Citi sounds a discordant note as it expects Hang Seng Index to drop to 29,500 by 2018 year end
A shares are expected to outperform Hong Kong stocks, helped by MSCI’s inclusion of mainland listed stocks in its key index
While most market watchers expect Hong Kong stocks to have another stellar year, Citibank anticipates the benchmark Hang Seng Index to fall to 29,500 by the year end, down 3 per cent from the current level, citing tightening global monetary rates and unpredictable geopolitical risks as the biggest threats.
However, the bank expect A shares to outperform Hong Kong stocks and international investors to boost holdings of China’s domestic stocks, helped by MSCI’s addition of A shares to its key emerging market index in June.
Hong Kong topped global major stock markets in 2017, as the HSI soared 36 per cent on corporate profit and abundant fund inflows from mainland China. Brokerage firms widely expect the index to rise further in 2018, with the most bullish forecast by Morgan Stanley at 37,600.
On Tuesday, the first trading day of the year, the HSI advanced 1.9 per cent to 30,476.61 in afternoon trading.
Nonetheless, Citi’s analysts are less optimistic. They expect the HSI to post a slightly negative return for 2018 and reach 29,500 by the end of the year.