Those were the years

China Daily (Canada) - - HONG KONG -

There are pro­fes­sion­als who owe their liv­ing to in­vest­ing in spe­cific mar­kets ir­re­spec­tive of how lousy the eco­nomic fun­da­men­tals may ap­pear. They be­long to the ex­clu­sive com­mu­nity of fund man­agers or hedge­fund in­vestors.

If you’re not one of them, it’s hard to come up with a rea­son to in­vest in the stock mar­kets of Hong Kong and the Chi­nese main­land.

The SAR’s eco­nomic out­look, as painted by pes­simistic re­ports pub­lished re­cently by nu­mer­ous in­vest­ment houses, is down­right scary.

The down­ward slide in the city’s ex­ports trade — once the main en­gine of eco­nomic growth — is widely forecast to ac­cel­er­ate in 2016, largely be­cause of the nag­ging eco­nomic slow­down on the main­land. The lo­cal re­tail in­dus­try is ex­pe­ri­enc­ing its worst drought since the SARS (Se­vere Acute Res­pi­ra­tory Syn­drome) epi­demic in 2003, as vis­i­tor ar­rivals from the main­land con­tinue to shrink.

The mori­bund stock mar­ket in re­cent months was a clear re­flec­tion of in­vestors’ deep con­cern, which is be­ing ex­ac­er­bated by the fall in property prices amid slug­gish sales. Al­though the US in­ter­est rate hike is not hav­ing an im­me­di­ate im­pact on Hong Kong, which has kept its rates steady, it has in­vestors wor­ried about the end of the low-rate en­vi­ron­ment that had kept the stock and real-es­tate mar­kets on the boil since 2008.

The main­land stock mar­kets have been strug­gling to re­gain their foot­ing since the big bust in June. For many years in the past, over­seas in­vestors, in­clud­ing those in Hong Kong, had been keen to in­vest in main­land com­pa­nies’ shares al­most at any price in the be­lief that break­neck eco­nomic growth would make even shares of in­cred­i­ble mul­ti­ples look cheap in a few years.

It was not un­com­mon for some main­land shares to be trad­ing at mul­ti­ple times higher than their peers in Hong Kong or other fi­nan­cial cen­ters.

That was the bet many over­seas in­vestors were will­ing to place. It looked like a sure win in those go-go years.

Not any­more. In the era of the “new nor­mal” when an­nual eco­nomic growth is ex­pected to slow from dou­ble dig­its to around 7 per­cent, many Chi­nese stocks are now con­sid­ered by many over­seas in­vestors to be over-val­ued.

Of course, there’s no short­age of main­land re­tail in­vestors will­ing to take the plunge on a hunch. For most over­seas in­vestors, there is really no com­pelling rea­son to buy Hong Kong or main­land at this point.

There are bet­ter ways to park their nest eggs.

The once-boom­ing Hong Kong re­tail sec­tor is fac­ing its worst drought since the 2003 SARS epi­demic, as more main­land visi­tors give it a miss.

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