Contradictory note as stocks attract investors

Top News | Kevin Xu 23 Jun 2020

Despite the gloomy economic outlook worldwide, around 71 percent of retail investors plan to take the plunge into Hong Kong equities over the coming 12 months, according to a survey by the Hong Kong Investment Funds Association.

The survey, conducted in mid-May, involved 710 retail investors with monthly incomes above HK$30,000 or liquid assets of over HK$500,000.

Yet this propensity to invest comes despite a high percentage of respondents having a negative economic outlook for the next 12 months, the association noted.

Nearly three quarter of the respondents are bearish on Hong Kong's economic outlook and 62 percent on China's economic outlook.

The respondents' most favored sectors are health care or biotech, tech sectors and utilities.

The association also pointed to 42 percent of millennials becoming more risk-averse because of extreme market volatility in the first quarter of the year.

But the fund market in Hong Kong recorded a marginal net inflow in April after a net outflow in March, said Nelson Chow Kin-hung, chairman of the association's unit trust subcommittee.

Chow said the local stock market has been dragged down by multiple uncertainties, including the social unrest and the introduction of national security law in Hong Kong, so investors could be diversifying their portfolios and investing globally.

For instance, mandatory provident fund contributors pulled out a net HK$384 million from Hong Kong and mainland stocks in May - the biggest monthly total in four years - Bloomberg reported, citing data from consulting firm MPF Rating.

And regional equity funds excluding Asia had a net inflow of HK$1.17 billion, with more than 80 percent going into US equities, according to MPF Rating.

But the US stock market has also been fluctuating recently after a sustained rally since late March with investors reacting to a global resurgence of coronavirus cases.

And a debate has emerged over whether a flood of new US retail investors in Robinhood, a commission-free online broker, has driven the recent rally.

The benchmark S&P 500 Index has surged nearly 40 percent from its multi-year low in March, but it tumbled on June 10 after the US Federal Reserve projected a 6.5-percent decline in gross domestic product this year.

According to the Financial Times, this is all happening at a time Japan is considering luring asset managers, traders and bankers from Hong Kong through visa waivers, tax advice and free office space for asset managers to promote Tokyo as an alternative financial center.

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