We have observed a negative sentiment is building up in the Indian Stock Market, where the market continues to be under pressure in such news like Adani Group & Hindenburg report. Meanwhile, FIIs continue to sell their holdings.
The global market has also being experiencing extreme volatility for quite long time, due to several issues.
In this volatility of Nifty, we can consider other up-trending international markets & its indices for better diversifications in our portfolio. Here, Hong Kong stock market might be our next destination for investment to get better returns.
Hang Seng Index (HSI) which represents the Hong Kong stock market has been outperforming Indian stock market in recent times. Even returns are 10 times higher than the Indian stock market in some cases.
HSI has recovered in a V shape way.
Recent Performance: NIFTY vs. HIS
Hang Seng Index (HIS) is outperforming the Indian stock market in last 3 months. When NIFTY has given negative returns in that period, HSI has returned more than 40% during the same period. It has shown in the chart.
The Hang Seng Index (HSI) is a stock market index in Hong Kong. It records and monitors the daily changes in stock prices of the 50 largest Hong Kong stock market listed companies.
The stocks that constitute the Hang Seng Index include major banks, utility companies, real estate companies, and entertainment companies. Notable constituent stocks include:
- HSBC Holdings plc.
- Hang Seng Bank Ltd.
- China Construction Bank.
- China Life.
- Hong Kong and China Gas Company Limited.
Hope of recovery in China: China’s economy grew 3.0% in 2022, one of its worst economic performances in nearly half a century, hit by strict COVID curbs and a property market slump. IMF Deputy Managing Director Gita Gopinath recently said, China could see a sharp recovery in economic growth from the second quarter onwards based on current infection trends after the dismantling of most COVID-19 restrictions.
Revenge Spending in China
In simpler terms, revenge spending is the urge to spend money to make up for lost time. Chinese households are sitting atop the biggest pool of new savings in history, accumulating $2.6tn of bank deposits last year alone as strict anti-corona virus policies crushed consumer spending. The anticipation of a wave of pent-up demand, with consumers opening their wallets after China shifted decisively on tackling the pandemic, is underpinning hopes for a global economic recovery.
This is the key reason behind this rally. Hang Seng has been heavily discounted due to Covid-19 obligations. Despite such kind of sharp rally, Price-to-Earnings (PE) is still at 12.80 as on 30thjan 2023, which is relatively half of Indian Stock Market PE. To know more about valuation metrics you can join our Insignia program.
FIIs/FPIs pulled out Rs 1.21 lakh Cr. from the Indian equity markets in 2022 on aggressive rate hikes by the central banks globally, particularly the US Federal Reserve, volatile crude, rising commodity prices along with Russia and Ukraine conflict. Chinese market is now more appealing to FIIs from a value standpoint. This caused FIIs to shift their focus to China, from economies with relatively high valuations like India.
We can invest easily in the Chinese market by tracking the Index fund. Here are two Index fund, which have performed comparatively better performed:
Nippon India ETF Hang Seng Bees
It is correspond to the total returns of Securities as represented by Hang Seng Index of Hang Seng Data Services Limited, by investing in the Securities in the same proportion as in the index.
Volatility in this fund is low and liquidity is also relatively low due to its low volume.
Mirae Asset Hang Seng TECH ETF
This fund is managed passively with investments in stocks in a proportion that match as close as possible to the weights of these stocks in Hang Seng TECH Index.
Liquidity in this fund is high due to its high volume.
According to latest figures published by the National Bureau of Statistics of China, the growth of real gross domestic product (GDP) in China amounted to 3.0% in 2022. This was slightly lower than forecasts published by the IMF in October 2022, which was forecasted 4.4% for 2023.
Although Chinese economy seems to be recovering well but still there is a concern. A smaller amount can be invested in this fund to take advantage of the low risk and high return potential.
As per proper fund & risk diversification, one can consider those funds for 10% – 12% portfolio allocations.
In this article, we have discussed about Hong Kong market and its funds. Get stock market & financial knowledge through our Insignia Program. Now what do you think about those Fund? Write us in the comment box.