Summary:
This article is a summarizes some personal observations that I have made regarding the current state of the US and Hong Kong Equity Markets. 2021 has been an eventful year for both US and Hong Kong equities.The S&P 500 has smashed multiple records in 2021, hitting record highs, one after another, culminating in the 52-Week High of 4545.85 on 2nd September 2021.
In contrast to the superb performance of the S&P 500, the Hang Seng Index peaked early this year, hitting its 52-Week High of 31183.36 on 18th February 2021 and has been on a downward trajectory since then.
Given the stark contrast in the performance of the two stock indices over the past 52 weeks, an inquisitive investor would want to pose the following questions:
- How does the current valuation of each index compare to historical data?
- Given the current valuation levels, what will be the Implied Return on Investment for the S&P 500 and the Hang Seng Index?
Introduction
So far this year the US and Hong Kong equity markets have travelled along diverging paths. The US market has moved steadily upwards, drawing strength from the country’s economic reopening and recovery from the Covid-19 lockdowns. Consequently, the S&P 500 has climbed a wall of worries, moving from its 52-Week Low of 3233.94 (30th October 2020) to the recent 52-Week High of 4545.85 achieved last month on 2nd September 2021. The S&P 500 closed at 4391.34 on 8th October 2021.
On the other side of the Pacific Ocean, the Hong Kong equity market’s performance has been disappointing, to say the least, for the better part of the year. Earlier this year, the Hang Seng Index (HSI) hit its 52-Week High of 31183.36 on 18th February 2021. Since then, the index has followed a declining path to reach a 52-Week Low of 23681.44 on 5th October 2021. The Hang Seng Index (HSI) closed at 4391.34 on 8th October 2021.
