Chan Chi-wah names nine bear-market defensive sectors
On.cc · 1 SOURCESabout 4 hours ago4 MIN
Summary
Chan Chi-wah (陳志華), president of the Hong Kong Securities and Futures Professionals Association, said historical analysis of 11 past bear-market cycles suggests nine sectors have shown unusual resilience when markets fall. He argued that defensive strength depends on low demand elasticity, but warned that even traditional safe havens can lose their protection if valuations become too expensive
Key Points
- Chan said beverages, pharmaceuticals and food have held up because consumers usually keep buying low-cost daily necessities even during economic contraction
- He said telecommunications outperformed the broader market in all 11 bear markets, supported by recurring monthly fees, stable cash flow and attractive dividends
- Tobacco posted positive returns in six bear markets, while electricity shares were flat or higher in five, reflecting addiction-driven demand and regulated utility returns
- Oil shares outperformed average declines in five bear markets and rose in one, while gold miners surged 174% in the 1973-1974 inflationary bear market
- Chan urged investors to buy only when price-earnings ratios are below historical medians and dividend yields exceed four-year averages, while avoiding building materials, machinery, truck parts and small caps
Why It Matters
For Hong Kong investors facing possible market volatility, the article argues that sector selection alone is not enough and that valuation discipline is central to downside protection. It also suggests bear markets can create long-term entry opportunities, but only for investors who distinguish between different downturn types and avoid overpaying for defensive names