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Hong Kong Indexes and ETFs Should Rise Further

by: Larry MacDonald May 20, 2008    
Larry MacDonald

Larry MacDonald

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A stimulative macroeconomic environment appears to be in place for Hong Kong stocks and real estate. Because Hong Kong pegs its currency to the U.S. dollar, it has floated down with the U.S. dollar against other currencies and is now about 20% cheaper on a trade-weighted basis since 2000 (adjusted for inflation). Even if domestic inflation picks up, the currency peg requires Hong Kong to keep its interest rates low, in line with U.S. rates.

The iShares MSCI Hong Kong Index exchange-traded fund has been on a bit of a roller-coaster ride since the bullish case made in the Aug. 30, 2007 post, Hong Kong stocks. It had risen by 50% in late October, then corrected back to nearly breakeven by mid-March, and now has recovered to a gain of nearly 25% (in U.S.$). Conditions look favorable for further appreciation.

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This article has 2 comments:

  •  
    May 20 05:21 PM
    Hong Kong inflation is serious; local economy may suffer big loss over the main transportation part for the expectation of Taiwan Bypass (direct flight on passenger and cargo between Taiwan and the mainland instead of via Hong Kong is under the way, around July 4, 2008 due to the change of Taiwan Politics, May, 20, 2008)

    The mainland China businesses is in trouble due to the earth quake and hyped inflation (CPI 8.5)

    Before the recovery, we will see big loss over HK play, check FXP today!
    Reply
  •  
    May 21 04:08 PM
    Hey, Buddy, check FXP again!
    Reply
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