In the month of October, we see the Hong Kong stock market register sharp rises and falls.

At the beginning of the month, the Hang Seng Index (HSI) opened high with a breakaway gap but suddenly plummeted by 600 points right after, resulting in a 1300-points difference between the high and the low of the HSI.

But investors must be careful that the market could be led by false news.

For example, the rumours of Hong Kong Exchanges and Clearing Limited (388.HK) suggesting to the Hong Kong government to lower the taxes on stock transactions.

Another example is the rumours of CK Asset Holdings Limited (1113.HK) selling its interest in The Center.

After the major whipsaw on 19 October, many lost their confidence and did not dare to re-enter the market in the short term, thus the lack of momentum for rebound.

Upward speculation possible for China Literature Limited, backed by Tencent

China Literature Limited (772.HK), which is in the midst of raising capital by floating shares, should be able to see more upward speculation.

Ever since its spinoff from Tencent Holdings Limited (700.HK), it has naturally been a hot stock, having Tencent as its backing.

I believe that even institutional investors were not allocated much of China Literature shares – they could only buy the shares in the market, and thus, create opportunities for short-term speculation.

The situation is similar to that of ZhongAn Online P & C Insurance Co Limited (6060.HK), which was recently listed too.

The Shanghai Composite Index (SHCOMP) is approaching 3,400 points while the Dow Jones Index has soared past 23,000 points.

The Nikkei Index had also surged after Shinzo Abe called for an early general election. Hong Kong stocks, on the other hand, showed poorer performance, relatively speaking.

The influence of the whipsaw on 19 October still remains.

However, I, on the other hand, have an optimistic market outlook, and see the whipsaw as something positive, as it scared off unconfident short-term speculators, while only the stronger players remain.

But of course, if you still don’t feel confident (despite what I have said), you can consider increasing your holdings of dividend stocks, public utility stocks, and REITs.

That is especially so after we’ve heard the news of Link REIT (823.HK) selling its assets.

Link REIT’s share price reached historical high a few days ago.

Currently, it is both a growth play and a defensive play, making it suitable for both short-term speculation and long-term holding.

Good prospects for environmental stocks

With the United States’ withdrawal from the Paris Agreement on climate change, China has the chance to leap to the world leader position for global environmental protection.

Becoming a world leader is part of the Chinese Dream.

Therefore, environmental stocks should have good prospects, though the only problem is that they had already been through a round of speculation some years ago.

To date, some investors remain “tied up” in the market.

Every time when share prices get driven up by speculation, there will be some tied up stocks that will suppress the rising trend. Investors must very patiently wait for these stocks to be cleared.

Among various green technologies, wind energy is more cost-efficient, and nuclear power should see accelerated growth after China’s 19th National Congress.

We may even see installations of solar panels everywhere.

Basically, there are two types of environmentally-friendly businesses that investors can look at:

  1. Environmentally-friendly electricity generators, and
  2. Environmentally-friendly power plants.

Dr Chan Yan Chong is a renowned investment expert with decades of experience in investing. He’s guided retail investors through the various financial crises and stock market corrections and crashes. Dr Chan is speaking at our upcoming Shares Investment Conference 2H2017《股林大会》(Chinese event) on 4 November 2016 along with Buck Tan Mu Kun, Goh Mou Lih and Liu Jin Shu, who are all regular 958fm guests. Click on the button below to learn more.

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This article was translated from Chinese to English by Chen Xushuang. Click here to read the original article.