Slumping growth in the US may lead to losses for Li & Fung, which purchases clothing on behalf of companies such as Abercrombie & Fitch Co. The stock may help drag the Hang Seng Index lower along with Johnson Electric Holdings Ltd, a motor producer that gets a third of its sales from North America.
"These companies are quite sensitive as they rely quite heavily on the US market," said Linda Choi, who helps manage US$130 million, mainly in Hong Kong equities, at Asia Insurance Co.
War with Iraq may hurt consumer confidence and trim corporate spending. Airlines such as Singapore Air may face greater fuel costs if a war in the Middle East disrupts oil supplies. Hong Kong's Cathay Pacific Airways Ltd, and Korean Air Co may also suffer.
Investors may seek to buy shares of Woolworths Ltd, Australia's largest supermarket chain, and Westfield Trust, an owner of shopping centers throughout the country and New Zealand, as a haven in the event of a war.
"Investors will play defensively," said Albert Hung, who oversees US$470 million at Tower Asset Management Ltd in Sydney.
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