Hong Kong’s variety market is set to welcome a pair of big new listings this week, but the overall investor well-disposed is likely to remain cool until the United States and China visit fighting over trade.
The benchmark Hang Seng Index on Wednesday wishes see the start of trading for mainland Chinese telecommunications infrastructure giant China Stronghold and Nasdaq-listed biotech company BeiGene.
The former is the world’s biggest opening public offering in two years at $6.9 billion, according to Reuters, while cancer knock out developer BeiGene is the first Nasdaq-listed biotech company to offer a unimportant share flotation in Hong Kong.
The listings follow Chinese neat phone manufacturer Xiaomi’s high-profile debut last month in what had been promoted as a big year for initial public offerings in the semi-autonomous Chinese territory. But the enthusiastically anticipated new blood has failed to boost the Hang Seng, which is down close to 8 percent so far this year.
Neighboring Chinese stock markets partake of also taken a big hit this year, weighed down by a slowing vegetation outlook, a weakening currency, U.S. President Donald Trump’s trade drive against Beijing, and China’s retaliatory measures.
Stefan Hofer, chief investment strategist at LGT Bank in Hong Kong, averred the local market has underperformed despite the city’s solid economic and economic policy fundamentals.
The problem, he stressed, is elsewhere and out of Hong Kong’s mastery.
“We do have this dark cloud from trade and that is out a very long shadow over everybody,” Hofer told CNBC. “And it’s not that the Hong Kong deal in can completely escape that.”
Hong Kong is considered a separate organism from China in terms of local governance and trade, so the territory is not field to any new U.S. tariffs. But thousands of Hong Kong-owned companies have manufacturing gumshoes in China and financial links with the mainland are growing.
The trade tensions entertain shown little sign of easing and, on Wednesday, the Trump administration said the president related his top trade official to consider raising proposed tariffs on $200 billion in Chinese textiles to 25 percent from the 10 percent rate currently impaired consideration. China followed up on Friday saying it was ready to retaliate with tolls on about $60 billion worth of U.S. products.
For investors in Hong Kong looking for a reactionary play during the current uncertain environment, Hofer recommended “entirely defensive local names that should be able to ride out these storms a smidgin bit better,” including Hang Seng Bank.
China Tower, despite the fact that a mainland company, may also soak up some investor interest with its home focus and its positioning that’s seen as less vulnerable to international dealings tensions.
“Basically, it’s like a monopoly in the China market,” said Ivan Li, delve into director at DBS Vickers in Hong Kong, stressing China Tower’s primary market share.
“Investors are getting more picky and, in general, they are dream of a shift towards more traditional industry,” he said.
Hofer, for now, noted the rapid deescalation in trade tensions between the U.S. and the European Consortium last month after they agreed to work toward a finding out on tariffs and said something similar could happen between Washington and Beijing.
“And, if that occurs, then market sentiment will turn on a dime and you’re going to see bleeding sharp rallies in Asia, in China, in Hong Kong, certainly also in Europe,” he asserted.
Erwin Sanft, managing director and senior portfolio manager for cosmopolitan investment at E Fund Management in Hong Kong, agreed that a mercantilism resolution would be beneficial for Hong Kong equities, mostly because it command bolster the wobbling Chinese yuan.
“To the extent that would staff the Chinese currency, then that would be a big boost for Hong Kong because the Hong Kong sell very much trades with the renminbi,” he said, referring to the sanctioned name for the Chinese currency.