Turn payout into long-term payday

money-glitz | 29 Jun 2020

Hong Kong residents who plan to use the HK$10,000 cash handout for investment have some options in equities, bonds, and even gold, but analysts say exchange-traded funds should be their first pick as it could diversify risk.

The government's cash payout scheme opened for registration on June 21 and the payout is expected to be available in bank accounts as early as July 8.

If investors prefer big companies with solid fundamentals, there are 12 blue-chip stocks whose minimum investment is below HK$10,000, such as China Construction Bank Corporation (0939) and Country Garden (2007).

Dickie Wong, executive director of research at Kingston Securities, says iShares Core MSCI China ETF (2801), tracking large and mid-cap Chinese companies listed in mainland China, is one of the choices for diversifying risk. The minimum investment is HK$5,603, based on the share price last Friday.

Investors with more capital are advised to consider the Tracker Fund of Hong Kong (2800), Wong says. Investors have to pay HK$12,514 for one board lot of 500 shares.

Analysts usually recommend investors to buy gold as a safe haven. The gold price rose 2.4 percent week-on-week to US$1,764.64 (HK$13,764.2) per ounce as of last Thursday, after the World Health Organization reported a record increase in global coronavirus infections with more cases in North and South America, as well as in Beijing, where infections exceed 250 in a resurgence.

More investment houses raised their target price for the safe-haven asset, with Goldman Sachs lifting its 12-month forecast of the gold price to US$2,000 per ounce.

Investors who plan to use the HK$10,000 handout to invest in the gold market could look at gold bullion ETF, and gold miner stocks.

There are three gold ETFs available in Hong Kong stock exchange, including SPDR Gold Shares (2840), Value Gold ETF (3081), and HS RMB Gold ETF (83168), with the minimum investment ranging from HK$3,000 to HK$6,500, approximately. The most-traded one, SPDR Gold Shares, which is tracking the London Gold Fixing Price, rose 1.9 percent to HK$1,285 last week. Gold miner stocks like Zhaojin Mining Industry (1818) costs HK$4,555 per board lot of 500 shares.

But Wong picks HK Electric Investments (2638) rather than SPDR Gold Shares as the former has cheaper minimum investment, which is HK$4,035, as of last Friday. Also, the unit price of HK Electric Investments has risen steadily since debut and the distribution yield is also stable at around 4 percent, Wong says.

HKT Trust (6823) is a possibility if investors are willing to pay extra about HK$1,400 to invest in one board lot of 1,000 units worth HK$11,373, Wong reckons. The distribution yield is around 6 percent.

Analysts say real estate investment trusts are also less-risky choices. The minimum investment value of all Hong Kong-listed REITs is below HK$10,000, with the cheapest is around HK$1,000 for one board lot.

Among all REITs, Tang Kin-chor, a share market analyst, suggests investing in Link Real Estate Investment Trust (0823). He expects a transformation in Hong Kong consumer habits from shopping on the street to shopping malls. Tang describes it is a less-risky investment for a long-term approach. Investors can gain from the cash distribution and also the unit price appreciation, Tang explains.

As of last Friday, Link REIT was traded at HK$63.8. With one board lot of 100 units, the minimum investment was HK$6,387. The rate of return was 4.5 percent if based on the price last Friday and excluded the price fluctuation.

As for short-term speculation, Wong says the new economy shares will continue to outperform the market. He recommends Xiaomi (1810), with one board of 200 shares worth HK$2,667, as of last Friday. Wong's opinion is to buy at around HK$12 and then wait for the share to break through the level of HK$13. Its initial public offering price was HK$17, thus, there is still some room for Xiaomi to rise.

Wong proposes that the public should spend the remaining cash handout to stimulate the economy, apart from investment.

Banks also offer different plans for HK$10,000 time deposits. People can put their HK$10,000 cash into ICBC (Asia) three-month Hong Kong dollar time deposit by registering in its mobile application to earn interest of HK$105 in three months. The annualized interest rate is 4.2 percent.

New customers of CMB Wing Lung Bank can set up a time deposit through its mobile application to gain HK$63.33 in two months. The annualized interest rate is 3.8 percent.

The Hong Kong and Shanghai Banking Corporation also announced interest of HK$83 for customers who registered for the cash payout scheme through the bank before August 31 and save their money in a time deposit for one month. The annual interest rate is 10 percent.

Investors could also consider bonds issued by the government. The minimum investment in silver bonds, which is only for Hongkongers aged 65 years or above, and inflation-linked retail bonds, also known as iBond, both are HK$10,000. And the government has said it plans to launch a further issuance of iBond this year.

The last batch of iBond was redeemed in June last year. The annualized interest rate was 2.43 percent.

The fixed rate is 2 percent per annum for Silver Bond Series due 2019 and Silver Bond Series due 2020; and 3 percent per annum for Silver Bond Series due 2021 and Silver Bond Series due 2022.

 

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