Hong Kong stocks are expected to continue heading north and hit new highs after a correction in the fourth quarter of this year, say market experts.
The Hang Seng Index (HSI) had surged to a two-year high in recent months on the back of strong performances in overseas markets but, according to Will Leung, head of investment strategy at Standard Chartered Hong Kong, it would not be easy for the city’s benchmark gauge to break through the 30,000-point barrier this year due to headwinds, including efforts by the US to shrink its balance sheet.
Leung said on Tuesday the performance of the local stock market will also depend on policy directions to be mapped out at this month’s 19th National Congress of the Communist Party of China (CPC), as well as how corporate earnings will play out in the third quarter.
He said the 19th CPC congress, due to start on Oct 18, might stimulate the stock market, especially Chinese mainland stocks listed in Hong Kong, as further financial reform and debt restructuring of State-owned enterprises are expected to be decided at the conference.
As for H shares, Leung said he would go for the technology, insurance, auto, consumption and environmental protection and energy saving sectors.
The HSI put up another strong show on Tuesday, surging 2.25 percent to close at 28,173.21, led by mainland banking and insurance stocks. The Hang Seng China Enterprises Index, or the H-share Index, rose 3.62 percent to close at 11,305.
According to the latest Standard Chartered Global Market Outlook report, equities remain the bank’s preferred asset class as strong global growth and corporate earnings provide support despite elevated valuations in the fourth quarter.
The report says European (ex-UK) and Asian (ex-Japan) stocks, especially Chinese mainland and South Korean shares within the region, are expected to outperform with positive returns to deliver, compared with other asset classes.
Leung also predicts that the US dollar will rebound in the next three months and expects the yuan to remain flat, with the exchange rate standing at between 6.5 and 6.6 to the greenback by the end of the year.