I’ve just returned from a cruise trip. During the voyage, I learnt that almost all the tour participants were retirees, and that most of them were financially secure. The senior citizens built up their wealth from hard work and smart investments.
For example, an indigenous inhabitant of a New Territories village told me that he benefited tremendously from the skyrocketing land and property prices in Hong Kong.
Interestingly, none of the people I spoke to said they were interested much in the stock market.
Stock investments are considered as gambling, from their perspective.
The retirees were very cautious, saying their equity investments, if any, are confined to blue-chips such as HSBC Holdings (00005.HK), Hong Kong & China Gas (00003.HK) and Link REIT (00823.HK).
They said they don’t want to risk losing the hard-earned wealth, as they are no longer in a position to start all over if the worst happens.
Now, why is property generally preferred and stocks shunned, at least in that age group?
The Centa-city Leading index, a gauge of the city’s secondary housing price, has shown a compound growth rate of about 10 percent over last decade.
But most may have felt far more dramatic housing price gains, since there is a leverage effect (through mortgages) and most tend to compare the current prices with the trough levels.
Housing prices have become increasingly unaffordable for young people, prompting some observers to believe that further upside could be limited.
Still, property remains one of the most favorable retirement investment options.
Stocks, however, have developed a bad reputation partly because of the awful experience of investors who were burned by stock manipulation activities in some scrips.
Also, mainland Chinese companies have begun to dominate the Hong Kong market, and more than 80 percent of the stocks have failed to create any value in the long run.
This is evident from the Hong Kong Tracker Fund (02800.HK), which has generated limited returns so far.
The recent Hong Kong market rally has not been accompanied by large turnover despite capital flows from the mainland.
This is reflected in the underperformance of the stock market operator, Hong Kong Exchanges & Clearing Ltd., and brokerage firms.
Amid this situation, it’s not surprising that some retail investors, especially the elderly, have become wary about equities.
This article appeared in the Hong Kong Economic Journal on July 11
Translation by Julie Zhu with additional reporting
[Chinese version 中文版]
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