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Private banking

Upward market momentum to spill into next year, says HSBC

Managing director of lender’s private banking operations still considers the persistent growth in the Hang Seng Index as healthy

PUBLISHED : Wednesday, 06 September, 2017, 2:03pm
UPDATED : Wednesday, 06 September, 2017, 2:50pm

HSBC’s private banking arm has ruled out any risk of a bubble forming in the Hong Kong equities market, and remains positive the current momentum will spill over into next year.

As the Hang Seng Index continues its seemingly endless upward trajectory – 26 per cent so far this year to 27,741.35 by Tuesday – Fan Cheuk Wan, head of investment strategy and advisory Asia, HSBC Private Banking, said she still considers the growth level as healthy, as it is been backed up by solid corporate results, rather that speculative trading.

This is the first time in ten years where emerging markets and developed economies are both benefiting from a cyclical recovery
Fan Cheuk Wan, head of investment strategy and advisory Asia, HSBC Private Banking

“This is the first time in ten years where emerging markets and developed economies are both benefiting from a cyclical recovery,” she said.

She maintains the price-to-earning ratio of the local benchmark currently, sitting at around 13, is healthy and still below its historic high.

Fan said the bank’s private clients expect the solid headway being enjoyed by many blue chips, especially, across in various sectors to continue, with profit levels being maintained over the next 12 months – a fundamental signal a market remains strong.

But she also made the point that many local shares had previously lagged the overall global market, and that part of the rapid gains seen in the last eight months was effectively their catching up with global counterparts, meaning the dramatic pace of growth is likely to ease.

In terms of the unit’s investment strategy, Fan said interest rates are likely to remain low short term, but that to expect the Federal Reserve to shrink its balance sheet this month, and lift them by 25 basis points in December.

“In the current environment, the Fed is only likely to raise interest rates once next year,” she said, adding that high levels of capital are likely to remain parked in emerging markets, if the global low interest rate trend persists.

Patrick Ho, HSBC’s Asia investment strategist, said Hong Kong stocks will also continue benefiting from mainland investment.

“A-shares are still around 30 per cent more expensive than H-shares, so southbound flow is likely to continue,” he said, tipping mainland Chinese blue-chips and financial stocks as strong bets.

Hoalso said the price-to-earning ratios of Chinese technology and internet companies range between 20 and 30, which the banks deems as sensibly priced.

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