I’ve always been a fan of local firms because they usually have good corporate governance and are not trading at much premium. But lately, I have made the painful decision of reducing some positions to a bare minimum as the long-term investment picture has changed.
I don’t mind short-term volatility, but in my opinion, the business environment in Hong Kong probably will never be the same again.
I would use the proceeds to look for investment opportunities in other markets.
Some argue that Hong Kong’s financial hub status cannot be easily replaced. That might be true, but sectors like tourism and retail have been hurt badly by the ongoing social unrest.
Lots of people work in these industries, and therefore, their troubles would have a huge impact on the overall economy.
If the players in these sectors can’t survive, landlords may find it hard to find new tenants. And with less demand for retail space, landlords can no longer afford to be choosy. The value of rental properties would face downward pressure.
Currently, global consumer plays are enjoying a bull market cycle. These stocks are viewed as similar to bonds but with much more attractive valuations. The re-rating of these companies is just unfolding.
The way I see it, it’s the perfect time to switch to these consumer stocks.
This article appeared in the Hong Kong Economic Journal on Sept 3
Translation by Julie Zhu with additional reporting
[Chinese version 中文版]
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