Hong Kong markets are undervalued, strategist says

Hong Kong’s market is presently undervalued, however conservative traders might need to keep on the sidelines for now earlier than dipping their toes again in, stated Kenny Wen from Everbright Solar Hung Kai.

“If you’re comparatively conservative, I might say you possibly can take a wait-and-see strategy, particularly when you’re already holding 40%, 50% shares,” Wen, wealth administration strategist on the agency, instructed CNBC’s “Road Indicators Asia” on Wednesday.

He stated the market, pushed by sentiment surrounding points resembling debt-ridden developer China Evergrande Group, is “nonetheless extremely unsure.”

To traders who’re “comparatively aggressive,” Wen stated: “I do agree now the Hong Kong market is undervalued, so you can begin to construct up your portfolio.”

As of its Wednesday’s shut, the benchmark Hold Seng index in Hong Kong was round 23% decrease than its February excessive. Within the third quarter alone, the index tumbled almost 15% for the interval.

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The funding outlook in Hong Kong stays “extremely unsure” because the inventory market — significantly institutional traders — will want time to digest various factors resembling China’s coverage tightening on tech shares in addition to uncertainties surrounding indebted property big Evergrande, Wen stated.

For these trying to purchase “extremely unstable” shares resembling these within the new financial system area, the strategist warned that U.S. Treasury yields have been on the rise and are prone to weigh on the tech sector. Some examples of latest financial system shares embrace these in expertise, whereas these in sectors resembling utilities are sometimes labeled as previous financial system shares.

“I feel the tech sector will stay pretty unstable,” Wen stated, warning traders towards being “too aggressive” on expertise shares within the coming weeks or months.

The benchmark 10-year Treasury yield lately crossed 1.5% and has largely stayed above the extent since. Increased bond yields can hit tech shares — when rates of interest rise, they make the corporate’s future money flows much less helpful, and their shares seem overvalued.

The rise in bond yields comes because the U.S. Federal Reserve prepares to reduce bond purchases within the months forward, often a precursor to future charge hikes.

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