Hong Kong stocks will post the biggest gain since 2009 next year on prospects the economy will stabilize, Goldman Sachs Group Inc. said.
The Hang Seng China Enterprises Index, also known as the H- share index, will rally 18 percent to 13,600 by the end of 2014, Noah Weisberger, a New York-based analyst at Goldman Sachs wrote in a report Monday. The bank’s outlook for the measure would be the fastest since the gauge surged 62 percent in 2009. The Bloomberg China-US Equity Index of the most-traded Chinese stocks in New York was little changed at 108.25 Monday afternoon in New York.
Chinese manufacturing growth beat analyst estimates in November, indicating the nation’s economic recovery is sustaining momentum amid government efforts to rein in credit growth. Investors should buy Chinese stocks and sell copper on speculation developed economies will drive global growth next year, leaving behind an expansion in commodity prices, Goldman said Monday, citing the trade as its fourth top recommendation for next year.
“Equities are favorite asset class in an environment where growth is moderate but not overheating, while policy makers remain accommodative,” Weisberger said by phone Monday. “For the first time in the last several years, we would argue to own exposure to China through the Chinese equity market.”
China last month vowed to allow more private investment in the state sector, loosen its one-child policy and better protect farmers’ rights in the most sweeping reforms in two decades. The government also pledged to elevate the role of markets in the world’s second-largest economy.
Economists estimate growth in gross domestic product will slow to 7.5 percent next year from 7.6 percent this year, according to the median projection in Bloomberg News surveys last month. The government set a target for 7.5 percent expansion in 2013.
While the H-share index added 0.9 percent to 11,548.07 yesterday, the highest level since Feb. 20, it still trades 19 percent below its average valuation of the last five years, according to data compiled by Bloomberg based on estimated earnings.
“We’ve been positive for China for quite some time and it’s an overweight country for us,” Allan Conway, who oversees $27 billion as head of emerging market equities at Schroder Investment Management in London, said in a phone interview Monday. Chinese stocks account for about 22 percent of his portfolio. “The market is attractively priced.”
The Shanghai Composite Index of domestic shares declined 0.6 percent on Monday to 2,207.37, snapping a three-day rally. The ChiNext Index of companies with a median market value of $1 billion posted the biggest drop on record, amid concern the government’s plan to restart initial public offerings will divert funds from existing equities.
© Copyright 2024 Bloomberg News. All rights reserved.