Hong Kong’s Crisis Is Creating an Opportunity for Investors, Julius Baer Says

(Bloomberg) -- Julius Baer is recommending Hong Kong’s battered stock market as investor appetite fades after five months of protests, saying “times of crisis” are usually an opportunity to invest.

The city’s stocks have appeal as valuations are suppressed and dividend payouts exceed the yields on government bonds by near the most on record, said Yves Bonzon, chief investment officer at Bank Julius Baer & Co. at a press roundtable in the city yesterday.

He added that the city’s currency board, which stabilizes its against the U.S. dollar, would likely remain intact.

“Hong Kong equities are a buy,” he said. “You can see from the Hong Kong market valuation that the appetite for equities at the moment is very low, which creates a unique entry point.”

Julius Baer’s positive outlook contrasts with pessimism in other quarters. S&P Global Ratings warned Tuesday that residential property prices may fall by 10-20% from their recent peak by the end of 2020 as a result of the sustained civil unrest. Meanwhile, Morgan Stanley downgraded their recommendation on the city’s banking sector to underweight the same day.

The Hang Seng Index, which has lost about 4% since the protests began in June, was up 0.4% at 1:45 p.m. Hong Kong time.

Read more about how Hong Kong’s economy is sliding into recession here

But investors should load up on Hong Kong stocks with as broad an exposure as possible as they should rebound during the next three to eight years, said Bhaskar Laxminarayan, Julius Baer’s chief investment officer for Asia. “In the next decade, you can’t afford not to own these.”

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