HSBC asset management favors HK stocks in Asia

HSBC asset management favors HK stocks in Asia

Rita Raagas De Ramos, Dow Jones/Hong Kong

HSBC Asset Management is most bullish over Hong Kong shares in Asia, the only market in the region where it is overweight, and cautious over South Korea, Indonesia and India stocks.

"Market fundamentals (in Hong Kong) remain solid in 2005 with major investment themes of reflationary pressure, rising property prices, and booming retail and tourism," said Leon Goldfeld, investment director at HSBC Asset Management, which manages around US$210 billion globally.

Excess liquidity in the Hong Kong financial system should also support the market over the long-term, Goldfeld added.

Hong Kong was among the most favored stock markets by international fund managers surveyed by Dow Jones over the past two weeks.

Local traders aren't as bullish over Hong Kong's stock market, however, with many still suggesting investors remain cautious in the absence of fresh impetus for gains. Many local traders say the good news on the economic front has already been factored in share prices.

Meanwhile, Goldfeld is cautious over stock markets in South Korea, Indonesia and India, where HSBC Asset Management is underweight.

South Korea's domestic consumption and construction spending have yet to recover, Goldfeld said.

He added that South Korea's manufacturing sector is suffering due to the margin squeeze from more expensive raw materials and higher transportation costs.

South Korea's banking sector also has been in a slump due to low interest rates and weak credit demand, he said.

Goldfeld believes that political and economic reforms initiated by Indonesian President Susilo Bambang Yudhoyono will help boost the country's growth.

However, he believes all those expectations have already been priced in share prices.

Indonesia's Jakarta Stock Exchange Composite Index ended up 45 percent in 2004, making it the best performing stock market in Asia last year.

"Valuations, although supported by decent earnings growth, are at the top end," Goldfeld said.

Current valuations are also behind HSBC Asset Management's underweight in India shares. Over the long-term, however, Goldfeld expects a 15 percent-20 percent rise in earnings-per- share growth in India in the fiscal year starting April 2006.

HSBC Asset Management is a unit of HSBC Holdings Plc. (HBC).