“I’m optimistic on China and Hong Kong, as the markets should focus on the valuation opportunities that they represent,” said Neil Hosie, the Swiss bank’s global head of execution services, in Hong Kong last week. “There are still more stimulus measures that China can take that could further boost the market and sentiment.”
The bank’s positive stance came as global investors appeared to be interested in divesting away from US equities and harboured concerns about other American asset classes amid trade tensions.
London-based Hosie said the US was over-represented in the MSCI World Index; 72 per cent of its weighting was invested in or was represented by the US. Within that representation, 31 per cent was made up by 20 American companies, he said.
He also said US stocks were overvalued. The Nasdaq’s latest price-to-earnings ratio recently stood at 31.70 times, while Hong Kong’s benchmark Hang Seng Index was at 10.86 times and Shanghai’s main board was at 15.60 times, according to Bloomberg data.
“With uncertainty about the economic outlook, high valuations do not make sense, and a retreat in stock pricing should be expected, yet we haven’t seen that,” said Hosie.
