My Hong Kong Trip August 2023

A pocket note on my personal trip to Hong Kong in August 2023. Here's what I've casually observed spending time on the ground.

I’ve love to share this with you. 

I just got back from my Hong Kong trip last month. And it was absolutely amazing. 

As an investor, I simply loved the vibe — strong entrepreneurial culture, great food and plenty of investment opportunities. 

Now, much of what I share here are my personal observations and conversations with fund managers, brokers and company management. And not scientific. 

Though I believe it’s still helpful in putting context to the investment data and reports I often read on my computer. 

Met one of ARA Group’s Hong Kong-listed REIT deputy CEO and her management team.

Just a side note, while I write a financial blog mostly on Singapore stocks, I’ve actually invested in Hong Kong for over ten years now. 

Why Hong Kong? Well, I’m always captivated by its huge market of interesting companies. Hong Kong has over 2,500 stocks, way more than our 600+ stocks in Singapore — whether it’s REITs, financials, developers, consumer stocks. These businesses not only have durable competitive advantage, but also the added tailwind of China’s giant economy. 

Like what famous Philip Fisher and any professional investor would do, this personal trip was to head down to “kick the tire”.

Central was full of heavy traffic and crowd is back after COVID-19 pandemic

The thing is, there are many high-quality Hong Kong blue chips that have compounded and paid consistent dividends over many decades. Diligence members will know this.

For instance, one that I’ve visited (see below) paid a more than 10% dividend yield, a return on capital of 30% and sells a great product across the world. 

But here’s what intrigued me about Hong Kong – plenty of hidden small-mid cap gems that are little known by the stock market. 

These aren’t typically covered by big institutional funds but are also home to some of the more well-known businesses.

In fact, some of these companies have major presence in Singapore too. And produced abundant free cash flow and paid good dividend yield. 

Hong Kong trades at “dirt cheap” valuation — and why I’m staying invested

Yet, if you ask me, the market is just disappointed with the Hang Seng Index. The Hang Seng Index trades at a dirt cheap valuation, probably not seen in many years.

While the big foreign investors are fleeing away from the market, I’m going in, buying alongside some of the major domestic fund managers. 

This is why I’ve been actively increasing my Hong Kong stocks position in my personal portfolio. 

While Singapore has changed so much over the years – with our casinos, F1 Grand Prix, newly-built shopping malls – over the past decades, Hong Kong has pretty much remained the same, in a good way.

Put it this way, Hong Kong has a stable, well-run economy – low inflation, highly-knowledgeable workforce and a strong Hong Kong dollar that continues to attract global talent. 

This makes investing in Hong Kong stocks much easier, unlike other emerging markets that may have a volatile currency, and major corporate governance issues. 

According to a CFO of a public-listed investment fund said “China still needs Hong Kong as a ‘reach-out’ for the Greater Bay Area.” 

China knows it can’t ignore Hong Kong — a city that has over 900 years of established common law to do business.

On the other hand, China is receiving so much hate today. And also the highest negative sentiments.

The prevailing story is that China may become the next “Lehman Moment” – a 2008-style housing bubble. My view? This fear is simply ridiculous. We all know how western media often portrays China. 

Yet, there’s a lot of unspoken policies and approaches the Chinese government is doing to make sure it doesn’t end up like the past crashes we’ve read and experienced from the US. 

 

The recent slowdown is really China trying to curb lending to highly leveraged, private developers. At the same time, state-owned developers like China Overseas Land and China Vanke are still doing very well.

Hong Kong — a place of rich culture

 

What I love is how Hong Kong has made efforts not just to retain its natural, but also much of its food culture. I had a great lunch with a long-time fund manager friend at Tai Ping Koon Restaurant. 

This is one of the world’s oldest continually operating Chinese restaurants since 1860. 

And has been ranked as one of Hong Kong’s most iconic restaurants. Pretty impressive to still see waiters decked in a good black and white suits. Pretty impressive. 

To me, investing is not just about sitting in front of the computer to read data. 

It’s about immersing yourself in different cultures, getting to know the world a little better and of course, searching for the most profitable ideas. 

Sometimes, investing can be simple. 

Willie Keng, CFA

Founder, Dividend Titan

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David Lim
David Lim
5 months ago

Hi Willie,
Thank you for the sharing.
No offence, i read there are more ‘fraudulent stocks’ stories outside the country we live.
e.g. China banks listed in HK. Though they have consistent 6-8% dividend, but over the years, these bank stocks NTA/NAV value keep going lower…
Lately, 1 of the HK stock, International Housewares Retail Co Ltd [HKG: 1373] really dropped a lot..
But I read reading your & other SG bloggers on opportunities in HK.
Telco stocks, e.g. China Mobile, Citi Telecom, still doing well.
Best Regards
David

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