Standard Chartered Bank

Time to buy, StanChart tells local bargain-hunters

PUBLISHED : Friday, 12 April, 2013, 12:00am
UPDATED : Friday, 12 April, 2013, 5:43am

The time is ripe for mid-term investors to find some bargains on the local stock market, now that a significant pullback since the beginning of this year has made shares fairly cheap, Standard Chartered Bank says.

Investors should not miss the chance to buy during the dip, as the Hang Seng will enjoy a strong rebound in the second half and is likely to climb as high as 28,000 points by the end of the year, said Will Leung Chun-fai, head of investment strategy at the bank's wealth management unit.

The Hang Seng Index was the worst performing developed-world stock market so far this year, as of yesterday's close. The local benchmark gained 0.30 per cent to finish at 22,101.27 yesterday, but has slipped 2.45 per cent since the beginning of 2013.

"The recent headwinds, including bird flu and the tension on the Korean Peninsula, will send the index even lower in the short term," Leung said. "But a level below 23,000 already makes many stocks cheap, and it is worth holding [those stocks] for the mid-term."

Mainland property shares, which are trading at around a 30 per cent to 40 per cent discount to net asset value, offer good buying opportunities, as no more curbs will be rolled out by Beijing and demand is picking up fast, according to Leung.

He said there are some good opportunities in cyclical plays such as raw materials and infrastructure companies.

Investors stopped adding to their positions and hot money stopped flowing into Hong Kong after earnings at Chinese firms in March failed to deliver any excitement, especially outside the finance sector. Policy meetings in Beijing last month also brought fewer surprises than expected.

Leung said the situation could change, as the expansion of credit on the mainland could help the economy avoid another slowdown. China's new yuan loans rose to a two year-high in March.

Leung said gold was another attractive investment as inflation risks return amid the Bank of Japan's ambitious monetary easing programme, which may trigger similar moves by other central banks. Gold could rise to US$1,700 per ounce in the second quarter, he said.

Leung also said the appreciation of the yuan offered a steady rate of return. The mainland's currency could gain 2.1 per cent to reach 6.1 yuan to the US dollar by the end of the year, he said.