THE GOOD TIMES are back, declared Trevor Cheung, head of research at DBS Vickers, after watching the Hang Seng Index breeze past his projection in the previous quarter.
'It almost feels like the 'go-go' days of the 1990s again. Luxury property prices are within a whisker of their highs in 1997, consumers are doling out their dollars on the latest handsets and MP3 players, restaurants are full and investment banks are snatching analysts left, right and centre,' he said in a recent strategy update to clients.
There are caveats. Unemployment remained high at more than 6 per cent and the consumer price index was barely growing, but the return of confidence was more important, Mr Cheung said.
Whatever the driving forces - be it the Closer Economic Partnership Arrangement or the democracy march - a good vibe has returned to Hong Kong and is expected to lift local stocks with it.
For the final quarter, Mr Cheung is tipping the index to reach 14,000 and recommends investors go overweight on the Hong Kong stock market in a regional context.
'A self-sustaining asset inflation spiral should provide good share price support for developers, banks, retailers and landlords,' he said in his report, though he advocated taking care about the stocks one picked. Look for laggards and special situations, he said.
Blue-chip property developers were carrying slightly stretched valuations, but rising property prices, driven by improving economic fundamentals, would justify their recent gains. Mr Cheung believed stocks with exposure to office properties looked particularly attractive, since the expected uptrend in the office market, which had lagged behind the residential and retail property markets, had yet to be reflected in share prices.