Citibank thinks Hong Kong stocks can claw their way back from painful slide. Here’s how
- Citibank forecasts a near-20 per cent rise in the Hang Seng this year
- Hong Kong benchmark index went into bear market on September 10
After a bloodbath in 2018, the Hong Kong stock market just got bullish vote of confidence – Citibank is forecasting the Hang Seng Index will rebound to 30,000 by the end of the year.
That would be a nearly 20 per cent rise from its close at 25,130 on Wednesday.
The Hang Seng lost nearly 14 per cent last year, weighed down by the US-China trade war as well as the China’s economic slowdown. It went into a bear market – defined as drop of 20 per cent from a recent high – on September 10, when it was 26,613.
So what’s Citibank seeing that jittery traders aren’t?
The possibility of the end of the trade war, for starters. A US delegation is headed to Beijing next week for talks.
And tax cuts and other stimulative policies will also drive a rebound, Citibank said at a news conference.
“Clarity about the trade war and macroeconomic factors such as policy support will be constructive for China and Hong Kong stocks,” said Pak Ling Wong, head of investment strategy and portfolio advisory at Citibank Hong Kong.
The prediction of a near-20 per cent rebound is significantly higher than other forecasts.
Deutsche Bank predicted a 10 per cent rise and Morgan Stanley forecast a 13.4 per cent gain to 28,500 for the Hang Seng. MSCI Hong Kong Index could rise to 15,199 in 2019 according to Goldman Sachs, a 6 per cent recovery based on Monday’s close.
Another positive driver for the Chinese and Hong Kong stock markets is the inclusion of China A-shares by MSCI, Citibank said. The index heavyweight completed a successful introduction of China A-shares in 2018. MSCI plans to increase the weighting of the A-shares on relevant indices from 5 per cent to 20 per cent in 2019, pending consultation. This will drive foreign inflow to the region, Citibank noted.
Emperor Securities director of research Stanley Chan said he’s also bullish on the Hang Seng, expecting it to go up about 13 per cent next year. Citibank is too rosy, in his estimation.
“I would not be so aggressive,” he said.
Citbank said investors should look for Macau gambling as well as Hong Kong commercial real estate to outperform. Gambling revenues from the former Portuguese colony grew by 14 per cent in 2018, despite concerns that the trade war would hurt the industry.