Citigroup predicts 16 per cent upside in Hang Seng Index as corporate earnings, China vaccine progress revive market confidence
- Hang Seng Index could climb by 16 per cent from current levels in the second half as policy stimulus aids earnings recovery, better vaccines ease lockdown risks
- Stocks have regained footing since sliding to a six-year low on March 15 on bets the worst of crackdown, lockdowns are past
The US bank forecasts the Hang Seng Index to reach 24,300 points, with much of the bad news on global inflation and interest rates already in the price, China equity strategist Pierre Lau said. Concerns about the US Federal Reserve’s lift-off could peak around three-quarters of the rate-tightening cycle, he added.
The city’s benchmark slipped 2.6 per cent to 21,008.34 on Wednesday, halting a three-day winning run. It has clawed back 15 per cent or more than US$500 billion of value since succumbing to a six-year low on March 15, according to Bloomberg data. Reports of an end to Beijing’s crackdown on the tech sector have helped Alibaba Group Holding, Tencent Holdings and Meituan soar 24 to 81 per cent from that slump.
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HKEX CEO Nicolas Aguzin on the future of Hong Kong’s capital market
Mainland Chinese companies, which dominate the benchmark and the broader Hong Kong stock market, are likely to chart higher profit as Beijing stepped in to shore up the economy and business confidence after weak manufacturing and consumption reports in April, he said.
“In terms of economic growth and earnings, the second quarter is the trough,” Lau said in an interview. “The downside from current earnings per share growth might not be so much, as expectations are already quite low,” having been scaled back to 1.3 per cent from 9.1 per cent in December, he added.
China’s economy took a hit this quarter after Covid-19 lockdowns in Shanghai and 40-odd cities across the country, shuttering factories and upending logistics and supply chains. As a result, banks including Standard Chartered and Goldman Sachs trimmed their second-quarter growth forecasts, with the latter cutting to 1.5 per cent year on year from 4 per cent.