Fund Insights Directory 2016 | Page 41

HONG KONG EQUITY SECTOR ANALYSIS Three-year sector performance Most funds in this category underperformed the major market indices over the threeyear period to March 2016. The sector average fell 1.90% in US dollar terms while the MSCI Hong Kong and Hang Seng Index returned 11.6% and 4.2%, respectively. Most funds displayed a similar risk/return profile, with 40%-50% allocated to financials, which is broadly in-line with the major indices. We also saw a similar picture emerge in terms of their top holdings as most funds held key index constituents leading to similar performances. MARKET REVIEW “New economy” sectors saw a stronger run in 2013 including information technology, healthcare and Macau gaming stocks. Meanwhile, performance from old economy stocks, including financials and telecoms, picked up in 2014 as investors rotated into the defensive sectors which were trading at attractive levels. These sectors were also supported by the accommodative Chinese government policies throughout the year. The launch of the Hong Kong Shanghai Stock Connect at the end of 2014 helped Hong Kong equities rally sharply in Q2 2015. Investment sentiment was further boosted following the liquidity-driven rally in the A-share market. The uptrend reversed in the second half of the year as concerns over the Chinese economic slowdown intensified. Source: FE Analytics (31 Mar ’13 to 31 Mar ’16) Three-year annualised return/volatility MARKET OUTLOOK Weakening economic growth in China will continue to weigh on Hong Kong equities. On the economic front, sluggish demand from China has been affecting Hong Kong’s export growth. Weakening inbound tourism from China has also impacted consumer demand, which in turn has drove retail sales sharply downward. On a positive note, Hong Kong equities continue to trade at a reasonable valuation level. Provided by FE Advisory Asia as of 31 May ’16 Source: FE Analytics (31 Mar ’13 to 31 Mar ’16) For professional investors only Fund Selector Asia Fund Insights Directory 2016 39