UBS Asset Management joins top brokerages in predicting Hong Kong bull market rally to continue

UBS Asset Management on Tuesday joined a chorus of brokers including Morgan Stanley, Goldman Sachs and HSBC that expect Hong Kong’s stock market rally to continue on the back of capital inflow from the mainland.

Geoffrey Wong, head of global emerging markets and Asia-Pacific equities at UBS Asset Management, said the market would resume its uptrend despite the recent volatility that has seen the city’s benchmark Hang Seng Index drop from a 10-year high reached last Wednesday.

The bull run on Hong Kong’s stocks has already lasted 21 months but the Hang Seng Index was still the cheapest on a valuation basis among the world’s major indices, including the S&P 500 Index, China’s Shanghai Composite and Europe’s Stoxx 600 Index.

Analysts from Goldman Sachs said last month that China’s “new-economy” stocks will help push Hang Seng Index to a historic high of 32,000 by the end of next year.

Beijing has recently stepped up efforts to manage excessive risk in the financial markets, triggering concerns that Chinese bond yields will continue their ascent while stocks will underperform global peers because of tighter liquidity conditions.

“The authorities seem to be quite aware of the impact on the financial markets, so they are giving a lot of time for the financial institutions to adjust,” Wong said. “It will only cause a little bit of stock market volatility.”