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
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