In today’s Asian equity markets, it often feels like everything revolves around artificial intelligence (AI). New listings and rapid innovation have captured investor attention, drawing capital towards high-growth sectors.
But during my recent visit to Hong Kong, a different story emerged, one that may be particularly relevant for income investors.
A market being overlooked
Many of Hong Kong’s traditional income sectors – particularly property developers and real estate investment trusts (REITs), telecom operators, and infrastructure‑style businesses – are currently out of favour. Investor focus has shifted firmly towards AI-related opportunities, leaving parts of the market underappreciated.
Yet, on the ground, the picture looks more encouraging.
Several companies continue to perform well, with dividends that are holding up – and in some cases coming in higher than expected. At the same time, there are early signs of renewed interest from mainland Chinese investors, particularly through Stock Connect (a scheme that makes it easier for mainland Chinese investors to buy Hong Kong-listed companies) potentially bringing more demand into the market.
There is also growing interest from domestic institutions, including insurers, in high-yield Hong Kong equities. With China’s high savings rate and policy support for equity investing, this could gradually become a positive driver for the market. More investors putting money into shares can help support share prices and make it easier for companies to continue paying dividends.
Property: unloved but not without appeal
Hong Kong property remains one of the clearest examples of this disconnect. Share prices are still relatively low compared to the value of the underlying assets, while many companies continue to pay attractive levels of income, even after a recent recovery in some names.
Link REIT is a good illustration. It is one of Hong Kong’s largest property investment companies, owning and managing shopping centres and retail spaces. The business has been a laggard, held back by strategic missteps and leadership uncertainty. However, management is now refocusing on its core strengths – running everyday shopping centres (such as malls for food, groceries and essential services) – while simplifying the business and looking to return capital to shareholders.
At current valuations (the relationship between share prices and the value of the underlying assets or earnings), expectations for the company are relatively low. This means there is potential for the outlook to improve if the business starts to perform more consistently.
Elsewhere, more cautious developers such as Sino Land – a Hong Kong property company known for owning and developing residential and commercial buildings – stand out for their strong financial position (low debt and healthy cash levels) and their focus on maintaining steady dividend payments, making them appealing for investors looking for reliable income.
Dividends still doing the heavy lifting
One of the more striking examples of resilient income came from Brilliance China – a Hong Kong-listed company whose main source of income is a joint venture with carmaker BMW in China.
Despite limited engagement with investors and little effort to promote the stock, the company has delivered substantial dividends, supported by strong cashflows from this partnership. A more formal dividend policy suggests that returning cash to shareholders will remain a key priority.
The broader takeaway is simple: strong income streams are still present in the market – they are just not the main focus for investors right now.
Stability still has a role
“Defensive” sectors (industries that tend to be more stable because people use their services regardless of the economic backdrop) also continue to play an important role. Companies like HKT – one of Hong Kong’s main telecom providers, offering mobile, broadband and digital services – may not grab headlines, but they offer dependable income (through dividends) and relatively steady earnings, helping to balance more volatile parts of the portfolio.
What does this mean for investors?
Hong Kong is currently a market where investor sentiment (how people feel about the market) and fundamentals (how companies are actually performing) are not fully aligned. In other words, some companies are continuing to generate solid cashflows and pay dividends, but this is not yet reflected in their share prices.
For income investors, this creates opportunity:
Attractive income from sectors that are currently being overlooked, meaning investors can access higher dividend yields than usual.
Valuations that already reflect a cautious outlook, so expectations are low and there may be room for improvement if conditions stabilize.
Early signs of returning demand from mainland Chinese investors, which could help support share prices and income over time.
In a market currently focused on high-growth stories, the quieter, income‑generating parts of Hong Kong may offer attractive opportunities for investors seeking reliable income, particularly if sentiment begins to improve.
AI
Artificial intelligence.
Capital
When referring to a portfolio, the capital reflects the net-asset value of a fund. More broadly, it can be used to refer to the financial value of an amount invested in a company or an investment portfolio.
Cash flow
The net balance of cash that moves in and out of a company. Positive cash flow shows more money is moving in than out, while negative cash flow means more money is moving out than into the company.
Dividend
A variable discretionary payment made by a company to its shareholders.
Equity
A security representing ownership, typically listed on a stock exchange. ‘Equities’ as an asset class means investments in shares, as opposed to, for instance, bond. To have ‘equity’ in a company means to hold shares in that company and therefore have part ownership.
Portfolio
A grouping of financial assets such as equities, bonds, commodities, properties, or cash. Also often called a ‘fund’.
Real estate investment trust (REITs)
An investment vehicle that invests in real estate through direct ownership of property assets, property shares, or mortgages. As they are listed on a stock exchange, REITs are usually highly-liquid and trade like shares. Real estate securities, including REITs, may be subject to additional risks including interest-rate, management, tax, economic, environmental, and concentration risks.
Share price
The price to purchase (or sell) one share in a company, not including fees or taxes. For investment trusts: The closing mid-market share price at month end.
Valuation metrics
Metrics used to gauge a company’s performance, financial health, and expectations for future earnings, e.g. P/E ratio and ROE.
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