2 Top Hong Kong Stocks to Buy in 2020 and Beyond

Amid all Covid-19 pandemic this year, it’s been hard to find anything to be positive about in the investment world. However, some companies have managed to navigate the turbulent business environment.

Admittedly, China has taken a huge hit – most notably in the first quarter of this year as the world’s second-largest economy went into lockdown.

For many investors, it’s been easy to identify which stocks to avoid in China given the new normal. Likewise, Hong Kong’s market has been battered due to protests and Covid-19, and avoiding certain stocks there will be key for investors’ longer term returns.

Yet, there are some stocks in Hong Kong that I believe will continue to do well over the long term. However, I find it hard to identify many really compelling Hong Kong-based stocks to buy for the long term.

Yet, there are still gems that can give investors long-term appreciation. Here are two Hong Kong-headquartered stocks that I think investors can buy in 2020 and beyond.

1. AIA Group

AIA Group Ltd (SEHK: 1299) is a pan-Asian life and health insurance provider that has been operating in Asia for over 100 years.

The insurer has a presence in 18 Asia-Pacific markets and is a pure-play Asian insurance stock for those of us wanting exposure to the region’s rising incomes and expanding middle class.

AIA posted operating profit after tax of US$5.74 billion in 2019, up 9% year-on-year. Meanwhile, its operating return on equity (ROE) was a solid 14.4% for the same period.

The company is also a reliable dividend payer and increased its total dividend per share (DPS) in 2019 by 11% year-on-year to HK$1.266.

Although the insurer will be hard-hit by the closure of Hong Kong’s borders to tourists during the Covid-19 pandemic, its burgeoning China business should offset this over the long term.

The fact that AIA also recently appointed former Ping An Insurance Group Co of China Ltd (SEHK: 2318) co-CEO and Chief Insurance Business Officer Lee Yuan Siong as its new CEO – formally having started his position on 1 June – is a positive in my view.

Ping An’s reputation for leveraging technology and Mr. Lee’s experience of building out Ping An’s China business will be invaluable as AIA starts to ramp up its expansion in the China market.

2. Techtronic Industries

The second Hong Kong stock for investors is none other than power tools manufacturer Techtronic Industries Co Ltd (SEHK: 669).

The company has been a big supplier of its branded power tools to the likes of big-box retailers such as US-based giant Home Depot (NYSE: HD).

Even amid the trade war between the US and China, the company managed to post some astounding numbers. In 2019, Techtronic saw a 9.2% year-on-year increase in sales to US$7.66 billion while its EBIT also improved – notching up a 10.9% year-on-year gain to US$673 million.

Meanwhile, the company posted a solid bump in its final dividend, which saw it hiked 16% year-on-year. As long as people globally are working on their homes and making improvements (which many likely were during the Covid-19 lockdown) then Techtronic will likely continue to do well.

Foolish bottom line

These two companies will likely continue to be profitable and market leaders in a post-Covid-19 world.

For longer-term investors, it’s likely an opportune time to pick up shares in both AIA and Techtronic as long as they have a three- to five-year investing time horizon.