Biggs on Finance, Economics, and the Stock Market: Barton's Market Chronicles from the Morgan Stanley Years

Section 3A: China and Hong Kong

Buy Hong Kong

November 1, 1983

Even from the middle of the harbor you could hear the throbbing roar of the city like some great economic dynamo, and the Chinese broker was lithe, articulate, but seemed a little dazed. “My family came to Hong Kong 20 years ago and we've made it big, but now I fear it's the old Beirut or late Shanghai. Our stock market is rice cheap, but maybe it's our last chance to get out with something,” he said wistfully, gazing at his magnificently appointed powerboat with its crew of three. “I wonder if this boat could make it to Canada?”

Instead, I suspect it's the time to buy the Hong Kong market. According to Capital International, that market through September 30 was the poorest performer in the world this year with a decline of 31.5 percent and is down 74 percent from its all-time high of a couple of years ago. Many of the blue-chip companies are selling at five or six times next year's earnings with yields of 7 percent. The entire market sells at a 33 percent discount to stated book value—by contrast, the S&P 500 has sold at about book value at the great bottoms of the last 20 years.

Hong Kong, along with Singapore, is the classic entrepôt, and it has risen time and time again like the phoenix from the ashes, most recently after the Chinese-instigated riots of 1967 and the recession of the early seventies. The stock market ...