Hong Kong’s battered market is poised for a U-turn
Market news selected by the DBS Chief Investment Office
MAINLAND CHINA & HONG KONG
Hong Kong stocks will end the year on a high note after handing investors the world’s worst returns this quarter.
That is according to analysts in a Bloomberg survey, who say attractive valuations, easing trade tensions, and stimulus measures from Beijing will help lift the Hang Seng Index about 7.9% by the end of December from Wednesday’s (25 September) close. History is on their side, with data since 1989 showing stocks rise an average 5.9% in the final three months of the calendar year, at least twice as much as any other quarter. The 28,000-point target also implies Hong Kong shares will avoid a rare back-to-back annual loss, something that has not happened since 2002.
Investors will be glad to see the end of a painful three months, set to be the benchmark’s worst since China’s stock bubble burst in 2015. Already reeling from a tumbling yuan and the US-China trade dispute, months of often violent street protests have added pressure on earnings for some of Hong Kong’s biggest companies. The city’s beleaguered stock market has lost nearly USD350b since the end of June.
The Hang Seng Index is lagging global peers by the most since 2006, when China’s central bank began an interest rate hiking cycle to curb excessive lending. Valuations for companies on the gauge are about 10% lower than the 10-year average, according to data based on projected earnings.
Selloffs accelerated in the three months since June after the US and China levied higher tariffs on each other. Adding to the gloom was worsening economic data that pointed to deepening problems in Hong Kong and on the mainland.
Challenges remain for the stock market, with no immediate resolution in sight for the city’s protests or the trade war. Still, Hong Kong stocks are “seriously undervalued” at a time when dovish central banks around the world are boosting sentiment. – Bloomberg News.
The Shanghai Composite Index slid 1.00% to 2,955.43 on Wednesday and the Hang Seng Index slipped 1.28% to 25,945.35.
REST OF ASIA
The largest Indonesian phone operator said it will wait to see how the spat between US officials and Huawei Technologies Co Ltd ends before picking suppliers for 5G wireless equipment.
Southeast Asia’s largest market for telecom services is still several years from launching 5G services, allowing PT Telekomunikasi time to decide whether to pick Huawei as a supplier, President Director Ririek Adriansyah said. The US, locked in a trade war with China, is campaigning against Huawei equipment, saying it poses security risks for countries because the company is too close to China’s government.
The Trump administration has blacklisted China’s largest technology company while accusing it of aiding Beijing in espionage. The US has also curbed sales of technology Huawei has used in some of its phones and telecommunications equipment, creating the risk that customers of the company will not be able to update software in its devices. Huawei has been one of the Indonesian carrier’s key equipment suppliers.
Telkomsel, the state-company’s mobile unit, had 168m subscribers at the end of June with two-thirds of them using smartphones. The digital business accounted for 62% of the unit’s revenue in the first half and was set to grow at a steady pace. The Indonesian carrier may post an increase in net income this year that is “slightly better” than the group’s revenue growth guidance of mid-to-high single digits, said Adriansyah, who took over as the group CEO in July.
Intensifying competition for mobile services last year saw operators from PT XL Axiata, PT Indosat, and PT Smartfren Telecom posting losses. But the tide has turned with the operators now maintaining stable subscriber bases. The market may become healthier if the government succeeds in nudging operators to consolidate. – Bloomberg News.
Australia’s S&P/ASX 200 Index edged up 0.08% at 6,715.90 at the open on Thursday (26 September). It shed 0.57% to 6,710.22 the previous session.
South Korea’s Kospi Index rebounded 0.50% to 2,083.72 early Thursday morning. It erased 1.32% to 2,073.39 the previous session.
The Taiwan Stock Exchange Weighted Index (Taiex) fell 0.41% to 10,873.69 on Wednesday.
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