The big underperformance

Ben Kwok December 13, 2023 10:20

No one knows more about the economic cycle than the stockbrokers.

In the good old days, they ordered shark fins at Fook Lam Moon and they never missed a celebration drink party at Sevva.

Now the Central is so quiet after 9pm. More people came out to dine ahead of the holidays but it is much easier to book a Christmas buffet this year.

These days I have had the privilege of attending dinner gatherings with some brokers I have known for nearly three decades. Yes, the chat and the crabs cannot be better, and apparently, no one really paid attention to the bad omen that crabs mean the stock portfolio is stuck and going nowhere.

It is a very bad market for Hong Kong equities this year. So bad that brokers are not looking at the market. Earlier this month, a boss of a securities firm issued an internal circular asking its brokers to focus on their work instead of talking to their families, watching online movies or taking a nap.

Having read financial news for almost 30 years, I could not remember a worse time than this year. 2023 will be remembered for a slow-decline and low-turnover Hong Kong stock market that has greatly underperformed all major markets.

Hang Seng Index closed at 16,347 yesterday, down 17.3 per cent year-to-date. Dow Jones Index, on the other hand, was up about 20 per cent.

Everything is relative. The underperformance made people wonder why Hong Kong is so stuck, and worse still, no one can tell when it will be over.

News headlines are depressing. A Citibank survey showed 57 per cent of people believed home prices would fall next year, as opposed to 10 per cent who thought it would go up.

In a different survey by human resources consultant Robert Walters, only 58 per cent of the professionals working in Hong Kong believed there would actually be salary raise next year.

Both home and employment markets reflected people’s lack of confidence in the local economy.

But as people tighten their purse strings, many choose to spend more in Shenzhen. Mainland media reported some 5.35 million Hongkongers had spent 3.6 billion in Shenzhen in October.

That amounted to over 10 per cent of the Hong Kong’s retail sales of HK$33.8 billion in October, where it saw a 12.5 per cent drop in durable goods and 5.8 per cent drop in supermarket sales, according to a local newspaper.

I do not have the crystal ball, but it looks like there is a long winter ahead, although it might not be too cold.

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Ben Kwok

EJ Insight writer