More pain for Hong Kong stocks in 2020 as smart money bets on China upside, analysts say
- UBS Global Wealth Management forecasts higher returns on MSCI China Index
- There is a lack of confidence, surprise catalyst in Hong Kong shares, Bocom International says
Hong Kong stocks are likely to underperform their China-listed peers in 2020 as political uncertainties continue to weigh on the local economy and sap investors’ confidence, analysts say.
The Hang Seng Index has gained 2.5 per cent so far this year while a gauge tracking the biggest companies listed in Shanghai and Shenzhen exchanges rose 29.4 per cent. That is the widest annual gulf since 2014, underscoring the damage caused by six months of anti-government protests, as well as investors’ rush into so-called onshore A shares as they gained more weighting in some key MSCI indices.
“It’s highly likely that the performance of the A shares market will beat that of Hong Kong next year,” said Hong Hao, head of research at Bocom International, said during a recent press conference. “The [Hong Kong] market lacks a catalyst, something exceeding market expectations, to reverse its downward trend.”
Street protests and reform inertia in Hong Kong have kept investors on the edge since June, hammering local industries from tourism to retail. After a bright start in the first quarter, the city’s stock market has traded in a narrow range at the same time tensions increased around the US-China trade war.
The performance gap is likely to continue with contrasting fortunes on both side of the border, analysts say, even as Hong Kong stocks trade at a low valuation and economists forecast China to post a slower rate of economic growth next year.