Famed economist Milton Friedman once described it as the world’s greatest experiment in laissez-faire capitalism with its low taxes and free trade agreements and the fact that it has let the market do its own thing without any government restriction. And what was once a sparsely populated area of farming and fishing villages, Hong Kong has become one of the most densely populated places in the world, a significant financial centre and commercial port.
Known for its resilient economy after managing to weather setbacks like the likes of the Asian financial crisis of 1997 and the 2008 global economic downturn, COVID-19 and its impact on the economy has been no different. The territory’s economic recovery remains stable thanks to the continuous development of goods exports and fixed investments, together with an improved private consumption expenditure, while analysts are expecting economic growth to approach 6.5% by the end of 2021.
On a more cautious tone, the 'one country, two system’ came under strain during 2020 as China tightened its grip on the country with the introduction of national security law that fundamentally changed politics in Hong Kong. This gave rise to heightened political tension that may undermine the democratic system. Meanwhile, hosting the fifth largest stock exchange and largest initial public market in the world since 2018, it has managed to attract interest from investors hailing from all corners of the world.
Below are some top Hong Kong companies that have shown resilience and growth during these challenging times.
China Mobile Ltd (941)
A so-called red chip company and a communications behemoth, China Mobile, provides telecommunications and other related services in all 31 provinces, autonomous regions and directly-administered municipalities throughout Mainland China and in the Hong Kong Special Administrative Region. With a current market cap of HKD949.04 billion, it is considered one of the largest red chip companies and one of the world’s largest mobile network operators by total number of subscribers.
In the first half of 2021, the company recorded operating revenue of RMB443.6 billion, an increase of 13.8% year-on-year, with RMB393.2 billion of this coming from the telecommunications service, which represents a year-on-year growth rate of 9.8%. In terms of profitability, China Mobile maintained its leading position among other top-tier global telecommunications operators, with EBITDA totalling RMB162.0 billion, up by 11.2% year-on-year.
As for its stock, China Mobile has received the green light to raise billions of dollars for its 5G ambitions by listing shares in Shanghai, just a few months after being kicked out of the New York Stock Exchange (NYSE), following the Trump administration’s barring of American investment in companies with ties to the Chinese military. To make matters worse, current U.S. President Joe Biden signed an executive order in June that expanded this ban.
Already one of the world’s leading 5G operators in both network scale and subscriber numbers, China Mobile has been growing its 5G take-up and traffic even further thanks to innovative digital services, which often combine 5G with AI (artificial intelligence) and smart technologies, such as AR (augmented reality) and VR (virtual reality). According to the company, it had 160 million 5G network customers at the end of September, up from the 127 million figure three months earlier. And so far, 5G has proven to be lucrative for the Chinese telco as it reported monthly ARPU (average revenue per unit) for mobile of CNY50.1 ($7.8) for the first nine months of the year, marking a 2.6% increase over the same period in 2020. In the meantime, handset data traffic was up by 39.1% in the first three quarters to 90.8 billion GB.
With its 5G growth prospects, its rosy financials and notable developments in other business areas like fixed broadband and enterprise, there’s no denying that China Mobile will maintain its telco crown.
Interested to invest? Click here to add China Mobile (941) to your portfolio.
CNOOC Ltd (883)
One of China’s largest producers of offshore crude oil and natural gas, CNOOC, short for China National Offshore Oil Corporation is a state-owned enterprise based in Beijing, considered a coveted member of the so-called Big Three Chinese oil companies, alongside CNPC Group, which specialises in onshore upstream exploration and production and Sinopec Limited, known for its refining and marketing. With a listing on the Hong Kong Stock Exchange since February 2001 and on the Toronto Stock Exchange following its acquisition of Canadian oil and gas company Nexen Inc, as recently as December 2021 the company was also listed on the New York Stock Exchange, however, its shares were suspended from trading back in March as part of a clampdown that began by the previous administration of ex-president Donald Trump.
CNOOC’s first-half profit more than tripled in 2021 from a low base last year, mainly thanks to rebounding oil prices and recovering energy demand after the COVID-19 pandemic. Net profit reached 33.33 billion yuan ($5.13 billion), up 221% from a year ago, surpassing its pre-pandemic profit in 2019 which stood at 25.48 billion yuan in 2019. Revenue in the first half of 2021 jumped 48% from a year earlier to 110.23 billion yuan, following a 52% rise in oil and gas sales. Meanwhile, thanks to rising commodity prices and other factors, CNOOC’s all-in production cost was $28.98 per barrel, up from $26.34 in 2020. As for its oil and gas production, this hit a fresh record high of 178.1 million barrels of oil equivalent (boe), up 7.9% year on year and boosted by several new projects in Bohai Bay and the South China Sea.
Making some notable moves towards expanding its international footprint, back in October of 2021, Petrobas Brasileiro (PBR) announced that CNOOC is interested in forking out $2.08 billion to purchase an additional 5% share in the massive Buzios pre-salt field in the Santos Basin located in Brazil. Its current Buzios stake is 3.667%, but having an even larger stake could serve CNOOC well when considering that Buzios’ FPSO (floating production storage and offloading facilities) capacity is massive. Indeed, the company’s interest in acquiring more of Buzios tends to match its recent trend of taking up minority stakes in large global projects, not only in Brazil, but also in Russia and the United Arab Emirates.
