Time to be positive about Hong Kong stocks, fund manager who correctly forecast January pullback says

It is time to be positive about Hong Kong stocks again, with a US$450 billion correction over, according to boutique-fund manager Qi Wang. It will not be smooth sailing, but the market is more likely to rise than drop over the next two months, he said.

Positive market drivers supported by the Chinese economy are likely to offset external downside risks, said the founder and CEO of MegaTrust Investment in Hong Kong. The improving basis will boost the odds that the Hong Kong market will pick up during the next two months, said Wang, who correctly forecast that the market would pullback in January.

"There are gradual but very clear signs that China's economy has improved," Wang said, citing data such as rising housing prices and travel numbers. External factors such as the banking crisis in the United States and Europe will only "inconvenience" the local market, he added.

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Hong Kong's benchmark index has suffered a 14 per cent pullback since peaking on January 27. China's top leadership reshuffle, the US Federal Reserve's rate hike campaign and the banking turmoil in recent weeks have ended a reopening euphoria and wiped out US$450 billion from the city's broader market.

Qi Wang, the founder and CEO of MegaTrust Investment in Hong Kong. Photo: LinkedIn alt=Qi Wang, the founder and CEO of MegaTrust Investment in Hong Kong. Photo: LinkedIn>

However, despite the ongoing banking crisis, sentiment appeared to have eased going into the week, with the local market rising for two straight days after regulators worldwide rushed to rescue lenders in the US and Europe. The Hang Seng Volatility Index, known as the "fear gauge", has fallen back to levels seen before the Credit Suisse crisis rattled local investors.

Wang's call was echoed by Alpine Macro chief strategist Yan Wang's optimism. "China should be insulated from the US and European banking sector turbulence," Yan said. The latest economic data confirmed a steadfast recovery in China, while still-sluggish sectors will prompt authorities to stay firmly accommodative, he added.

"We expect growth rates will pick up strongly after the second quarter, as the favourable base effect kicks in," Yan said in a note to clients on Tuesday.

About 75 per cent of Asian fund managers polled by the Bank of America expected Chinese equities to end the year on a higher note even if US stocks do not, according to the bank's latest survey. US-China relations and potential policy tightening are still key risks for investors, the bank added.

Despite being optimistic about the outlook, MegaTrust's Wang said he was unsure about where the Hang Seng Index will go from here in the next wave. "The market will be choppy," he said. "But I think the upside definitely outweighs the downside risks."

MegaTrust's 39-member Hong Kong Reopening Index, launched towards the end of December last year to track the reopening of the Hong Kong and Macau economies, was down 2.4 per cent through Monday. That beats Hang Seng Index's 4 per cent retreat over the same period.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2023 South China Morning Post Publishers Ltd. All rights reserved.

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