Why HK's stock and property markets didn't fall further

January 22, 2019 09:14
Having reaped excellent returns in previous years, investors in Hong Kong have largely held on to their assets, be it equities or property, despite the choppy macro environment last year. Photo: Reuters

At an investment outlook summit held by the Hong Kong Economic Journal last weekend, most guest speakers agreed that Hong Kong may not suffer much this year despite bearish sentiment in both the property and equity markets.

Alex Wong, director of Ample Finance Group, said the Hang Seng Index could have tumbled to 18,000 points given various negative factors at the end of last year.

But the index bounced back after nearing 24,500 points over past few weeks, he pointed out, adding that ample liquidity was the key factor behind the market's bounce.

Most investors had accumulated pretty good returns on their portfolios since the Federal Reserve launched its quantitative easing (QE) program in 2008, and are hence in a strong position.

Meanwhile, the low-rate environment is likely to stay given that the Fed has slowed its pace in hiking rates.

Investors are worried that they may not be able to find other good investment options if they sell their stock holdings, hence their reluctance to sell and the resilience of Hong Kong equities.

Chief economist of HKEJ, Eric Lui, agreed, but for a different reason.

Lui pointed out in this round of market downfall, the benchmark index came up to 25.8 percent off the peak of over 33,000 points hit in January last year, compared with a more common correction of about 35 percent in previous bear markets.

Expectations for a positive turn on the US-China trade talks and Beijing’s stimulus measures are probably what have shielded the market from falling further, Liu said.

Even if the market retests the downside after the recent rebound, Lui believes that there is a good possibility for the lows seen earlier this year to hold and for an N-shape rebound to take place.

Perhaps the same logic can be applied to the housing market.

Previously, Shih Wing-ching, founder of property agency Centaline, projected a price slide of 30 percent. CK Asset's executive director Justin Chiu had also echoed his view, saying housing prices may fall by 20 percent.

So far the CCL index has dropped less than 10 percent since the peak of 188.6 points in August last year, and several popular estates have witnessed an uptick in transaction prices last month.

It seems a strong resistance to further price erosion has come much earlier than what most observers had expected.

Like the stock market investors, most property owners and investors have reaped great returns in the multi-year rally since 2003.

As they are in a strong financial position, they tend to be unwilling to sell their properties when there is no better alternative to deploy the funds.

This article appeared in the Hong Kong Economic Journal on Jan 21

Translation by Julie Zhu

[Chinese version 中文版]

– Contact us at [email protected]


Hong Kong Economic Journal columnist