A recent article from Reuters dated 8th April 2015 carrying the title "China investors aiming at arbitrage profits make Hong Kong shares soar" has certainly caught my attention in terms of creating an opportunity to invest.
The article states that the main reason for the sudden surge of interest in Hong Kong stocks by China's mutual and hedge funds was "to exploit a major pricing imbalance between the markets, the result of a mainland rally that until now showed little sign of spilling over into Hong Kong."
What it means here is that the Hong Kong equity market is currently playing catch up with the China equity market whereby:
- China-listed blue chips are now about one-third more expensive than their Hong Kong versions
- Chinese dual listed small-caps trade at a premium of 10 times the cost of the same company's shares in Hong Kong
IS THIS TRUE?
Let us reaffirm this scenario by comparing the performance of the Hang Seng Index (Hong Kong) versus the Shanghai Stock Exchange Composite Index (China) from 1st Dec 2014 till 9th April 2015.
Shanghai Stock Exchange (SSE) Composite Index
 |
| (%) Gain from 1st Dec 2014 to 9th April 2015 : +47.66% |
Hang Seng Index
 |
| (%) Gain from 1st Dec 2014 to 9th April 2015 : +15.31% |
Clearly the (%) gain of the SSE Composite Index is about 3.11 times the (%) gain of the Hang Seng Index over the same period.
If the Hang Seng Index were to play catch up, then investors whom invest into Hong Kong equity now stand to make an additional +32.35%.
IS IT SAFE FOR US TO INVEST?
Obviously for Hong Kong equity market to play catch up with China, a large amount of liquidity must come from China. By that, we are referring to continuous interest from China's mutual and hedge funds.
From what was reported in the article, there's a huge interest by China mutual and hedge funds as quoted below:
More interest due to attractive evaluation as quoted below:
If there's truth that these mutual and hedge funds from China are going to invest into Hong Kong, then this creates an opportunity for us investors to jump onto the plane before it takes off.
HOW DO WE INVEST?
There's the option of investing directly into stocks from Hong Kong through various trading facilities offered by our local bank or via international trading companies. These trading platform allows you to buy and sell stocks directly. However to do so, you need to actively manage your investment as well as spend time on researching the right stocks to invest in.
Another option is for you to invest into a mutual fund that invest directly into the Hong Kong equity market. If you are to select this option, the next question would be which fund should you invest into?
Those whom are familiar with mutual fund investing or follow my Top 10 Best Performing Funds Review would be aware that there's an abundance of mutual funds that invest into China equity market. Without a doubt that these funds have provide quite a profitable return to those whom have invested since early 2014.
Now the question is, what about investing in Hong Kong equity market? Is there a fund that invest into this market?
The answer is YES!
A FUND THAT INVEST IN HONG KONG EQUITY AND AVAILABLE FOR EVERYONE?
Out of the hundreds of mutual/unit trust funds available for Malaysian investors, I've discovered only one fund that allocates more then 90% of its fund size into Hong Kong Equity market.
Here are some key information of this fund:
Fund Size:
Approximately RM130 million
Fund Allocation:
Sector Allocation:
Performance as of 9th April 2015:
- 3 months : +15.2%
- 6 months : +37,7%
- 1 year : +43.3%
Unfortunately I'm unable to publish the name of this fund in this post to prevent any acquisition of bias towards a particular fund or fund house. However you may email me personally at shanesee03@gmail.com to find out more about this fund.
WARNING AND REMINDER
I am sharing this post as a notification/information to investors that there could exist an opportunity for one to invest into Hong Kong equities.
In addition, I've also shared that we could invest passively into Hong Kong equities through a specific mutual fund in Malaysia. However there are some key risks that you might experience when investing into mutual funds such as:
- There is no guarantee of profit. In fact there is a possibility that you might suffer losses if the market crashes.
- Your capital is not protected by PIDM
- The fund manager fails to select performing stocks or the stocks selected by the fund manager does not perform well.
Therefore when making an investment that possesses such risk, one should allocate only a portion of your saving into if (if you intend to invest). Diversify your investment into different sectors and markets to safeguard your investment and to prevent total loss of your savings. To know more about diversifying your unit trust portfolio, you may read this article.
That is all for now! Cheers and Happy Investing!
