Goldman Sachs (Asia) has rejoined the Hang Seng Index bulls, issuing its third end-of-year call on the market in four months.
The United States investment bank said it expected the benchmark to hit 13,200 points by the end of December because Asian currency markets had stabilised and domestic interest rates headed lower.
The target is 18.36 per cent up on yesterday's close and 23.1 per cent ahead of its 10,722.76-point finish at the end of last year.
Executive director Mike Warren said: 'The probability of delinking [the Hong Kong dollar peg] has substantially reduced . . . You may get bouts of speculation from time to time but not the same degree of severity that we saw back in October and January. That's the main message.' In late December, Goldman called for 13,800 points on the Hang Seng Index by the end of this year. About three weeks later it plumped for 11,000 points.
'The reason for the [most recent] upgrade - that really flowed from our economists taking a look at things around the region, and becoming more sanguine on the trouble spots in Asean,' Mr Warren said.
'They had a look at their currency forecasts and took those down . . . and of course that translates into a more benign outlook for interest rates in Hong Kong.' Goldman's research team puts the rupiah 12 months out at 7,000 to the US dollar, compared with yesterday's 8,000, while the baht is tipped for 35 compared with yesterday's 39.45. The South Korean won is seen at 1,300 against yesterday's 1,384.
'Similarly, our economists took a look at the interest rate forecasts for Hong Kong and we shaved 100 basis points off our risk premium, which is quite significant for it is a very sensitive equity market,' Mr Warren said.