and a raft of measures to support the market.”

Even after the gains, the Hang Seng Index is valued at 6.3 times realised earnings, the lowest in the world, according to Bloomberg data. That compares with a multiple of 24 times for the S&P 500 index and 26 times for Japan’s Nikkei 225, the data shows. The Hang Seng gauge is currently almost halved after a record run of four annual declines from a peak set in 2018.