Positive signs of strong China and Hong Kong markets next year
Consumer goods, health care, technology, and infrastructure sectors favoured, while red flags raised over energy and some property stocks
Next year is looking promising for Chinese stock markets, although the macro economy may still be in for a bumpy ride.
In particular, analysts and fund managers favour consumer, infrastructure, and technology sectors, which should see improved earnings, but investors are being warned off some property developer and utilities shares.
“We envision a good year for Chinese equities,” said Wenjie Lu, a strategist at UBS Securities.
“Although China’s economic growth will weaken further in 2017, corporate earnings will grow in double-digits, backed by easy credit and abundant liquidity, as money flows out of the property market after tightening measures, and back into cyclical sectors, such as infrastructure,” he said.
Lu forecasts average earnings per share (EPS) for the MSCI China index to grow 12 per cent in 2017, versus low-single-digit growth in 2014, 2015, and 2016.
The MSCI China index tracks large and mid-cap Chinese companies listed in Hong Kong in local currency, as well as so-called B-shares, those traded in mainland Chinese markets in foreign currencies.
Lu predicts the MSCI to jump to 72 by the end of 2017, up around 20 per cent on its current level.