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Pedestrians walk past a billboard showing the Hang Seng Index. The benchmark has declined 19 per cent year to date. Photo: EPA-EFE

Hong Kong stock picks outrank US market as top preference, investors say in HKIFA survey

  • Hong Kong-listed equities are also the highest ranked asset class, followed by US stocks and time deposits amid rate rises, the HKIFA survey shows
  • Around half of those surveyed have no interest in the Wealth Management Connect scheme

Hong Kong and US stock markets are the top choice of investors over the next 12 months as they believe their valuations have become attractive after the setback this year, a survey released by the Hong Kong Investment Funds Association (HKIFA) showed on Thursday.

Investors who were asked to rate their choices preferred Hong Kong stocks by a wide margin, with 76 per cent saying they would invest at home. Half of the respondents preferred US equities while 41 per cent favoured the market in mainland China.

More than 640 residents with a monthly income of more than HK$50,000 (US$6,370) and liquid assets of over HK$1 million took part in the survey conducted in June and July.

“Since the US and Hong Kong stock markets have dropped substantially, some investors may find these markets attractive from a valuation point of view,” said Sally Wong, CEO of HKIFA. “They also see opportunities in these markets to enable them to capitalise on megatrends, such as new energy sectors, electric vehicle and biotech stocks.”

The city’s benchmark Hang Seng Index has declined 19 per cent year to date and the S&P 500 lost 16.5 per cent. The price to earnings ratio of Hong Kong’s main board companies stood at 9.73 on average, compared with 17.2 a year ago. S&P500 companies fetched 20.1 times, compared with 24.6 a year earlier.

Among asset classes, 60 per cent of Hong Kong investors preferred equities, with local stocks ranking ahead of US shares, followed by Hong Kong dollar deposits and foreign currency deposits at 26 per cent because of the rising interest rates.

The interest rate on Hong Kong dollar time deposits now is between 2 per cent and 3 per cent, compared with less than 1 per cent last year. HSBC offers 10.5 per cent interest on one-week Australian dollar and pound sterling deposits but only pays 1.8 per cent for one-month tenors for these currencies.

Geopolitical tensions are biggest worry for rich Hongkongers, survey finds

The survey also showed that nearly half of the investors have little or no interest in investing in the Wealth Management Connect scheme due to a lack of knowledge about the mainland markets.

Wong said more investor education will help to encourage investments in products offered under the scheme. The scheme, which was introduced in September last year, allows Hong Kong investors to trade mainland fund products via banks, and Greater Bay Area residents to invest in Hong Kong fund products.

Hong Kong Exchanges and Clearing chairwoman Laura Cha Shih May-lung on Wednesday said that opportunities in the Greater Bay Area can help Hong Kong to beat Singapore.
Separately, Secretary for Financial Services and the Treasury Christopher Hui Ching-yu said Hong Kong’s fund industry can benefit from Greater Bay Area, thanks to the 18 measures announced last Friday between Hong Kong and Qianhai. The measures offer a range of incentives to encourage talent to work across the border and attract more Hong Kong private equity (PE) investments in Qianhai.
A general view of Shenzhen, a key city in the Greater Bay Area. Top officials from Hong Kong government and the stock exchange have said that there are abundant opportunities waiting to be seized in the area. Photo: Martin Chan

“Given Hong Kong’s position as an international financial centre and the cluster of information technology resources in Shenzhen, as well as Qianhai’s policy of early and pilot implementation in the area of cross-boundary finance, joint development of and mutual access to the PE markets of the two places will achieve great synergy,” Hui said in his blog on Thursday.

Global money manager have about HK$35.5 trillion of assets under management in Hong Kong, representing about 12 times the city’s gross domestic product, Hui said. Non-Hong Kong investors account for over 65 per cent of these funds, he added.

“Hong Kong is truly a place where global capital converges,” he said, pointing out that Hong Kong is now Asia’s second largest PE market with over US$190 billion of assets under management, slightly lower than mainland China.

Hong Kong introduced a limited partnership fund regime in 2020, which is popular with PE companies. Hui said over 510 funds have been set up under the new regime as of July, paving the way for Hong Kong to develop into a world-class base for PE funds.