Global stock markets have experienced major declines so far in 2022. That’s mainly been due to decades-high inflation and rising interest rates from the US Federal Reserve.
While most headlines focus on US stock markets, the world’s second-largest economy is China. And China’s stock markets also attract a lot of investors’ money in Asia.
One of the best places to invest – if you want exposure to the Chinese market – is Hong Kong. As of the end of 2021, companies listed there had a combined total market cap of US$5.4 trillion.
That made the Hong Kong Stock Exchange the fourth-largest in Asia and the seventh-largest market in the world.
Within Hong Kong, the key benchmark index – similar to Singapore’s Straits Times Index (STI) – is the Hang Seng Index. It’s been a tough year so far, with the index currently at 16,211 as of 21 October 2022, down 30.3% since the start of the year.
So, how have the top five stocks in Hong Kong’s Hang Seng Index (by market weighting) performed so far in 2022? Let’s find out.
Read Also: Dogs Of Hang Seng: Investing In The Top 10 Dividend Yielding Constituent Stocks
HSBC – Down 11.3%
HSBC Holdings plc (SEHK: 5) is a London-headquartered bank that is also the dominant financial services provider in Hong Kong.
It’s also the stock with the biggest weighting in the Hang Seng Index (making up 9.8% of the benchmark). The bank has outperformed the Hang Seng Index so far this year. As of 21 October 2022, its share price is 41.55 HKD, down about 11.3% for the year.
One of the biggest reasons for that has been its positive exposure to rising interest rates in the US. In the first half of 2022 the bank reported net interest income (NII) of US$14.5 billion, which was up more than 10% from the year-ago period.
The management team at the bank also said that it intends to reinstate HSBC’s quarterly dividend (which it paid pre-Covid) next year.
Meanwhile, the bank has also seen calls from its largest shareholder – Ping An Insurance Group Co of China – to break itself up into separate European/Global and Asian entities.
That has been a popular proposal among many shareholders in Hong Kong, who feel that the value of HSBC’s shares is weighed down by its ex-Asia operations – which are much less profitable.
Tencent Holdings – Down 48.7%
Most people will have heard of Tencent Holdings Ltd (SEHK: 700), the world’s largest gaming company and WeChat operator.
The company is the second-biggest stock component of the Hang Seng Index (with a 7.63% weighting).
Its WeChat social media phenomenon has morphed into an all-in-one “superapp” for Chinese residents over the past decade or so.
While the company’s share price enjoyed a strong run from 2008 up to 2020, in the past 18 months the Chinese technology sector has come under pressure from Chinese government scrutiny.
That has seen Tencent get caught in the crosshairs. As well as a government ban on new games, Tencent recorded its first-ever quarterly decline in revenue in its latest Q2 2022 earnings. It’s currently trading at 232.80 HKD, down 48.7% since the start of the year.
Read Also: Understanding Tencent (HKG: 0700) – The All-In-One Chinese Technology Stock
AIA Group – Down 16.5%
AIA Group Ltd (SEHK: 1299) is a pan-Asian life and health insurance giant. The company is the third-largest component of the Hang Seng Index (with a 7.55% weighting).
It traces its roots to operating in Shanghai as far back as 1919. In more recent years, though, it used to be owned by American insurance giant AIG.
However, AIG spun off AIA as a separately-listed entity in a Hong Kong IPO in October 2010.
So far this year, AIA’s share price has fallen mainly due to its business’s exposure to China and its Covid-Zero policy.
As Mainland China (along with Hong Kong) made up over 50% of AIA’s Value of New Business (VNB) in the first half of 2022 – a measure of growth for life insurers – the continued closure of the world’s second-largest economy has hurt AIA’s business.
However, given its diverse business geographically (it has operations in 18 Asian countries), AIA’s share price has managed to outperform the Hang Seng Index. Its share price is currently trading at 65.95 HKD, down about 16.5% since the start of the year.
Meituan – Down 36.6%
Meituan (SEHK: 3690) is an online platform for online dining and retail as well as other services like travel.
The company, which is a key competitor to Ele.me in the Chinese online food delivery space, makes up 7.38% of the Hang Seng Index.
The Beijing-headquartered company has been in a similar position to many other tech companies in China this year in that its share price has been adversely impacted by negative sentiment. Late in 2021, Meituan was fined RMB 3.44 billion (US$533 million at the time) by Chinese anti-competition authorities for monopolist practices.
However, its H1 2022 earnings saw solid revenue growth and an improvement in its operating loss. Meituan’s expansion into new, large markets, such as online groceries, has also created new potential revenue streams. Its share price is currently trading at 141.60 HKD, down about 36.6% since the start of the year.
Alibaba – Down 39.4%
Finally, we have Alibaba Group Holding Ltd (SEHK: 9988), which is the owner of e-commerce platforms Taobao, Tmall, and Lazada, among others.
It also has a sizeable cloud computing arm. The company has a 7.3% weighting in the Hang Seng Index.
Similar to Tencent and Meituan, Alibaba’s share price has continued to suffer in 2022 on account of the Chinese government’s crackdown on technology companies. It’s currently trading at 69.90 HKD, down about 39.4% for the year.
In terms of its business, like Tencent, Alibaba saw a severe growth slowdown as its second-quarter 2022 results saw the group’s revenue come in broadly flat year-on-year.
E-commerce competition from the likes of Pinduoduo and JD.com has also hurt Alibaba’s business. Meanwhile, its large cloud computing business has seen its rate of growth decelerated in the past few quarters.
Tech & Financials Companies
As investors can see, the top five components of the Hang Seng Index are dominated by companies in the financial and technology sectors.
It makes sense that financial companies have outperformed the broad Hang Seng Index – given rising interest rates and diversification – while the big technology component stocks have underperformed on account of their domestic-focused businesses.
The post HSBC, Tencent, AIA, Meituan, Alibaba: How The Top 5 Stocks Of The Hang Seng Index Have Performed In 2022? appeared first on DollarsAndSense.sg.
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