Investors ‘cautious’ about Hong Kong markets in 2020 as questions remain over how protests, trade war will be resolved
- City’s markets ‘destined for volatility’ in coming months as the trade war drags on, and with no obvious resolution to the protests, according to State Street
- Hong Kong’s bourse received shot in the arm from Alibaba listing this week
Investors are keeping a “cautious” eye on Hong Kong’s financial markets heading into 2020 as the city’s economy takes a battering from the US-China trade war and months of civil unrest.
Benjamin Jones, senior multi-asset strategist at State Street in London, said stocks listed in the city are probably “destined for some volatility” in the coming months.
“It wouldn’t be a market that I would be jumping into at the moment. Some people say, yes, it is cheap now. It has fallen an awful long way. Is this a buying opportunity? My view is no, because it’s nigh on impossible to say what is going to happen on the political side right now. This has gone on far longer than many people had feared or expected.”
Anti-government protests since early June have turned into fiery battles with police in university campuses, dragging down the stock market and the economy. The Hang Seng Index’s 2.5 per cent gain this year has trailed a 10 per cent to 29 per cent rally in major US, UK and mainland China bourses.
The city’s biggest stocks have cheapened with investors willing to pay 9.9 times for their earnings in 2020, and 9.2 times for 2021, according to Bloomberg data. The price-earnings multiple has dropped from 13.7 times in 2017 to 11.2 times this year.
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The protests began in June over a controversial extradition bill that would have made it easier to send criminal suspects to China, but have evolved into a broader movement about issues ranging from income inequality to Beijing’s influence over city affairs.
Andrew Swan, head of global emerging markets equities at BlackRock, said the world’s biggest asset manager remains “fairly cautious” about locally based listed companies in Hong Kong until they have a clear vision of how the situation will play out.
“It’s a very difficult environment and, at this point, it’s difficult to see what the resolution is,” Swan said.
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The move by the Trump administration came just days after pan-democrats won by a landslide in Hong Kong’s district council elections in a blow to the city’s pro-establishment camp. A period of extended calm has descended over the city since the results were announced.
As of Wednesday’s close , the Hang Seng Index was up 1.3 per cent from November 22, the last trading day before the weekend elections.
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“Entering into a period of stability would be a step in the right direction,” said Tara Joseph, the president of the American Chamber of Commerce in Hong Kong. “However, it will take months to restore confidence in many aspects of the economy. The city’s global reputation has been tarnished and we need to actively show that change is afoot to restore peace, security and a solution to the ills affecting society.”
