Hong Kong shares got off to a sluggish start to the new year under the shadow of more disappointing manufacturing data from the mainland. Some market watchers have already lowered their sights for the market, expecting the benchmark index to lag global peers in 2014.
The Hang Seng Index gained 33.66 points, or 0.14 per cent, to finish at 23,340.05 yesterday, after a factory activity report for last month fell short of estimates. The final HSBC/Markit manufacturing purchasing managers index, released yesterday, slipped to 50.5 from 50.8 in November.
Hong Kong was the worst performer among major developed equity markets last year, as investors cashed out due to growing worries about the mainland's economic growth and concerns over the tapering of quantitative easing in the United States.
The city's benchmark index rose just 2.6 per cent last year, compared with gains of 56 per cent for Tokyo's Nikkei Index and 29 per cent for the S&P 500 Index in the US.
"The price to earnings ratio is still below the average 12.7 times, but the index lacks a catalyst for growth in the short term," Catherine Cheung Man-wah, head of investment strategy and research at Citibank Hong Kong, said yesterday.
Cheung expects the local benchmark to climb to 25,000 points by the end of this year, representing a gain of only 7.1 per cent from yesterday's close. She expects the market will benefit from cheap valuations, with potential support from economic restructuring on the mainland.
But Cheung estimates that global equity markets will see an average gain of 10 per cent, thanks to a shift of funds out of bond markets. Tokyo's Topix Index was expected to increase by 18 per cent, while the Shanghai Composite Index is forecast to rise by 33 per cent this year, she said.
Cheung said the main sectors to benefit from proposed reforms on the mainland would be consumer goods, consumer staples, health care, insurance, brokerages and technology.
Mainland technology giant Tencent closed at a record high of HK$504.50 yesterday, following its recent move to launch internet television linked to its popular messaging service WeChat.
Accounting firm PricewaterhouseCoopers (PwC) said that while it expected the secondary market would be flat this year, it was optimistic on the outlook for initial public offerings in Hong Kong.
Funds raised from new listings would exceed HK$250 billion this year, up from HK$169 billion last year.
Last year, Hong Kong moved back into the world's top three listing hubs by funds raised.
Of those companies to tap the primary market, PwC expects to see more retail and consumer goods businesses and mainland financial institutions.