It might be time for ‘bottom-fishing’ Hong Kong stocks, Barclays says

Real Estate

It might be time to go “bottom fishing” for Hong Kong stocks, according to Barclays’ head of markets for Asia Pacific, as the unrest in the embattled city drags on, which has hit businesses badly.

Barclays’ Matt Pecot told CNBC at the Barclays Asia Forum on Thursday: “I think a lot of investors have chosen to steer clear … property stocks, a lot of your hotel stocks have corrected pretty dramatically.”

The months-long protests in the city have affected retailers, airlines and property companies, among other industries.

Tourist arrivals have plunged — overall September arrivals declined 34% year over year — while hotel occupancy rates have slumped. Hong Kong’s August retail sales were the worst on record, its government said earlier this month, falling 23% from a year earlier.

“Hopefully we’ll get a resolution of this soon and some of the violence and vandalism stops. But I think lot of it is probably already priced in and it may be time for a little bottom fishing,” Pecot said, referring to the strategy of investing in assets that have seen declines and are considered undervalued.

Hong Kong’s benchmark Hang Seng index plunged to a seven-month low in August and has since bounced back slightly — but it is still more than 12% off its highs this year in April.

Property names listed on the index have taken a hit. Shares of New World Development has tumbled about 20% since April, while Henderson Land is down around 13%. CK Asset has plunged around 24%.

The real estate industry is regarded as critical to Hong Kong’s financial stability. The sector is tracked as an indicator of the health of the wider Hong Kong economy and banking sector, according to the Hong Kong Monetary Authority.

The iShares MSCI Hong Kong ETF — which closely tracks Hong Kong shares — has also plunged more than 12% since its highs this year in April.

On Thursday afternoon, the city’s government said third-quarter GDP slipped 2.9% compared with the same quarter a year ago — marking the “marking the first year-on-year contraction for an individual quarter since the Great Recession of 2009.” Hong Kong’s Census and Statistics Department said in a statement that it now projects “to record a negative growth for 2019 as a whole.”

— CNBC’s Stella Soon contributed to this report.

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