People walk past an electronic display showing the Hang Seng Index in Central, Hong Kong, on Feb 26, 2021. (ISAAC LAWRENCE / AFP)
The Hong Kong stock market is likely to stay bullish in the second half of this year, with the Hang Seng Index (HSI) reaching 30,420 points by the end of 2021, according to HSBC Private Banking.
The market has emerged from the gloom of anti-monopoly policies on the Chinese mainland that had battered technology shares and, with the retreat in US bond yields, the HSI has the potential to climb further, according to Fan Cheuk-wan, managing director and Asia chief investment officer at HSBC Private Banking and Wealth Management.
The US Federal Reserve’s gradual reduction in bond purchases and the possible withdrawal of the qualitative easing policy in December this year are expected to have a limited impact on Hong Kong stocks, according to Fan Cheuk-wan, managing director and Asia chief investment officer at HSBC Private Banking and Wealth Management
She said the stepped-up promotion of vaccines worldwide has also helped Hong Kong’s economy to enter a new phase, benefitting the consumption sector.
The city’s benchmark stocks gauge extended losses by the end of trading on Wednesday, retreating 201 points, or 0.7 percent, to close at 28,436.
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Fan believes that the US Federal Reserve’s gradual reduction in bond purchases and the possible withdrawal of the qualitative easing policy in December this year are expected to have a limited impact on Hong Kong stocks. She suggested that investors should focus on investment opportunities with strong earnings growth potential and structural growth drivers.
The Chinese yuan’s recent significant rebound has also demonstrated the mainland export sector’s satisfactory performance.
However, the vaccination campaigns in Europe and the United States have yet to produce the herd immunity effect, and their economic recovery has been shifting to consumption and services, and this is expected to slow down the growth of China’s external demand and ease the pressure on the yuan’s appreciation, said Fan.
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In her view, the mainland’s growth is likely to slow in the second half of this year, as the central government does not want the yuan’s appreciation to further hit exports and the economy.
The People’s Bank of China has intervened in the currency’s exchange rate, and the renminbi will depreciate slightly to 6.6 per US dollar by the end of 2021 and remain at almost the same level next year, Fan added.