BANK OF E ASIA: It is not ruled out that the Hang Seng Index may see another low in the short term, with support around 15,400 points.
BANK OF E ASIA predicts that the Hang Seng Index may see another low in the short term, with support expected around 15,400 points and a P/E ratio of 7.7-7.8 times. Due to the large holdings of technology and growth stocks by foreign investors, as well as lower-than-expected profit growth, the Hang Seng Index is facing selling pressure. The performance of Hong Kong stocks is weak, and the net outflow of foreign capital is causing concerns for the mainland economy. BANK OF E ASIA expects a positive outlook for the renminbi, with the anticipation of a rate cut by the Federal Reserve in the first half of 2024, and the renminbi exchange rate will fluctuate within the range of 7-7.15. The downgrade of China's economic outlook by Moody's has limited impact on the trend of the renminbi.
Zhitong App learned that Chen Weicong, an investment strategist at Bank of East Asia, said that the Hang Seng Index has a significant weighting in technology and growth stocks, and foreign holdings in these stocks are relatively high. The profit growth of these companies in the past year has also been disappointing. Under the pressure of selling, it is not ruled out that the Hang Seng Index may reach a new low in the short term. The support level for the Hang Seng Index is expected to be around 15,400 points, with a forecasted price-to-earnings ratio of 7.7-7.8 times.
Bank of East Asia has set a 12-month target level for the Hang Seng Index at 19,500 points. Chen Weicong stated that the above target is measured based on long-term and valuation considerations. The 19,500-point level corresponds to a forecasted price-to-earnings ratio of approximately 9 times, while the average price-to-earnings ratio of the Hang Seng Index over the past ten years is about 11.5 times. The recent performance of Hong Kong stocks has been disappointing, lagging behind the global stock market. The current major concern is that foreign investors may have reservations about the mainland economy, resulting in a net outflow of foreign capital.
Huang Yan'e, Senior Investment Strategist at Bank of East Asia, stated that loose monetary policy will continue to support the economy, and the outlook for the renminbi remains positive. It is expected that the Federal Reserve will cut interest rates in the first half of 2024, which will help the renminbi's trend.
Huang Yan'e also mentioned that the People's Bank of China may deploy interest rate cuts and reserve requirement ratio reductions to support the economy. The fundamentals of the domestic economy are improving, and the rebound momentum is yet to be confirmed. Moody's downgrade of China's economic outlook has limited impact on the renminbi's trend. It is expected that the exchange rate of the US dollar against the renminbi in the first quarter will remain in the range of 7-7.15.