Unfazed by the city’s biggest political unrest since the 1960s, investors in exchange-traded funds tracking Hong Kong-listed stocks added more money even as the stock market posted its largest drop in seven months.
Since pro-democracy protests escalated on Sept. 28, traders have put more than $200 million into the six largest ETFs focused on Hong Kong and mainland Chinese companies listed in the city. Short sellers cut bets on price declines by an average 16 percent as the Hang Seng Index fell 2.6 percent last week, the most since March.
While the ETF inflows comprise a small portion of trading on the Hong Kong exchange, they signal that investors who make market-wide calls are confident stocks will rebound after valuations fell to a 26 percent discount versus their decade average. Just 13 percent of companies in the Hang Seng gauge get a majority of their sales from Hong Kong, where protests disrupted one of the busiest shopping seasons of the year. Firms focused on China make up more than half the measure.
Hong Kong shares pared some of their losses on the final trading day of last week after Chinese policy makers eased property curbs and the selloff lured bargain hunters. The Hang Seng added 0.6 percent on Oct. 3 and the Hang Seng China Enterprises Index (HSCEI) of mainland firms with Hong Kong listings rose 0.4 percent, paring its drop to 9.3 percent from this year’s high on Sept. 8.