Hong Kong stocks remain favourable, as attractive valuations and easing tariff uncertainty have enhanced the predictability of corporate earnings on the city’s stock market, according to US fund manager Franklin Templeton.
The firm, which manages US$1.5 trillion of assets worldwide, was “constructive” on Hong Kong and mainland China’s stock markets, as the valuations remained reasonable and Beijing had introduced supportive policies, said Ferdinand Cheuk, portfolio manager at Templeton Global Equity Group, on Wednesday in a briefing.
While the city’s benchmark Hang Seng Index had surged more than 25 per cent so far this year, outperforming major indices globally, the momentum could be maintained through stock selection and positioning in certain sectors, he said.
The average price-to-earnings ratio among Hong Kong stocks stood at around 10.8 times, slightly above the 10-year average of 10.4 times, Cheuk said. By comparison, the constituents of the Standard & Poor’s 500 index traded at an average of 25 times, while Nasdaq stocks averaged 35 times, according to Bloomberg’s data.
In addition, the decreasing uncertainty from the US-inflicted trade tensions would be helpful for fund managers and investors to predict companies’ earnings, Cheuk said.
“We believe it is fair to say that the risks from Trump’s current trade war and trade policies will diminish in the future,” said Christy Tan, investment strategist at Franklin Templeton Institute, at the same briefing. Tan added that the US tariffs on China’s imports were largely expected to be below 40 per cent.
