BUSINESS REVIEW, PROSPECTS AND FUTURE PLAN
The year 2023 was quite a volatile year for investing in the listed securities both Hong Kong, PRC and the US. In the first half of 2023, both the Hong Kong stock market and the PRC stock market experienced a continuation of vulnerabilities.
The US Federal Reserve announced the July 2023 interest rate decision, raising rates by 25 basis points. The federal funds rate has been increased to 5.25%-5.50%, the highest in 22 years. The Hong Kong Monetary Authority stated its intention to follow suit and raise rates by 25 basis points, bringing the interest rate to 5.75%. This move indicated the end of near-zero interest rate regime and it is expected that with US normalising its interest rate cycle in coming future, US currency will be strengthened, triggering a capital outflow from Hong Kong stock market. It also affect the Hong Kong stock market and even the overall economy.
The Hong Kong government announced that based on preliminary estimates, the domestic gross domestic product (GDP) in the second quarter of the year 2023 increased by 1.5% compared to the same period last year, which was lower than the market’s expectation of 3.5%. However, compared to the first quarter’s rapid recovery of 5.4%, the economy contracted by 1.3% in the second quarter. The main reasons for this economic downturn are likely attributed to high interest rates and the persistent uncertainty in the external environment.
As the US Federal Reserve raised interest rates further in the first half of the year 2023, Hong Kong’s interest rates also gradually increased, dragging down the total fixed capital formation, which reflects investment. After recording yearly growth in the first quarter, it declined by 1% in the second quarter. The global economy slowed down due to elevated interest rates, which continued to have a negative impact on Hong Kong’s external trade performance. The Group expects the stock market and economy of the PRC and Hong Kong will continue to struggle between continuation of uncertainty in 2022 after the COVID-19 outbreak. The PRC is the top principal trading partner of Hong Kong, so its economy will definitely affect the Hong Kong’s economy.
Looking ahead to second half of 2023, the Company will stay in focus to invest in trading securities, private equity funds and private enterprises with potential prospect. Our approach will keep timely and appropriate investment strategies in response to the volatile market, in order to enhance our investment portfolio and achieve net asset appreciation. The Board will pay close attention to the macro trends and keep seeking opportunities to invest in the PRC, Hong Kong and overseas. The Company will continue to implement its risk management policy with an aim to achieve stable returns on investments for our shareholders.