25 October 2016
Who could have known that Hong Kong H shares would be the best performers in the world? Photo: Bloomberg
Who could have known that Hong Kong H shares would be the best performers in the world? Photo: Bloomberg

The curious market case this summer

Whether you’re are a billionaire hedge fund manager or a financial genius who has been crunching market data for 40 years, your chances of success in predicting what just happened in the Hong Kong stock market were probably as good as mine.

Who would have known that Hong Kong H shares would be the best performers in the world?

No kidding.

Despite lackluster interim results from most mega state-owned enterprises, the Hang Seng China Enterprise Index was up 6.5 per cent in August, outperforming all other indices.

Leading the rally were mainland banks (for a change) which reported an unexciting first half but produced super-high yields.

Forget those reports that warned you August is the worst month because investors are either selling stocks or are on their European holiday.

Yes, the results were bad, so was the trading environment in Europe which suffered from a number of terrorist attacks on key cities.

But who would have predicted HSBC (0005) would be up more than 20 per cent since Brexit?

Thanks to a share buyback, Hong Kong’s once favoured retail stock, also known as the Lion Bank, has roared back to life.

It was up 13 per cent in August and 21 per cent since June 24, the day Britain voted for Brexit, outperforming surging internet giant Tencent Holdings (0700).

We can’t help wondering if such a wonderful outcome for the British giant would have been possible if Britain had chosen to stay.

One sector that was helped by Brexit, which caused major countries with the exception of United States to continue quantitative easing, was the local property market.

Realizing property, after all, is a safer bet in the choppy yet inflationary investment environment, investors dug themselves out of the rut and piled into properties.

Hong Kong home prices were up 1.88 per cent in July, the fourth consecutive month of increase, according to Ratings and Valuation Department data.

Little wonder three residential sites in Kai Tak, Yuen Long and Tseung Kwan O picked this weekend to sell a combined 1,000 units to get the most of what’s being described as panic buying.

Where are all those people who say the most important work of Chief Executive Leung Chun-ying has been to suppress the surging residential market?

Now it seems the data and reports are being wheeled out to shore up his reelection hopes.

And finally, as they say, money is where your heart is.

Lack of confidence by Hong Kong people in China was shown in yuan deposits crashing 6.2 per cent in July, according to data from the Hong Kong Monetary Authority.

Yuan deposits dipped below HK$700 billion (US$90.24 billion), the lowest since 2013, on worries of a further renminbi devaluation after foreign exchange reform was launched in August 2015.

On the other side, mainlanders who bought Hong Kong life insurance surged to a record high in the second quarter and the momentum is going strong because insurance is a means to transfer assets outside China.

That concludes the curious investment case this summer.

Now it’s anybody’s guess what will happen in the new school term but that’s another story.

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EJ Insight writer

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