Hong Kong faces worst earnings recession since 2008

Their slowing economy is buckling under the pressure of 11 straight weeks of protests
Chief Investment Office22 Aug 2019
    Photo credit: AFP Photo


    Hong Kong stocks are poised for their worst quarter since 2015 and corporate earnings are unlikely to save them.

    After a selloff erased more than USD600b from the city’s equities, attractive valuations stood as a potential bright spot. But those multiples do not look so good when analysts keep slashing their profit forecasts for 2019. Their call for an average 19% slump in operating income would be the biggest contraction for Hang Seng Index companies since the Global Financial Crisis, data compiled by Bloomberg show.

    While a protracted US-China trade war and a weak yuan are to blame for a big chunk of the profit reductions, the latest cuts reveal a deeper issue. With Hong Kong’s slowing economy buckling under the pressure of 11 straight weeks of protests, demand for everything from bank loans to utility gas may be jeopardised.

    Shares of utilities provider Hong Kong and China Gas Company Limited fell 5.3% Wednesday (21 August) after it posted disappointing results and said the local business environment is “full of challenges”. Political unrest in Hong Kong may dampen its sales to the hospitality industry as people opt to cook at home rather than dine out, analysts at an investment company say.

    The threat from the trade war and weeks of local unrest has been apparent in the property market, as well as hotel occupancy and retail sales. CK Asset Holdings Limited, whose shares fell to lowest since January 2017 last week (ended 16 August), postponed a luxury residential project because of the protests. Various banks have lost about 9% this month as investors become increasingly concerned about capital flight. – Bloomberg News.

    The Hang Seng Index gained 0.15% to 26,270.04 on Wednesday and the Shanghai Composite Index slipped 0.01% to 2,880.33.



    Singapore has a message for Elon Musk: Taking mass transit is a better climate-change solution than tooling around in one of his Tesla Inc’s electric vehicles (EV).

    The city-state, which has said its efforts to cope with climate change are as crucial as military defence, has prioritised greater use of its trains and buses, Masagos Zulkifli, Minister for Environment and Water Resources, said in an interview Wednesday (21 August). Musk has criticised the country for being slow to adopt EVs and said in a January tweet the government “has been unwelcome”.

    The low-lying island nation faces an existential threat from the impacts of climate change and the country’s Prime Minister Lee Hsien Loong said in a national address Sunday (18 August) it could cost more than SGD100b (USD72b) over the next century to protect it from rising sea levels, hotter temperatures, and more intense rainfall.

    Singapore’s trains and buses cover much of the island’s 720 square kilometres (280 square miles) with the newest subway routes featuring driverless carriages and several of the most popular bus routes traversed by double-decker carriers. The country, with a population of about 6m, is aiming to enhance mass transit options so that by 2040, any trip within the country will take no longer than 45 minutes.

    Even though Singapore is focused on public transport, the nation is still uniquely positioned to transition to plug-ins, according to Zulkifli. That is because the state controls car ownership licenses, which it gives out on a 10-year basis and could be used as an instrument of change. – Bloomberg News.

    Australia’s S&P/ASX 200 Index gained 0.35% to 6,505.90 at the open on Thursday. It lost 0.94% to 6,483.27 on Wednesday.

    South Korea’s Kospi Index slipped 0.25% to 1,959.68 early-Thursday morning. It climbed 0.22% to 1,964.65 the previous session.

    The Taiwan Stock Exchange Weighted Index gained 0.03% to 10,525.80.

    The information published by DBS Bank Ltd. (company registration no.: 196800306E) (“DBS”) is for information only. It is based on information or opinions obtained from sources believed to be reliable (but which have not been independently verified by DBS, its related companies and affiliates (“DBS Group”)) and to the maximum extent permitted by law, DBS Group does not make any representation or warranty (express or implied) as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions and estimates are subject to change without notice. The publication and distribution of the information does not constitute nor does it imply any form of endorsement by DBS Group of any person, entity, services or products described or appearing in the information. Any past performance, projection, forecast or simulation of results is not necessarily indicative of the future or likely performance of any investment or securities. Foreign exchange transactions involve risks. You should note that fluctuations in foreign exchange rates may result in losses. You may wish to seek your own independent financial, tax, or legal advice or make such independent investigations as you consider necessary or appropriate.

    The information published is not and does not constitute or form part of any offer, recommendation, invitation or solicitation to subscribe to or to enter into any transaction; nor is it calculated to invite, nor does it permit the making of offers to the public to subscribe to or enter into any transaction in any jurisdiction or country in which such offer, recommendation, invitation or solicitation is not authorised or to any person to whom it is unlawful to make such offer, recommendation, invitation or solicitation or where such offer, recommendation, invitation or solicitation would be contrary to law or regulation or which would subject DBS Group to any registration requirement within such jurisdiction or country, and should not be viewed as such. Without prejudice to the generality of the foregoing, the information, services or products described or appearing in the information are not specifically intended for or specifically targeted at the public in any specific jurisdiction.

    The information is the property of DBS and is protected by applicable intellectual property laws. No reproduction, transmission, sale, distribution, publication, broadcast, circulation, modification, dissemination, or commercial exploitation such information in any manner (including electronic, print or other media now known or hereafter developed) is permitted.

    DBS Group and its respective directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned and may also perform or seek to perform broking, investment banking and other banking or financial services to any persons or entities mentioned.

    To the maximum extent permitted by law, DBS Group accepts no liability for any losses or damages (including direct, special, indirect, consequential, incidental or loss of profits) of any kind arising from or in connection with any reliance and/or use of the information (including any error, omission or misstatement, negligent or otherwise) or further communication, even if DBS Group has been advised of the possibility thereof.

    The information is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. The information is distributed (a) in Singapore, by DBS Bank Ltd.; (b) in China, by DBS Bank (China) Ltd; (c) in Hong Kong, by DBS Bank (Hong Kong) Limited; (d) in Taiwan, by DBS Bank (Taiwan) Ltd; (e) in Indonesia, by PT DBS Indonesia; and (f) in India, by DBS Bank Ltd, Mumbai Branch.