Legg Mason affiliate Martin Currie bullish on H-shares

Martin Currie, the global asset manager Legg Mason’s investment affiliate, says it is overweight on H-shares, basing its judgement on a strong earnings outlook attractive valuations, despite the Federal Reserve being set to raise interest rates as early as next month.

H-shares are shares in a company incorporated in the Chinese mainland that is listed on the Hong Kong Stock Exchange or other foreign exchange.

Hong Kong’s stock market has gained about 14 per cent this year, with the Hang Seng Index reaching 21-month highs.

China’s second-largest internet giant Tencent, which is listed in Hong Kong, was the most heavily traded stock in recent days ahead of the release of its first quarter results on May 17.

Several brokerages including Citibank, JPMorgan and Macquarie raised the company’s target price last week. Shares in HSBC Holdings also jumped by the most in almost five months in early May after the world’s sixth-largest bank by assets beat forecasts with stronger-than-expected revenue in the first quarter.

“The most encouraging thing about Hong Kong equities is that they’ve had the best earnings in the first quarter this year for several years,” said Martin Currie’s Asia CEO Paul Danes, adding that Chinese equities’ earnings growth is expected at about 12 per cent this year, with Hong Kong’s remaining in single digits.”