Standard Chartered and UBS bullish on Hong Kong, China stocks on policy support, earnings
Standard Chartered is overweight on allocations to Chinese equities, while UBS expects the premium between A and H shares to narrow further
Mainland Chinese and Hong Kong stocks will rise in the second half as Beijing’s policy support is expected to revive earnings growth, according to Standard Chartered and UBS Group.
The bank said it preferred Chinese offshore stocks to onshore ones because many of them were growth companies that had strong upside potential and their valuations were lower than their peers in the US and Europe.
Meanwhile, UBS predicted that the premium of mainland China-listed A shares to their Hong Kong counterparts would further narrow this year as more Chinese institutional investors hunted for bargains in Hong Kong via the Stock Connect trading link.
“We see increasing buying interest in H shares by mainland-based mutual funds,” said Meng Lei, a strategist with the Swiss Bank, on Monday, referring to the Hong Kong-listed stocks. “The price gap between A and H shares is set to narrow further.”
Standard Chartered set a 12-month target of 25,500 for the Hang Seng Index, implying roughly a 5 per cent gain from the benchmark’s current level. The Hang Seng Index advanced 20 per cent in the first half of the year, closing at 24,072.28 on Monday.