20160815-杰富瑞-Global_Equity_Strategy_HK__Reaching_Across_the_Pacific_16页_745kb

Global Equity Strategy Summary

Core Content

This document outlines the current state of the Hong Kong equity market in the context of global investment trends, particularly the "reach for yield" phenomenon. It highlights the attractiveness of Hong Kong equities compared to US equities, emphasizing the high dividend yields and low valuations in the Hong Kong market.

Key Takeaways

• High Dividend Yields in HK: Hong Kong equities offer significantly higher dividend yields compared to US equities. The S&P 500 has a dividend yield of approximately 2.1%, while Hong Kong's dividend yield is close to 4%.
• Low Valuation Metrics: Hong Kong stocks are undervalued relative to the S&P 500 in terms of forward price-to-earnings (PE), price-to-book (PB), price-to-earnings growth (PEG), and price-to-sales (PS) ratios.
• Low Interest Rates and Negative Yield Bonds: Global bond yields, particularly in the US and Europe, have dropped to record lows or even negative territory, increasing the demand for income. This has led to a shift in investment focus towards equities with higher yields.
• Currency Stability: The Hong Kong dollar is pegged to the US dollar, which eliminates currency risk and ensures that the yields of HK and US equities are correlated.
• ROE and Payout Ratios: While the return on equity (ROE) in Hong Kong is lower than in the US, the payout ratios are comparable, suggesting that companies in Hong Kong are not necessarily less profitable but are more focused on dividend distribution.
• Investor Sentiment: Despite the value proposition, global investors have largely ignored Hong Kong equities due to concerns over China and the pace of US interest rate hikes, which have negatively impacted sentiment.
• Global Asset Allocation: The document suggests that Hong Kong equities should be considered as a good investment option within a global asset allocation strategy due to their high yield and low valuation.

Main Points

• Dividend Yield Gap: The yield gap between Hong Kong and US equities is significant, with HK offering much higher yields.
• Valuation Advantages: Hong Kong equities are undervalued based on various valuation metrics, making them attractive for income-focused investors.
• Central Bank Policies: Central banks have been purchasing large amounts of government bonds, leading to a squeeze in financial markets and driving investors towards equities with higher yields.
• Investor Behavior: There is a growing interest in equities that offer higher yields, especially in the context of negative yields in bonds.
• Market Performance: The Hong Kong equity market is experiencing capital withdrawals, but the document remains modestly bullish on its long-term prospects.

Key Information

• Dividend Yield: Hong Kong's dividend yield is around 4%, while the S&P 500's is approximately 2.1%.
• Valuation Metrics:
  • Forward PE: Hong Kong is much lower than the S&P 500.
  • Forward PB: Hong Kong is significantly lower.
  • Forward PEG: Hong Kong is cheaper.
  • Forward PS: Hong Kong is also lower.
• FCFY and DY: Hong Kong equities have a higher free cash flow yield and dividend yield compared to US equities.
• ROE: Hong Kong's return on equity is lower, but this is offset by higher dividend yields.
• Payout Ratios: Both markets have similar payout ratios, indicating comparable dividend distributions.
• Capital Flows: Both markets have seen capital withdrawals, but the document suggests that Hong Kong's value proposition remains strong.
• Investment Recommendations: The document recommends Hong Kong equities for investors looking for high yield and value, with specific companies highlighted as having strong fundamentals and high yields.

Exhibits Summary

• Exhibit 1-5: Comparisons of valuation metrics (PE, PB, PEG, PS, DY) between Hong Kong and the S&P 500.
• Exhibit 6-7: Comparison of ROE and payout ratios.
• Exhibit 8-9: Companies trading below 1.25x price-to-book in Hong Kong, with various financial metrics.
• Exhibit 10-13: Companies with high free cash flow yields, showing their financial performance and research ratings.
• Exhibit 14: Companies that have experienced positive earnings and target price revisions over the past 3 months, indicating potential for growth and investment.

Conclusion

The Hong Kong equity market is currently undervalued and offers a significant yield advantage over the US market. Despite recent capital outflows and concerns over China, the market remains a compelling option for investors seeking income and value. The document recommends a modestly bullish stance on HK equities within a global investment strategy.