ING Investment Management is cautiously optimistic about the outlook for Hong Kong stocks. Senior investment manager Oscar Leung Kin-fai says there is the possibility of resistance, or even a correction, as we enter the historically volatile month of October.
In the all-important property sector, Mr Leung favours developers over investors, and he points to recent rosy signs of a turnaround in property market activity.
'We see transaction volumes and prices of property have been picking up a bit in the past month. For developers, the government is bringing in more measures to support the market, so we think the developers will continue to outperform the market in expectation of a recovery in the market,' Mr Leung says.
'For property investors, the recent rally in investor stocks may need to take a rest. In terms of earnings, investors will remain flat. The current value is just a narrowing of the market discount to net asset value. We don't really see a dramatic pickup in their revenue.'
But for developers, Mr Leung says he expects more of a pickup in earnings as they continue strategically to sell properties and book profits. He says a rebound in property prices will, if sustained, tip the balance of the local economy well toward recovery.
'Once we see a slight pickup in property prices, or people's confidence in the property market is restored, then we can see more consumption created. That will bring a wealth effect and a feel-good effect. That will help domestic consumption, which has been holding back the economy.'