At the same time, it has started operations at Lingshui 17-2, a gas field that sits 1,500 metres below the sea surface in the South China Sea. With proven reserves of 100 billion cubic meters, the project has shored up confidence that China's energy majors, such as CNOOC itself has the technical and operational acumen to fulfil its gas ambitions.
Click here to buy Cnooc Ltd (833) via Moneybase Invest.
AIA Group Ltd (1299)
An American-founded Hong Kong multinational insurance and finance corporation, AIA Group is one of the largest publicly listed life insurance and securities group in the Asia-Pacific, with a presence in 18 markets across the continent. Offering a variety of services to its clients, ranging from insurance and financial services to writing life insurance for individual and businesses, accident and health insurance, as well as retirement planning, wealth management services, variable contracts, investments and securities, amongst others, AIA has become a key player in the global health insurance market, a market which, according to Forbes, is the world’s second-largest institutional investor after pension funds, holding $31 trillion assets under management.
AIA closed 2020 on a high note and with a profit despite a pandemic hit, so much so that in March of 2021 it announced a 5% growth in operating profit for 2020 at $5.9 billion, which was mainly attributed to the company’s large and growing in-force portfolio, together with recurring, high-quality sources of earnings. The company went on to post strong results for the first half of 2021, marking a 22% growth in the value of new businesses to $1,814 million. At the same time, it recorded a 5% increase in operating profit after tax (OPAT) to $3,182 million, while it increased its free surplus levels by $4.4 billion to $17.9 billion. As for the value of its new business, this rose 22% to $1.8 billion in the same period.
In contrast to its financials, the company’s stock has had a rough couple of months, dipping 9.7% over the past month alone. Yet its sound fundamentals and growth prospects, as well as the overall health of the industry it operates in, may make the stock worth looking at. In 2020, the total gross premiums of the Hong Kong insurance industry increased by 2.5% to $581.3 billion. And despite the fact that the battle with COVID-19 is far from over, the widespread vaccine deployment has been an important catalyst in rebuilding confidence among people and businesses, while fuelling economic recovery. As a result, insurance companies are expected to accelerate their growth in 2022 and those who are set to rethink their offerings, increase digitalisation and embrace new skills to offer personalised services are set to be winners.
AIA is already on the right path to setting itself apart from the competition. More recently, the insurance company made headlines when it became the first major Asian insurer to end its exposure to coal. Playing a key role in facilitating the transition to a low-carbon economy, AIA Group’s move comes at a crucial time when net-zero investing is gaining momentum among Asia’s financial institutions as companies are seizing investment opportunities in the green transition.
To add AIA Group (1299) to your portfolio, click here.
Galaxy Entertainment Group Ltd (27)
Originally a construction material business by the name of K. Wah Construction Materials, Galaxy Entertainment Group, often referred to as GEG, is a leading resorts, hospitality and gaming company situated in Macau. In fact, it became the only Hong Kong-listed company to hold an operating license in the autonomous region when it acquired a 97.9% stake in Galaxy Casino SA back in 2005.
Just like its counterparts across the globe, COVID-19 left its brunt on the company’s financials for most of 2020, as mainland China, Hong Kong and Macau continued to experience travel restrictions. Full 2020-year group net revenue came in at $12.9 billion, down by a whopping 75% year-on-year, while given the subdued revenue, its adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $1.0 billion for the year’s fourth quarter, however, this represented a 207% improvement compared to the adjusted EBITDA loss of $0.9 billion which was reported in Q3.
Despite the lacklustre 2020, the Group maintained that it’s forging ahead with its growth plan locally and its expansion plans internationally, which include Japan. In contrast to last year, so far 2021 has been lucrative for the company, with results for the three-month and six-month periods ended June 30, 2021 showing net revenue for H1 of HKD10.5 billion, an improvement of 71% year-on-year, while in H2, the Group’s net revenue was that of HKD 5.6 billion, a notable progress compared to the HKD1.2 billion in the second quarter of 2020. Its adjusted EBITDA also saw an improvement at HKD 1.1 billion, marking growth when compared to the HKD1.4 billion loss of the second quarter 2020.
Considered one of the world's largest gambling hubs, Macau is revising its multi-billion-dollar gaming industry as it aims to make changes to its gaming law. Some analysts fear that this could lead to tighter regulations which in turn could impact brands such as GEG. Others believe that once travel restrictions ease, demand is expected to explode, which will fuel a similar recovery to that noted in Las Vegas, which has been on a winning streak, irrespective of changes to the law.
To add Galaxy Entertainment Group (27) to your portfolio, click here.
How to invest in top Chain Restaurant stocks with Moneybase Invest
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- On the New Order page, input the number of shares you would like to purchase and hit the Place Buy Order. The stock has been added to your portfolio.
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