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Hong Kong Not Spared From Recent Rout
Aspire, Thought Leaders | 27 August 2015
By: Vance Wong
Articles (74) Profile

Dow Jones Industrial Average 5-year chart; Source: Capital LQ

The Dow Jones Industrial Average Index ended with a 205-point loss before the market closed on Tuesday (UST). The roller coaster ride continues as investors are questioning when this would start to settle down.

Louis Wong, Director of Phillip Securities Hong Kong gave his two cents about the current situation in US, China and Hong Kong.

Dow Jones: Expect a 10-20 Percent Correction

Since the market took a nosedive on 21 August, the Dow Jones had been a roller coaster ride.

The Dow Jones had been running for close to four years without a significant correction. Louis Wong thinks that a major correction is “long overdue” and investors should expect a correction of about 10 to 20 percent.

China: Possible Prolonged Slowdown Is Worrying

Louis looks back at the sell-off of the China market earlier in July this year. He maintains that it was most likely caused by over-speculation and over-leveraging of the Chinese investors. Following that, the Chinese government realised that they had to step in and revise financial policies to ensure that a crash does not occur.

However, the sell-off this time might actually mean that markets are realising that China might experience a prolonged slowdown, which is more worrying. Louis is afraid that there will be further downside. He looks at a probable 50 percent correction to about 2590, down from the recent peak of 5178.

Hong Kong: Victim of US & China’s Markets

After the materialisation of the stock connects between China and Hong Kong, it is inevitable that Hong Kong’s market is affected. The recent US rout made it worse for Hong Kong and Louis sees a high possibility that the Hang Seng Index will drop to around 20,000 points.

In his opinion, that would be the time where valuations are cheap, but investors should definitely stay on the sidelines and observe. The appropriate entry time will arise when not only the HSI settles from high volatility, but also the China and US markets.

With a Communications background, Vance has the passion to write with a purpose - to provide content supported with substantial evidence to vested readers.

Please click here for more information about this author.

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