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Monday, July 7, 2014, 17:32

HSBC cuts HK equities to underweight from neutral

By Emma Dai/ & Reuters

 HSBC cuts HK equities to underweight from neutral
A trader works on the floor of the Hong Kong Stock Exchange on the day of the trading debut of the People's Insurance Company (Group) of China Ltd (PICC) in Hong Kong on December 7, 2012. (Photo / AFP)

HONG KONG - HSBC cut its rating for Hong Kong equities to underweight from neutral on Monday, saying a campaign for greater democracy in the Asian financial centre could sour relations with the Chinese mainland and hurt the city's economy.

Occupy Central with Love and Peace, the organisers of a recent referendum on electoral reforms, have threatened to lock down the Central area of Hong Kong, home to some of Asia's biggest companies and banks, as part of its campaign to demand greater democracy in elections for the city's leader in 2017.

Hundreds of thousands of pro-democracy protesters marched in Hong Kong on July 1, many calling for the city's leader to be sacked.

On the other hand, Credit Suisse feels that Hong Kong's financial sector is less concerned over the short term impact of street politics, whereas more are watching the long term influence of “Occupy Central”.

“The recent political volatility has not caused massive fluctuation in Hong Kong market,” said Fan Cheuk-wan, Asia Pacific chief investment officer of Credit Suisse AG HK Branch. “By far the protests have been relatively peaceful.”

“To deal with the campaign’s impact on local market, the authorities have arranged maneuvers with various institutions. As for being prepared, we expect little impact on the stability of local financial system, if the blocking plan is really to be carried out,” she said.

However, Fan added that more people in the financial sector were keeping an eye on how how things evolved.

"Things are still evolving. It's too early to jump to a conclusion," she told China Daily.

Separately, Fan estimated rebound for the Hong Kong equity market given it has lagged behind performance of global markets so far this year. "We expect the HSI to reach 26000 by end of this month, whereas the HSCEI could attend 11500 by December," she said.

"The rebound would be particularly strong in July and August given the support of improving China economy data in the second half. Meanwhile, global capital targeting the A share market would begin relocation before the kick off of the Hong Kong-Shanghai exchange link, which is scheduled for October."

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