Hong Kong SAR
Highlights The China-specific tariffs proposed by the Trump administration last week represent a great escalation in U.S. protectionism, but the actual measures may be smaller than what was initially announced. The proposed tariffs, if applied as stated, would likely shave 2% off of China's…
Feature Valuations, whether for currencies, equities, or bonds, are always at the top of the list of the determinants of any asset's long-term performance. This means that after large FX moves like those experienced this year, it is always useful to pause and reflect on where currency…
Highlights Hong Kong property prices are frothy and will continue to face headwinds. Real estate currently offers a poor risk-return trade off from an investment perspective, and will likely lag other asset classes in the medium to long run. A replay of another spectacular housing bust is…
Highlights Our "fair value" models incorporate prevailing domestic risk-free interest rates and long-term earnings, which provide an assessment on market valuation levels from a historical perspective. Hong Kong and Chinese A shares are substantially "undervalued" compared with their…
Highlights Renewed deflationary pressures indicate that the Hong Kong dollar may have once again become expensive. The currency peg will stay and domestic prices will adjust as a release valve. Developing deflationary pressures and slowing rent growth may reinforce one other. Rising risk free…
Highlights Chinese fiscal stimulus, both direct fiscal spending and infrastructure investment, has slowed significantly since late last year. This raises a red flag on the sustainability of the cyclical upturn. The Chinese economy should remain buoyant in the near term, despite fiscal…
Highlights The Chinese authorities have progressively tightened capital account control regulations to staunch capital outflows, which will likely slow the drawdown of the country's official reserves in the near term. Rising yields in China are largely reflective rather than restrictive.…
Highlights Dear Client, The growth of the electric-vehicle market, particularly re its implications for hydrocarbons as the primary transportation fuel in the world, will remain a key issue for energy markets, particularly oil. The IEA estimates transportation accounted for 64.5% of oil demand…
In a February <i>Special Report</i> titled "Assessing Fair Value In FX Markets" we introduced a set of long-term valuation models based on various fundamentals. We have updated the results and added KRW, INR, PHP, HKD, CLP and COP to our analysis. The dollar still remains expensive, albeit with no signs of a dangerous overvaluation. The yuan is now at its cheapest level since 2009.
Hong Kong's growing political awareness and rising sensitivity to public policy underscores brewing social tensions brought about by decades of <i>Laissez-Faire</i> capitalism. Social policies will likely become progressively more redistributive, with potentially a longer-term negative impact on asset prices.