Hong Kong markets are undervalued, strategist says

The Hong Kong market is currently undervalued, but conservative investors may want to sit on the sidelines for now before they get back into the game, said Kenny Wen of Everbright Sun Hung Kai.

“If you’re relatively conservative, I would say you can take a wait-and-see approach, especially if you already own 40%, 50% shares,” Wen, the company’s wealth management strategist, told CNBC “Street Signs Asia “Wednesday.

He said the market, driven by sentiment surrounding issues such as debt-ridden developer China Evergrande Group, is “still very uncertain.”

To investors who are “relatively aggressive,” Wen said, “I agree now that the Hong Kong market is undervalued, so you can start building your portfolio.”

At Wednesday’s close, the benchmark Hang Seng in Hong Kong was about 23% lower than its February high. In the third quarter alone, the index fell almost 15% for the period.

The outlook for investing in Hong Kong remains “very uncertain” as the stock market – especially institutional investors – will need time to digest various factors such as China’s tightening policy on tech stocks as well as the uncertainties surrounding it. indebted real estate giant Evergrande, Wen said.

For those looking to buy “very volatile” stocks such as those in the new economy, the strategist warned that US Treasury yields were on the rise and should weigh on the tech sector. Some examples of new economy stocks include those in technology, while those in sectors such as utilities are generally classified as old economy stocks.

“I think the tech sector will remain quite volatile,” Wen said, warning investors against being “too aggressive” on tech stocks in the weeks or months to come.

The benchmark 10-year Treasury yield recently crossed 1.5% and has remained well above the level since. Higher bond yields can affect tech stocks – when interest rates rise, they make the company’s future cash flows less valuable and their stocks appear overvalued.

The surge in bond yields comes as the US Federal Reserve prepares to reduce its bond purchases in the coming months, usually a precursor to future rate hikes.