Hong Kong’s market and subsequent exchange traded fund (ETFs), like many other other Asian markets, are showing signs of strength. But why do some feel that Hong Kong is especially poised to be among the standouts?

Global specialist Nicholas Vardy notes that Hong Kong’s performance has been tied to the monetary policies of the United States, remarks Steven Halpern for BloggingStocks. The Hong Kong currency board keeps the H.K. dollar at a preset exchange rate to the U.S. dollar.

History has shown that when the Fed reduced real rates to zero (in 1992-1993 and 2003-2005), the Hong Kong stock market has doubled. Vardy says that Hong Kong is the safest and most liquid direct way to play China’s stimulus package and global economic recovery.

Hong Kong’s economy has strong fundamentals and is one of the “freest” markets in the world. It is also seen as one of the safest plays on news of government stimulus plans and an eventual global recovery. When the market has plummeted to low levels in the past, Hong Kong stocks have gone on to produced double or triple gains in a few years.

The Hong Kong stock market has crossed the 200-day moving average.

  • iShares MSCI Hong Kong Index (EWH): up 20.6% year-to-date


Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.