Hong Kong’s market is at the moment undervalued, however conservative buyers could wish to keep on the sidelines for now earlier than dipping their toes again in, mentioned Kenny Wen from Everbright Solar Hung Kai.
“In case you are comparatively conservative, I might say you’ll be able to take a wait-and-see strategy, particularly in the event you’re already holding 40%, 50% shares,” Wen, wealth administration strategist on the agency, informed CNBC’s “Road Indicators Asia” on Wednesday.
He mentioned the market, pushed by sentiment surrounding points resembling debt-ridden developer China Evergrande Group, is “nonetheless extremely unsure.”
To buyers who’re “comparatively aggressive,” Wen mentioned: “I do agree now the Hong Kong market is undervalued, so you can begin to construct up your portfolio.”
As of its Wednesday’s shut, the benchmark Grasp Seng index in Hong Kong was round 23% decrease than its February excessive. Within the third quarter alone, the index tumbled practically 15% for the interval.
The funding outlook in Hong Kong stays “extremely unsure” because the inventory market — significantly institutional buyers — will want time to digest various factors resembling China’s coverage tightening on tech shares in addition to uncertainties surrounding indebted property large Evergrande, Wen mentioned.
For these trying to purchase “extremely unstable” shares resembling these within the new financial system area, the strategist warned that U.S. Treasury yields have been on the rise and are prone to weigh on the tech sector. Some examples of recent financial system shares embrace these in know-how, whereas these in sectors resembling utilities are usually categorised as previous financial system shares.
“I believe the tech sector will stay pretty unstable,” Wen mentioned, warning buyers towards being “too aggressive” on know-how shares within the coming weeks or months.
The benchmark 10-year Treasury yield not too long ago crossed 1.5% and has largely stayed above the extent since. Larger bond yields can hit tech shares — when rates of interest rise, they make the corporate’s future money flows much less helpful, and their shares seem overvalued.
The rise in bond yields comes because the U.S. Federal Reserve prepares to reduce bond purchases within the months forward, normally a precursor to future price hikes.