Only way is up for HSI, say analysts
Hot money and relative cheapness of city's market is good news as index is tipped to climb to 25,000 points in the first quarter next year
Toh Han Shih and Ray Chan
Analysts predict the Hang Seng Index will rise further in the next few months, after it hit a 16-month high.
The benchmark rose 128.64 points to 22,623.37 yesterday, up 22.7 per cent year to date.
An influx of hot money, mostly from the United States and some from Europe, has recently been driving up the index, said Francis Kwok Sze-chi, executive director of Bright Smart Securities and Commodities.
"The market has too much hot money now," Kwok said, adding that the index will rise to 23,000 points at the end of this year and 25,000 at the end of March.
The benchmark has further room to rise, Kwok said, because its price-earnings ratio of 10.6 times is relatively cheap.
"The market can't go down," he said. "There is no bad news."
The flow of liquidity from the US after it issued a third round of quantitative easing will drive the Hang Seng upwards until early next year, said Kenny Tang Sing-hing, the general manager at AMTD Financial Planning.
Values on Hong Kong's stock market are cheap compared with those of US and Europe, which is why funds from those regions have flowed to Hong Kong, Tang said.
Market players have also shifted funds from the bond markets to the city because of fears of a correction in the sector, he said.
The flood of overseas funds into Hong Kong has prompted the Hong Kong Monetary Authority (HKMA) to intervene continually to maintain the Hong Kong dollar's peg to the US dollar, Tang said.
"When funds flow in from overseas, they buy Hong Kong dollars, [pushing] up the Hong Kong dollar," he said.
The HKMA stepped into the currency market late on Tuesday, selling HK$4.42 billion as the local currency repeatedly hit the strong end of its permit- ted trading range, Reuters reported.
Yesterday, shares of China International Marine Containers (CIMC) fell from their opening price of HK$12.60 to HK$11.22 on their first day of trade on the Hong Kong stock exchange.
CIMC, an equipment and solutions provider to the logistics and energy sectors, is the first company to list on the exchange by conversion from mainland-listed B shares to H shares.
Chan Ka-keung, the secretary for financial services and the treasury, said the government was standing firm on stamp duty on stock transactions, after waiving the broker's business registration fee for two years and adjusting the stamp duty to 0.2 per cent.
"The government has no intention to lower the stamp duty on equity trading, as well as setting a minimum stamp duty, because the fee is the major contributor to government revenues," Chan said.