The Hong Kong stock market will continue its bull run this year, powered by robust earnings forecasts, low interest rates and capital inflows, according to China Construction Bank Corp, although Citibank is more conservative about the outlook.
Construction Bank expects the Hang Seng Index to hit a new 12-month high of 29,000 points, with momentum strongest in the first half of the year before possible rate rises and winding down of US stimulus packages in the fourth quarter trigger a possible correction.
The index closed 137.09 points higher at 22,416.67 yesterday.
The bank forecasts a price-earnings ratio of 20 times for the Hang Seng Index this year, based on expectations of earnings growth of about 18 to 20 per cent and low interest rates, said Peter So, the lender's head of research. 'There's a lot of confidence in the Hong Kong stock market right now,' he said.
Construction Bank highlights excess liquidity as a key concern for the mainland this year, and although the bank does not believe a bubble has formed, it says policymakers will nonetheless implement policies to combat the problem.
Efforts to drive liquidity overseas could benefit Hong Kong in the form of an increase in qualified domestic institutional investor licences.
Excess liquidity in China could also spur corporate restructuring of state-owned enterprises, which could present opportunities for mergers, acquisitions and spin-offs.
