Ronald Chan

Opinion | How to buy Hong Kong stocks in 2024? Find the local dividend havens

With foreign investors pulling out and the Hang Seng Index at a four-year slump, overlooked local firms delivering historically high dividend yields offer great value

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An electric monitor shows the Hang Seng Index in Central on December 11 when it fell to 16,201 points, approaching the lowest level in 14 months. Although investors have reason to feel aggrieved, there are still stocks worth watching in Hong Kong. Photo: Edmond So

Ronald Chan

Published: 9:30am, 10 Jan 2024Updated: 10:18am, 10 Jan 2024

Investors have some important decisions to make in 2024. This year will see 2 billion people across 50 countries go to the polls, including in the United States, United Kingdom, India, Indonesia and Taiwan. These elections have the potential to create immense economic turbulence and uncertainty, which are likely to affect investor confidence and global stock markets.

Closer to home, investors in the Hong Kong stock market have had to adjust to a long losing streak. The Hang Seng Index has dropped for a fourth year in a row, a record-breaking underperformance since the creation of the index in 1969. Investors have good reason to feel aggrieved when they see the Hang Seng being outperformed by other stock market indices around the world.

Over the same four years, for example, the Nasdaq composite index has increased by 61 per cent and the S&P 500 by 45 per cent. For those who had invested in the Hang Seng Index, however, HK$1,000 put in the beginning of 2020 would be worth about HK$580 (US$74) today. Ouch.

On top of stock markets performing well globally, investors have had many reasons to sell down mainland China and Hong Kong over the past few years. Geopolitics, regulatory uncertainty created by the Chinese government and the crisis in the property sector, which affected close to a third of the Chinese economy, have battered the stock markets and disappointed everyone.

With China increasingly cited as uninvestable, international investors have been reducing their exposure to it through Hong Kong from 2021. According to a Morgan Stanley report, foreign capital accounted for 37 per cent, on average, of market participation at the Hong Kong stock exchange from 2016 to 2020. This, however, began to drop afterwards, to 27 per cent in 2021, then 23 per cent in 2022. As of last September, the figure stood at 25 per cent.

So where do opportunities exist in Hong Kong? The answer: hidden value lies in many overlooked Hong Kong-listed local companies, seemingly trading in their own vacuum.