The Hong Kong Protests Will Give Way to Opportunity

I never thought I’d be happy to leave Hong Kong so soon.

Flying into Chek Lap Kok International Airport last week, I was relieved that I was only there for a short layover before my connecting flight to Manila.

The airport had been swamped with hundreds of black-clad protesters the weekend before. More than 100 flights were canceled. So I was more than a little anxious.

I lucked out, though.

Our plane arrived a full hour early. There wasn’t a protester in sight at the main terminal. And all flights leaving later in the day appeared to be on schedule.

This weekend, travelers to Hong Kong weren’t so lucky…

A sea of protesters staged a sit-in at the arrival section. This is where I would normally order some roasted duck and pork dumplings at the Crystal Jade restaurant.

The sit-in started last Thursday. And the number of protesters swelled even more on Monday, forcing the Hong Kong Airport Authority to cancel all departures starting late afternoon. It’s an unprecedented level of disruption for an airport that typically handles more than 1,000 flights a day.

These protests are starting to get some serious airtime in Western news outlets. Many countries, including Canada and Australia, have already issued travel warnings to the city.

From the outside, it certainly looks bad. But growing up in Asia’s politically charged economies, I’ve seen much worse.

While these protests are unprecedented, Hong Kong is acquainted with political turmoil. And the results of these scuffles might surprise you…

Similar (though smaller) anti-government protests swept Hong Kong in late 2014. As a result, the region faced a severe drop in tourism – particularly from the mainland – for most of 2015.

Chinese mainlanders account for 80% of Hong Kong tourist arrivals today. So as you might imagine, that decline in 2015 viciously slammed the city’s retail industry. Retail sales fell nearly 4% that year. It was a disaster for an economy that prided itself in having one of the most vibrant retail markets in the world.

It took a full year before Hong Kong’s tourism industry and retail market recovered. But by the time the dust settled at the end of 2015, the crisis had opened up one of the best buying opportunities I’ve seen…

For instance, shares of the world’s leading gold jewelry retailer, Chow Tai Fook, went on to double in value over the next 18 months.

Over the same period, leading shopping mall operator New World Development saw its shares climb more than 60%. And a leading real estate investment trust, Champion REIT, enjoyed an 80% gain on its shares.

There’s no telling yet where the current political situation in Hong Kong will end up. It could get worse before it gets better… Or it could suddenly dissipate if the current administration is able to appease the protesters.

For now, it looks like tensions will keep rising. Protests have shut down the airport twice already, screwing up travel for tens of thousands of tourists and denting Hong Kong’s once-pristine image in the international community.

But no matter what happens in the short term, I see a similar bargain-hunting opportunity opening up in Hong Kong’s best and brightest companies.

Despite the turmoil, Hong Kong will still continue to be one of the world’s great financial centers. It’s still the main conduit between China and the rest of the world. And it will remain the destination of choice for tens of millions of mainland shoppers… and tens of millions of Asian consumers.

The protests are scary and disruptive right now. But last time around, they created a major opportunity. And I expect that to be the case again this time.

It’s best to be patient now as protests continue. Things will settle down. And when they do, you’ll want to be in this market in the years to come.

Good investing,

Brian Tycangco

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Source: Daily Wealth