4 Leading Stocks of the Hang Seng Index in 2020

Due to the coronavirus outbreak and economic contractions around the world, the Hang Seng Index in Hong Kong is down 6.5% year-to-date (as of early July).

Although the macro headwinds are strong, several components of the 50-stock index have outperformed. Here are four that are actually in “bull market” mode (up over 20%) so far in 2020 and why their shares are flying high.

1. Tencent

Tencent Holdings Ltd (SEHK: 700) has outperformed in 2020. Shares have increased almost 40% year-to-date as investors cheer the technology conglomerate’s momentum in fintech, social, and even gaming.

Due to growth in those sectors, Tencent sales rose 26% year-on-year and adjusted profit attributable to equity holders increased 29% year-on-year for the first quarter of 2020.

For the future, many investors expect more growth as Tencent’s huge planned investments in
“new infrastructure” could help its cloud division do well and lead to new or refreshed products and services.

2. HKEX

Due to the rising trade tensions between China and the US, many US-listed Chinese companies are considering listing in Hong Kong.

That’s good news for Hong Kong Exchanges and Clearing Limited (SEHK: 388), otherwise known as HKEX, which has an effective monopoly in Hong Kong in terms of the local stock exchange.

HKEX would benefit if more companies listed via listing fees and potentially more fees for the exchange.

Its stock price is also up due to strong core growth. For the first quarter, core revenue increased 19% year-on-year and core business basic earnings per share (EPS) rose 33% year-on-year.

Like Tencent, shares of HKEX have surged by almost 40% year-to-date.

3. Sino Biopharmaceutical

Sino Biopharmaceutical Limited (SEHK: 1177) has rallied around 30% in 2020 as investors expect a lot of growth in the company’s future.

The growth expectations are understandable. Sino Biopharmaceutical benefits from two secular trends, increasing R&D productivity in China and rising demand for pharmaceuticals in the country as China becomes wealthier.

If China can compete with the UK and the US in making a potential Covid-19 vaccine, the country will likely be able to compete at making potential solutions for big healthcare ailments in the future.

Although Sino Biopharmaceutical isn’t in the potential Covid-19 vaccine market, it could be competitive in developing potential solutions for many other big markets such as hepatitis and oncology.

4. Techtronic Industries

Techtronic Industries Co Ltd (SEHK:669) has risen 26% year-to-date as investors remain bullish on the cordless power tools maker’s branding and R&D prowess.

The increasing usage of cordless power tools in housing is a secular trend and Techtronic Industries management has executed very well over the past ten years.

That Techtronic Industries doesn’t do much business in Asia is itself an opportunity. Management has wisely used M&A before. Could they do so again in the future?

If well-executed, M&A or organic expansion in Asia could help the company for the next ten years. Right now, though, this is a hypothetical.

Foolish conclusion

Hang Seng component stocks Tencent, HKEX, Sino Biopharmaceutical, and Techtronic Industries have each rallied over 20% year-to-date as individual tailwinds drive their shares higher.

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