Part of the big disappointment for many is Beijing's lack in readiness to start letting Chinese retail investors buy shares in Hong Kong, making the price disparity between dual-listed companies only an arbitrage opportunity in principle right now.
"I think many still think it will happen, but not at the end of this year as expected. Most think next year now," says Winner Lee, a quantitative strategist for BNP Paribas in Hong Kong.
Lee adds that hedge funds are seeing this period as a "time to play the downside." She sees China-related shares, like China Mobile and Aluminum Corp of China (ACH), as the weakest bet, with Hong Kong property stocks as the strongest.
"A lot of my friends are already trying to find properties to invest in -- they prefer to buy property instead of stocks right now." Part of the reason is a potential further reduction in rates both in the U.S. and Hong Kong, coupled with a creeping level of uncertainty in the capital markets.Sun Hung Kai's Pang concurs, although he advises exercising caution "because it is still too early to say whether the U.S. is persisting in interest rate cuts." Pang expects the Hang Seng to trend between 28,000 and 30,000 next week, just shy of the 31,000 point target set by Standard & Poors for the index in 2008. He adds that Chinese insurers may also be a good bet for bargain hunters, although he is bearish on the rest of the big Chinese shares, and in particular PetroChina, which he says has been overbought. "In the insurance sector in China, which seems to have had a large correction already, prices and valuations seem to be close to fair value, so China Life and Ping An will be the first movers."