Time for bar­gains

China Daily (Canada) - - HONG KONG -

In­vestors who take the Hong Kong press com­ments on the econ­omy se­ri­ously will have many sleep­less nights. In the past sev­eral weeks, busi­ness re­ports in print and on air have painted a dark pic­ture, quot­ing in­vest­ment ex­perts for their prog­no­sis of gloom and doom.

Ear­lier this week, a mass cir­cu­la­tion Chi­nese-lan­guage daily ran a ban­ner head­line pre­dict­ing a prop­erty mar­ket crash. The re­port it­self was based en­tirely on one in­ci­dent in which sev­eral home buy­ers had their down pay­ment for­feited for reneg­ing on con­tracts to buy apart­ments in a large de­vel­op­ment pro­ject.

It was not the only ex­am­ple of a seem­ingly con­certed ef­fort to talk down the mar­ket. Even some prop­erty agents have joined in the cho­rus for some very self­serv­ing rea­sons. They are try­ing to add pres­sure on the gov­ern­ment to re­move the tough mea­sures in­tro­duced last year to clamp down on ex­ces­sive spec­u­la­tion that pushed prop­erty prices to dizzy­ing lev­els. The gov­ern­ment has said that lift­ing those re­stric­tions is not on the cards.

The stock mar­ket hasn’t been spared by the doom­say­ers. Ear­lier, stock com­men­ta­tors sounded re­peated warn­ings about the ex­pected US in­ter­est rate hike and its neg­a­tive im­pact on global stock mar­kets. Now these same com­men­ta­tors are say­ing that the US Fed­eral Re­serve’s (Fed) de­ci­sion not to raise in­ter­est rates in­di­cates that the global econ­omy is in a worse shape than pre­vi­ously thought. That, of course, is bad for stocks.

As an in­vestor, what are you go­ing to do? You can sell ev­ery­thing you have, stocks and prop­er­ties, and keep the money in the bank. The bet­ter al­ter­na­tive is not to panic be­cause prop­erty prices are not go­ing to crash and money can still be made in the stock mar­ket. The out­flow of cap­i­tal to the US is mod­est and liq­uid­ity in Hong Kong and on the Chi­nese main­land has re­mained plen­ti­ful.

Af­ter the sell-off in the past weeks, the stock mar­ket is ripe for bar­gain hunt­ing. As men­tioned in this col­umn ear­lier, the shares of Li & Fung were over­sold while the com­pany has largely left its prob­lems be­hind. Its shares re­bounded nearly 10 per­cent last Tues­day on the strength of a bullish re­port from Bank of Amer­ica Mer­rill Lynch.

The more ad­ven­tur­ous may take a close look at bank shares, which have been sold down on con­cerns about their nar­row­ing profit mar­gins that have been squeezed by low in­ter­est rates. That is go­ing to change be­cause the Fed is widely ex­pected to raise rates in its next sched­uled meet­ing in De­cem­ber.

Of course, the down­side risk of as­set in­vest­ment now is larger than it was a year ago. But look at it this way: Things are just re­turn­ing to nor­mal. The ex­cep­tion­ally low in­ter­est rate and the large in­flow of funds that fu­eled the mar­ket boom were ex­cep­tional.

Doom­say­ers may shake their heads, but signs are that things may just be re­turn­ing to nor­mal.

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