Near-term Caution on Hong Kong Market

Expect a 10-18% correction in the current rebound since October 2022

I am Qi Wang, CEO of MegaTrust Investment (HK), a boutique China fund manager based in Shanghai and Hong Kong. Total 25 years of experience in Chinese and global equities. This is my blog for MegaTrust clients and professional investors.

Exactly a year ago, analysts (including myself) believed the Hong Kong market was oversold and might have bottomed. At the beginning of 2022, who would have thought Hang Seng Index would reach a 10-year low of 14,597 eventually? A 42% drawdown!

Unfortunately, this is the extreme uncertainty that we have to cope with. Never say never.

Fundamentally, 2023 is poised to improve from 2022 for China. I don’t expect the panic-selling in 2022 to return. However, it is good to be cautious given the strong rally in Hong Kong recently.

Our analysis suggests a possible 10-18% downside to Hang Seng Index near-term. This implies an index level of 18,614 to 20,431 in the next two months or so (based on the January 27 high). More downside to single stocks…