Hong Kong: The Ugliest Girl At The Dance

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Hong Kong: The Ugliest Girl At The Dance

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

Four Pillars of GDP: Least attractive in Asia

Hong Kong is, unfortunately once again, the object of many a euphemism: the moldiest pear in the pear in the pear tree, the cheapest rock in the jewelry shop, the ugliest girl at the dance. Take your pick!

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The market’s low GDP growth, annualized at 2.83%, is falling below even the low-growth environment of 2016. Investment was the largest contributor to GDP growth, but net exports were a significant obstacle to growth.

Still the Lowest ROE in Asia

Despite a slight recovery in 2016, the first quarter of 2017 was a letdown, and consensus estimates for 2017-2018 earnings growth sit below the Asian average.

Return on equity expectations of 7.5% for this year are the lowest in Asia.

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

Overall Hong Kong is the 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 yields tempt some investors.

Momentum: Hong Kong has moderate price momentum.

Risk: The market’s beta and price volatility compared to Asia ex-Japan are relatively high.

Strong performance in Information Technology

Top 3 largest sectors: Real Estate: 17% of the market; Information Technology: 16%; Financials; 15%.

Best sector & stock: Info. Tech. +23.6%, Landing International Development Ltd +129.7%

Worst sector & stock: Materials -2.8%, Shougang Fushan Resources Group Ltd -23.8%

*CE is consensus estimates

Article by Dr. Andrew Stotz, Become A Better Investor

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In 1992 Dr. Andrew Stotz, CFA, left a management career at Pepsi-Cola in California to teach finance in Thailand. In 1993, he found his life calling as a financial analyst, a job for which he was eventually voted #1 in Thailand. In the second half of his 20-year career in investment banking, Dr. Stotz was a Head of Research, leading teams of financial analysts. He served as a two-term president of CFA Society Thailand and now runs his firm, A. Stotz Investment Research, which provides research and tools for institutions and high-net-worth investors and helps CEOs make their companies financially world class.
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