Hong Kong Stock Market Valuations and Expected Future Returns

Updated at Fri, 10 Jul 2020 20:30:06 -0500
Country: Hong Kong (updated daily) check out Global Overview for detailed methodology.

Ratio of total market cap over GDP: Maximum - 2363.31%; Minimum - 571.84%; current - 998.01%
Expected future annual return: 10.6%

ETF Used for dividend yield: EWH (Yield=3.26%)
Market Index used: Hang Seng Index
Current Annual GDP: $377 billion US dollars or 2,921 in billions of national currency (GDP in Local Current Prices Annual Growth=4.76%)
Data since year 1990

Hong Kong Historical GDP Growth

Historical GDP of Hong Kong in billions of national currency. The GDP in local current prices has grown at the annual rate of 4.76% over the past 8 years. Please note this growth rate includes the effect of price inflation and it is NOT the real GDP growth rate. Current Annual GDP: $377 billion US dollars or 2,921 in billions of national currency.

Hong Kong GDP (Billion, National Currency)

Historical Stock Market Cap

Historical total market of Hong Kong in billions of national currency. This value is normalized using the data published by WorldBank. Hang Seng Index is used for the normalization. Use Hang Seng Index as index, data goes back to 1987. Annual GDP data from IMF, back to 1980, in billions Hong Kong Dollar.

Hong Kong Total Market Cap (Billion, National Currency)

Historical Ratio of Total Market Cap over GDP (%)

The current ratio of total market cap over GDP for Hong Kong is 998.01%. The historical high was 2363.31%; the historical low was 571.84%. If we assume that the ratio will reverse to the recent 20 years mean of 1221% over the next 8 years, the contribution to expected annual return is 2.55%. This is the detailed historical chart of the ratio.

Hong Kong Ratio of Total Market Cap over GDP (%)

Predicted and Actual Returns

From the equation presented on the U.S. market valuation page,

Investment Return (%) = Dividend Yield (%) + Business Growth (%) + (Re/Rb)(1/T)-1

We can compute the predicted and actual returns of the Hong Kong stock market over a given time period, T. In the calculation, we set T to equal eight years, the approximate length of a full economic cycle. The calculated results are presented in the chart below. The green line indicates the expected, or predicted return if the market ratio trends near the recent 20 years average ratio of 1221% over the next eight years.

The blue line indicates the actual, annualized return of the Hong Kong stock market over eight years. We use “Hang Seng Index” to do the actual return calculation. We can see the calculations largely predicted the trend in the stock market as the blue line is closely parallel to the green line.

Predicted and Actual Returns of Hong Kong


The stock market of Hong Kong is expected to return 10.6% a year for the coming years. This is from the contribution of economic growth in local current prices: 4.76%, Dividend Yield: 3.26% and valuation reverse to the mean 2.55%.

This is the projected return of the stock market in Hong Kong relative to other countries. Click on each bar in the chart to go to other countries:

You can go here to see what international stocks Gurus are buying.

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