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Hong Kong Has Strong Momentum but Overall Unattractive

Watch the video with Andrew Stotz or read a summary of the country profile on Hong Kong.

Four Pillars of GDP: Driven by private consumption and investments

Hong Kong’s GDP grows at moderate pace. Private consumption and investments have been the main contributors to GDP growth, while net exports have been a drag.

Slow earnings growth expected in Hong Kong

Earnings saw a slight recovery in 2016, but analysts’ estimates for 2017-2018CE* EPS growth are below the Asian average. Return on equity (ROE) is the lowest among Asian markets.

#HongKong:  Strong momentum but overall unattractive

A. Stotz Four Elements: Hong Kong’s rank relative to Asia

Overall, Hong Kong is the second least attractive in Asia considering all our four elements: Fundamentals, Valuation, Momentum, and Risk.

Fundamentals: Hong Kong has the lowest ROE in Asia, hence weak profitability.

Valuation: Low price-to-book value and moderate dividend yield.

Momentum: Hong Kong has good price momentum and had moderate earnings growth in the past 12 months.

Risk: The market’s price volatility compared to other Asian markets is relatively high.

Materials, Real Estate, and Info Tech up 20%+ in 3Q17

Top 3 largest sectors: Real Estate: 18% of the market; Financials: 17%; Information Technology: 16%.

Best sector & stock: Materials: +28.9% & Hengxing Gold Holding Co Ltd: +165.4%.

Worst sector & stock: Telecom: -0.8% & China Communications Services Corp Ltd: -10.2%.


*CE is consensus estimates

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DISCLAIMER: This content is for information purposes only. It is not intended to be investment advice. Readers should not consider statements made by the author(s) as formal recommendations and should consult their financial advisor before making any investment decisions. While the information provided is believed to be accurate, it may include errors or inaccuracies. The author(s) cannot be held liable for any actions taken as a result of reading this article.