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When global markets are fearful of the coronavirus, cash-rich Hong Kong investors can afford to be bold
- With both plummeting equity prices and US dollar strength, there is an added incentive for Hong Kong investors to act, given that the currency peg affords stability
- With 2047 not that far away, now is the time to plan a longer-term portfolio diversification strategy
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“Be fearful when others are greedy and greedy when others are fearful,” said Warren Buffett, CEO of Berkshire Hathaway. This global coronavirus crisis will pass. With that in mind, perhaps cash-rich Hong Kong investors might want to act boldly to make overseas equity investments, amid dramatic sell-offs induced by the coronavirus in markets around the world.
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After all, 2047 is not that far away, nor is the expiry of the provision in the Basic Law that Hong Kong’s “capitalist system and way of life shall remain unchanged for 50 years”. Hong Kong investors with access to cash might decide 2020 is an opportune time for acquiring overseas assets as part of a longer-term portfolio diversification strategy.
Of course, the argument that investors should be greedy when others are fearful can be applied generally, but when that fearfulness is evidenced both by plummeting equity prices and US dollar strength, there is an added incentive for Hong Kong investors to act. Hong Kong’s currency peg affords stability.
Amid broad US dollar strength on the foreign exchanges, the Hong Kong dollar remains stable versus the greenback while other currencies slide versus the US dollar. By the same token, the Hong Kong dollar also appreciates against the currencies that are weakening the most versus the US dollar. That enhances the buying power of the Hong Kong dollar in these economies.
In short, Hong Kong investors moving into these overseas markets get more bang for their Hong Kong buck.
Back in 2015, on a visit to Britain, Chinese President Xi Jinping was photographed enjoying a pint of Greene King India pale ale with then British prime minister David Cameron. This publicity was priceless for Greene King. The profile of the publicly listed British brewer skyrocketed in China.
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