HomeA strategist says Hong Kong’s markets are undervalued

A strategist says Hong Kong’s markets are undervalued

The Hong Kong market is undervalued, but conservative investors may want to stay on the sidelines for now before dipping their toes again, Kenny Wen of Everbright Sun Hung Kai said.

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

He said the market was driven by sentiment surrounding issues such as the heavily indebted developer Chinese Evergrande GroupIt remains highly uncertain.

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

As of Wednesday’s close, the indicator is Hang Seng Index In Hong Kong it was about 23% below its February high. In the third quarter alone, the index has fallen about 15% for the period.

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Wen said Hong Kong’s investment prospects remain “highly uncertain” because the stock market – especially institutional investors – will need time to absorb various factors such as Chinese policy tightening on technology stocks as well as the uncertainties surrounding debt-laden real estate giant Evergrande.

For those looking to buy “extremely volatile” stocks like those in the new economic space, the strategist warned that US Treasury yields are on the rise and are likely to affect the technology sector. Some examples of new economic stocks include those in technology, while those in sectors such as utilities are usually categorized as old economy stocks.

“I think the tech sector will continue to be somewhat volatile,” Wen said, warning investors to be “too aggressive” about tech stocks in the coming weeks or months.

The benchmark 10-year Treasury yield recently crossed 1.5% and has remained largely above the level since then. Higher bond yields can hurt technology stocks — when interest rates rise, they make a company’s future cash flows less valuable, and its stocks appear to be overvalued.

The rise in bond yields comes like the US Federal Reserve getting ready for Reducing bond purchases in the coming months, usually a prelude to future interest rate hikes.