bodyType

customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

hooksAmpRedirectArticle

articleSchemaContent

liveArticle

advertZone

sentiment

contentLock

topics

types

sections

paywallTypes

createdDate

publishedDate

urlAlias

moreOnThisArticles

sponsorType

commentCount

authorLocations

authors

corrections

displaySlideShow

multimediaEmbed

printHeadline

seriesContainer

articleSpeeches

socialHeadline

headline

images

flag

firstTopic

glossary

flattenTypeIds

image

relatedLinks

relatedNewsletters

__typename

sponsor

pdfFiles

seriesReverseOrder

series

disableOffPlatformContent

published

updatedDate

summary

subHeadline

body

keywords

readingTime

customTimezone

liveContents

Laura He

The rise of China’s “new-economy” stocks will help push Hong Kong’s benchmark Hang Seng Index to a historic high of 32,000 by the end of next year, according to Goldman Sachs.
An estimated US$50 billion of mainland capital flowing into Hong Kong equities will also provide support, said Kinger Lau, the investment bank’s chief China strategist, who sees the MSCI China index climbing to 100 in the next 12 months.
“This year’s rally has been fundamentally driven,” Lau said on Friday.
So far this year, the Hang Seng Index and MSCI China have soared 35 per cent and 55 per cent respectively to stand at 29,866.32 and 91 by Friday afternoon.
Lau sees them reaching 32,000 and 100 separately by the end of 2018.
Hong Kong shares nearing record high as strong company profits draw Chinese money
Corporate earnings growth among MSCI China component companies accelerated to 20 per cent in the first nine months of 2017, the best since 2010.
Lau said the growth rate will remain high, at 18 per cent, in 2018, with technology and “New China” sectors contributing the most.
By “New China”, Lau was referring to sectors including health care, e-commerce and entertainment.
Fundamentals aside, liquidity should also remain positive next year, Lau added.
Southbound net buying of Hong Kong-listed stocks has reached US$38 billion so far this year, one of the main driving forces behind the 35 per cent surge in the Hang Seng Index.
That figure could jump to US$50 billion in 2018, as mainland investors are still keen to diversify their asset portfolios and hedge against the risk of volatility in the yuan.
“It [the demand] will be a mid-to-long term trend,” Lau said.
As well as mainland cash, global mutual funds could increase investments in Hong Kong and Chinese equities, as their current allocations are “light”.
Even for “hot” names such as technology titans Tencent and Alibaba, global investors are still underweight.
“With the macro and earnings growth momentum likely staying healthy in 2018, and China still being priced at meaningful valuation discounts to its global alternatives, we see upside liquidity risk from global mutual funds in 2018.”
China’s domestic capital will flow to equities from property as well, with roughly 330 billion yuan of incremental capital estimated to be reallocated in 2018, according to the bank.
Among the top sectors, Goldman suggests “overweight” on Chinese banks, insurers, brokers, and health care companies, while putting “market weight” on IT, industrials, and consumer stocks.
Separately, HSBC is predicting 2018 will be another good year for Asian equities, supported by a weaker US dollar, stronger China growth, and an earnings upgrade cycle.
“Some of the best equity performers of 2017 were the Chinese internet names. Their high growth
is likely to continue in 2018, albeit maybe at a slightly lower level,” said Herald van der Linde, head of equity strategy in Asia-Pacific for HSBC, in a recent note.
“The interesting development in 2018 will be a raft of new Chinese internet companies that aim to list – ranging from fintech names to online video companies and online publishing platforms as well as Alipay, Alibaba’s payment platform.”
Besides Chinese internet stocks, the outlook for the consumer sector looks healthy in 2018, while property stocks could be muted, he added.
However, the HSBC analyst warned investors of risks when the US Federal Reserve continues unwinding its balance sheet in 2018, which may introduce more volatility into equities in Asia.


L&G Asset Management sees AI equity upside despite US$3 trillion debt concerns

Hong Kong stocks secure weekly gain ahead of key rate meetings

Hong Kong stocks edge higher as weak jobs data firms up rate-cut bets

Hong Kong stocks stumble after 2 days of gains as investors await policy signals

Hang Seng Index

China’s new-economy sector to push Hang Seng Index to 32,000 next year, says Goldman

Goldman Sachs and HSBC both predict solid Chinese corporate earnings growth in 2018

Goldman Sachs sees ‘New China’ sectors including health care contributing the most to earnings growth in the MSCI China index. Photo: Shutterstock

Southbound inflows push Hang Seng Index to 19-month high

The Hang Seng Index closed 0.8 per cent or 192 points higher at 24,502, its best level since mid-August 2015. Photo: David Wong

In this photo taken on November 20, 2015, a worker sorts coal on a conveyer belt, near a coal mine at Datong, in China's northern Shanxi province. A Chinese pledge to upgrade the nation's coal-fired power plants to cut pollution is aimed mainly at soothing domestic fears over dangerous smog, rather than tackling climate change emissions, analysts said on December 3. AFP PHOTO / GREG BAKER / AFP PHOTO / GREG BAKER

Hang Seng adds private firms to raise H-share index’s appeal as benchmark for China investors

Industry weightings in HSCEI. Source: Hang Seng Indexes Company.

Vincent Kwan Wing-shing, Director and General Manager, Hang Seng Indexes attends Hang Seng China Enterprises Index Enhancement Press Conference at Hang Seng Bank Headquarters in Central. 17AUG17 SCMP / Edward Wong

An electronic stock board showing the Hang Seng China Enterprises Index on Sept. 9, 2015. The index has since risen 8 per cent to surpass 10,000. Photo: SCMP

Hang Seng at fresh 2-year high; China’s startup index continues rising

China Resources Land led the rally among property stocks on optimism the Hong Kong monetary authority will following the Fed in keeping interest rates unchanged due to the city’s currency pegging to the greenback. The stock gained 4.1 per cent to HK$25.35, the top gainer among Hang Seng Index’s constituents. Photo: EPA

FILE PHOTO: Employees close a valve of a pipe at a PetroChina refinery in Lanzhou, Gansu province January 7, 2011. REUTERS/Stringer/File Photo CHINA OUT. NO COMMERCIAL OR EDITORIAL SALES IN CHINA

Business

Markets

Money

Markets & Investing

Companies

Banking & Finance

Stock Talk

China Business

Tech

Big Tech

Goldman Sachs and HSBC both predict solid Chinese corporate earnings growth in 2018


China stock market

Stocks

Goldman Sachs

China’s new-economy sector to push Hang Seng Index to 32,000 next year, says Goldman

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Goldman Sachs and HSBC both predict solid Chinese corporate earnings growth in 2018

Goldman Sachs and HSBC both predict solid Chinese corporate earnings growth in 2018