Hong Kong Investors Pin Hopes On Trade Deal To Boost Hang Seng Index, Shrug Off Protest Impact

Hong Kong investors and stockbrokers remain largely positive about the market’s outlook for next year as they expect a possible US-China trade deal to more than offset the impact of the months long anti-government protests
, a survey has found.
Some 42 per cent of investors believe Washington and Beijing will find a solution to the trade war, leading the benchmark Hang Seng Index above the 28,000 level next year, according to a survey of 3,000 retail investors over the last two months by Bright Smart Securities, the largest local brokerage with 20 branches and more than 300,000 customers. The index closed at 26,681.09 on Monday.
The city, one of the busiest entrepots, has been squeezed by the 21-month long trade war between the world’s two largest economies and a trade deal
 would boost exporters and manufacturers. The other factors supporting the positive outlook include a relaxed monetary policy in mainland China and an improvement in Hong Kong’s political situation.
Twenty-seven per cent expect the index to trade in the 26,500 to 27,999 range, close to current levels. 26 per cent said the index will move in the 26,500 to 22,000 range, while 5 per cent expect it to fall below 22,000.

“The protests may have led Hong Kong’s economy into a technical recession in the third quarter, but the survey shows Hong Kong investors are cautiously optimistic about the stock market next year,” said Edmond Hui, chief executive of Bright Smart Securities.

Hui said the current social unrest has definitely hurt market sentiment, but the market has coped far better than previous crises.

“The Asian financial crisis in 1998 saw short sellers attack the local stock and currency markets while the global financial crisis in 2008 saw big problems at US and European banks. In comparison, the current problem in Hong Kong is mainly a local issue, while overseas markets, particularly the US, have been robust this year,” Hui said.

Bright Smart expects the Hang Seng Index to trade in the 22,000 to 30,000 range next year. It is bullish on 5G and other tech-related stocks, as well as financial companies from Hong Kong and mainland China.

Hui said a big indicator of the upbeat investor sentiment is the increase in the city’s IPO market activity since September, adding that e-commerce giant Alibaba Group Holding’s initial public offering
 has been oversubscribed at least twice as of Monday evening.
The New York-listed Alibaba, which owns the South China Morning Post, is seeking to raise up to US$13.8 billion in a secondary listing in Hong Kong, making it the city’s biggest offering this year and possibly the world. Subscriptions opened on Friday and will close on Wednesday noon.

“The worst is over, and the stock market has reached its bottom. The stock markets in Hong Kong, mainland and the US are likely to see strong growth next year,” said Christopher Cheung Wah-fung, a lawmaker representing the financial services sector and chairman of brokerage Christfund Securities.
“The US will have a presidential election next year, which means [President] Donald Trump will introduce policies to support the market. The central government will also have policies to support the Hong Kong and mainland economies.”

Hong Kong Market

Separately, JPMorgan Asset Management on Monday upgraded its outlook on global equities from “slightly underweight” to “slightly overweight” to reflect its positive view of the US economy.
The fund manager, which had downgraded Hong Kong to “slightly underweight” in September, has not changed its view as the city’s economy continues to be affected by the trade war and social unrest.
“From a regional perspective, we have become more positive on cyclical equity markets. Emerging market equities are now our most favoured region alongside US large-cap equities, which we believe can do relatively well under a range of scenarios,” Patrik Schowitz, global multi-asset strategist at JPMorgan Asset Management, said in a statement.

“Renewed optimism about the US-China trade negotiations seems to have been the main initial driver of improved risk sentiment,” he said. “But what is likely more important for risk sentiment from here are early signs of an upturn in the macro data. Global as well as US manufacturing PMIs [purchasing managers’ index] have moved up in their latest readings, and macro data from some of the bellwether Asian manufacturing economies have been improving as well.”
The firm now estimates that there is only a 20 to 30 per cent chance of a US recession over the next 12 months, compared with about 50 per cent a few weeks earlier.
Global equities have gained around 6 per cent since October, a sign that shows investors have been regaining their appetite for risk, Schowitz said.

Source: (South China Morning Post)

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