Bar­gains ga­lore

China Daily (Canada) - - HONG KONG - By PE­TER LIANG

Af­ter slid­ing pre­car­i­ously for sev­eral months, Hong Kong’s stock mar­ket ap­peared to have re­gained ground last week, rais­ing hopes that the bears have fi­nally run their course.

In the past few trad­ing days, the Hang Seng In­dex had man­aged to stage a smart re­bound on in­creased daily turnover. Stock an­a­lysts, how­ever, are still cau­tious in mak­ing pre­dic­tions, but they agree that the price ad­just­ments made in the past months amid a spate of bear­ish news are largely over.

The mar­ket, they say, has largely dis­counted the un­cer­tain­ties over US in­ter­est rates. The US Fed­eral Re­serve’s de­ci­sion to de­lay a rate hike at its meet­ing last month has sparked fears that the global econ­omy is worse than pre­dicted. Since then, global eq­uity mar­kets have largely re­cov­ered from a sell­off de­spite lin­ger­ing con­cerns.

It’s widely be­lieved the Fed will raise rates be­fore the end of the year. Such an in­crease is good for banks as it pro­vides room for them to widen their profit mar­gin, or spread, in their lend­ing busi­ness.

The lo­cal stock mar­ket has also been trou­bled by fore­casts by some an­a­lysts of an im­pend­ing fall in prop­erty prices, bas­ing their prog­no­sis largely on the drop in trans­ac­tions in the sec­ondary-homes mar­ket over the past few months. This was seen to have con­trib­uted to the re­cent mini mar­ket crash.

De­spite the dire pre­dic­tions, real-es­tate prices in all mar­ket seg­ments have held firm. There aren’t signs yet that homes own­ers are in a rush to sell, while de­mand, es­pe­cially for smaller apart­ments, has re­mained high, as demon­strated by the big rush by prospec­tive buy­ers for the lat­est batch of gov­ern­ment-built flats.

Since early this year, in­vestor sen­ti­ment has been de­pressed by largely ex­ag­ger­ated talk about the pos­si­ble col­lapse of the tourism industry as vis­i­tor ar­rivals, par­tic­u­larly from the Chi­nese main­land, con­tinue to shrink. Some shops, mainly drug stores that cater ex­clu­sively to main­land vis­i­tors, have pulled down the shut­ters, drag­ging down rentals of re­tail premises in sev­eral busy com­mer­cial dis­tricts.

How­ever, do­mes­tic con­sump­tion has stayed ro­bust, boosted by strong de­mand from work­ers which, in turn, has pushed up av­er­age wages. Af­ter all, tourism in­come ac­counts for less than 5 per­cent of Hong Kong’s to­tal eco­nomic out­put.

At cur­rent prices, Hong Kong shares are trad­ing at an av­er­age mul­ti­ple of un­der 10 times, which is low for an econ­omy that is set to grow by 2 per­cent to 4 per­cent an­nu­ally in the com­ing years. The down­side of buy­ing shares now seems lim­ited.

This may be the time for some se­ri­ous bar­gain hunt­ing.

Hong Kong shares are traded at an av­er­age mul­ti­ple of un­der 10 times, which is low for an econ­omy that is set to grow by 2 per­cent to 4 per­cent an­nu­ally.

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