Hang Seng Index

Hong Kong stocks up 22.9 per cent over 2012

Mainland stocks end a two-year losing streak with Shanghai Composite up 3.17pc; Hang Seng may hit 28,000-point level in 2013, expert says

PUBLISHED : Tuesday, 01 January, 2013, 12:00am
UPDATED : Tuesday, 01 January, 2013, 3:49am

Last year was a profitable one for the Hong Kong stock market and hopes are high for this year.

The Hang Seng Index ended the year up 22.9 per cent as euro-zone worries ebbed and the leadership change in Beijing triggered hopes for greater economic reforms.

Though modest compared with Hong Kong, mainland stocks also ended a two-year losing streak, with the key Shanghai index advancing 3.17 per cent for the full year.

On the last day of the year, the Hang Seng stayed flat, nudging down 9.67 points, or 0.04 per cent, to 22,656.92.

The index's 22.9 per cent gain for the full year followed a disastrous 20 per cent loss in 2011, but analysts are divided on the outlook for this year.

"The HSI did very well last year. The growth was sound as the market recovered from the correction in 2011," said Simon Lam Ka-hang, director of Christfund Securities research, who is upbeat on this year.

Lam predicts the HSI could climb to the 28,000-point level as the debt crisis in Europe eases off further and the change of guard in Beijing is formalised.

"The mainland stock market rose 12.8 per cent in December, reflecting investors' expectations for 2013," he added.

The Shanghai Composite Index edged up 35.88 points, or 1.61 per cent, to 2,269.13 yesterday.

This is the first time since 2009 that the Shanghai index has posted an annual gain, thanks to the strong rally in December.

Francis Lun Sheung-nim of Lyncean Securities, however, said last month's gains on the mainland was only a bubble as the market's fundamentals do not support the current prices.

According to Lun, 2013 will be a difficult year, against the backdrop of a bleak economic outlook for the United States.

Real estate stocks led the surge in Hong Kong this year. New World Development shot up 92 per cent over the year, closing at HK$12.02, while China Overseas Land & Investment followed on its heels with a 78 per cent advance.

On the mainland, Shanghai's 3.17 per cent rise provided little succour to beleaguered small investors, leaving most of the 100 million-plus with paper losses.

"The full-year gain has rekindled hopes for a bullish 2013," said Haitong Securities analyst Zhang Qi. "But it will still take a while for investors to recover all their losses."

The Shanghai index, one of the worst-performing indicators worldwide from 2010 to 2011, dived 14.3 per cent in 2010 before tumbling another 21.7 per cent the following year.

Despite last year's advance, the mainland was still among the worst-performing major equity markets worldwide.

The Shanghai index hit an intraday low of 1,949.46 points on December 4, the lowest in four years, as worries over poor corporate earnings dented confidence.

It has since rebounded amid signs that the newly elected Communist Party leaders would introduce economic incentives to accelerate China's urbanisation drive and increase people's disposable income.

"At least, the small gain helped reverse the downward trend," said Zhu Zhengrong, a retail investor. "It helped a bit in making us regain confidence and look forward to 2013."