Friday, July 10, 2020
Martin Hennecke

HSI forecast to test 28,000 by end of year
<p>Citi and HSBC Private Banking both expect that the Hang Seng Index will reach 28,000 points by the end of this year or in the next 12 months.</p><p>Setting a target of 28,226 points, Citi analysts pointed out that combined with earnings per share, electricity demand in the mainland and broad money supply growth forecast, the benchmark index will have room to rise over the next 12 months.</p><p>The institution believes that the current valuation of the HSI is not expensive, with an expected price-earnings ratio close to the 10-year average of about 11.5 times.</p><p>Citi expects a rebound in corporate profits next year and is optimistic about the performance of crisis defensive stocks, including new economy shares, Internet shares and the healthcare sector.</p><p>Meanwhile, HSBC Private Banking said that funds have flowed into Hong Kong stocks in recent months.</p><p>The bank said it believed that the deterioration of Sino-US relations has promoted the return of Chinese stocks to Hong Kong for a second listing.</p><p>The HSI is expected to challenge 28,080 points by the end of the year, the bank said.</p><p>HSBC Private Banking also expects that 11 large Chinese stocks will be listed in Hong Kong in the next three years, which may significantly change the composition of the HSI. The proportion of technology stocks will increase from the current 13 percent to 21 percent, and the proportion of financial stocks will fall from 48 percent to 36 percent.</p><p>It also expects the Hong Kong economy will shrink 5 percent year-on-year this year due to the plunge in trade, consumption and business activities this year, and expects growth of 4.3 percent next year.</p><p>Fan Cheuk-wan, chief market strategist Asia at HSBC Private Banking, pointed out that Hong Kong&#39;s pandemic control has achieved good results and the global travel restrictions are expected to be gradually lifted, which can help drive retail sector and is expected to support the return to growth next year.</p><p>Meanwhile, DBS expects the Hong Kong dollar will trade at a small premium to the US dollar while remaining close to the strong side of the currency peg thanks to a relatively high interest rate and a busy initial public offering pipeline in the city, said Andrew Ng Wai-hung, group executive and head of treasury and markets.</p><p>But he added that doesn&#39;t expect the aggregate balance will rise as much as during the 2008 financial crisis.</p><p>Ng believes the currency peg will not change for a decade and does not see significant capital outflow from the city.</p><p>He projects the HSI will trade within a range of 23,000 to 27,000 points this year.</p><p>Hong Kong stocks fell yesterday, dropping 248.71 points to 24301.25 points, as sharp spikes in new Covid-19 infections around the world raised concerns about a recovery in the global economy.</p>

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