Those were the years
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.