Top 4 catalysts that will drive the Hang Seng Index this week
The Hang Seng Index has stalled at a key resistance level as the recent momentum in China's technology sector fades. The index was little changed on Monday, trading at around 24,200, up 7.7% from its lowest level of the year.
EWH: Highly Concentrated In Below Average Businesses At Above Average Valuations
The iShares MSCI Hong Kong ETF (EWH) focuses on Hong Kong-listed stocks, avoiding many of the typical risks tied to ADRs and VIEs, which I view as a positive. The ETF is highly concentrated, with only 28 holdings and nearly 70% of total assets in the top ten holdings. Not ideal for an ETF. EWH's holdings trade at above average valuations, but the underlying business quality doesn't justify those premiums. Many holding show inconsistent earnings growth over the past 5 years.
EWH: The Recent Surge May Be A Dead Cat's Bounce
EWH's high exposure to financial and real estate sectors, impacted by China's housing bubble and weak economy, poses significant risks for investors. Despite a recent surge due to Chinese government stimulus, EWH's long-term earnings growth rate has been declining since 2012. EWH's current valuation is not expensive but isn't attractive either, given its weak earnings growth outlook and political risks.
EWH: Unsteady Macros, But Still Worth A Look
iShares MSCI Hong Kong ETF has underperformed global stocks, losing -15% of its value in the past year. Hong Kong's macroeconomic picture doesn't look too alluring, and its close correlation with Chinese equities is another limiting factor. However, Mainland Chinese investors are increasingly turning to Hong Kong equities, boosting overall turnover.
