It has been almost 10 years since Hong Kong reverted to Chinese Rule and the latest research from Fidelity indicates that this has had a negative impact on investment returns.
According to the research, if a British investor placed money in the Hong Kong stock market in 1997, then they would see returns of just 33%. The report draws attention to the fact that top paying UK cash accounts can achieve a much higher return over a similar period.
Despite the lacklustre performance of the Hong Kong stock exchange, the colony still compares favourably to mainland China which has seen a loss of around 25% since 1997, based on the MSCI China index.
China has experienced a boom over the past four years but when Hong Kong returned to Chinese control the region experienced a severe economic crisis. On 2nd July 1997 the Thai government devalued the Baht, a decision which resulted in financial shockwaves across the world and plummeting values for Hong Kong shares.
Of nine markets in the Asia Pacific which were analysed, Korea was the most successful market with a return of 235% during the ten year period. Only four other markets saw a positive return: Singapore came second with 85%, Hong Kong saw a 33% gain, Thailand rose by 12% and Malaysia 6%.
However, the report also emphasises that the economies of the region are changing as domestic consumption increases and GDP growth rates are high at 9.4%.
Allan Liu, manager of Fidelity South East Asia Fund, thinks the Asian region is growing fast and will be more stable in future, saying “most countries have enormous amounts of foreign exchange reserves which would protect the value of their currencies should they be faced with sudden capital outflows or other crisis in the future.”
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