Worldsec International, the Asian equity broking associate of Bank of Tokyo-Mitsubishi, has renewed its call for 20,000 on the Hang Seng Index, extending the time-frame for reaching that level until the end of next year.
In a speech appropriately titled '20,000 - Surely You're Joking', the head of Hong Kong research, Bethany Chan, told clients the slide in Asian currencies was nothing more than an 'exogenous temporary disruption' that took little away from Hong Kong's strong fundamentals.
The bullish forecast for next year assumes either a re-rating of the Hong Kong market to a price-earnings ratio of 15 times next year's earnings, compared with levels now of about 10.
Many others have predicted such a rerating, but investors do not seem to agree. Hong Kong has traditionally traded at a discount to other markets in the region.
Even if Hong Kong saw no rerating, a yield-gap analysis would put the index at about 15,700 points if three-month interbank rates fell to 6 per cent next year, Ms Chan said.
Yield-gap analysis is a comparison of what can be earned from money-market investments versus equity market investments.
Worldsec is assuming a sharp drop in interest rates to support that level, counting on a reflation of the mainland economy as well as easier rates there.