KGI Asia: The Hang Seng Index is expected to return to the level of 23,200 points next year

According to Zhitong Finance APP, KGI Asia pointed out that the Hang Seng Index is expected to return to the level of 23,200 points next year, corresponding to a forecasted price-to-earnings ratio of 10.5 times, slightly higher than the 10-year average of 10.26 times. This is considering that the market atmosphere was exceptionally exuberant when the Hang Seng Index fell from its peak this year, with daily trading volume once exceeding HKD 600 billion.

KGI believes that although Sino-U.S. relations will be the biggest risk for Hong Kong stocks next year, optimistically, Trump's claim of imposing a 60% tariff on Chinese imports may only be a negotiating tactic, and the final tariff rate and coverage remain unknown. Additionally, considering that the Ministry of Finance has indicated that there are still economic stimulus policies yet to be introduced, they are not too pessimistic about the market outlook, expecting the Hang Seng Index to return to the level of 23,200 points by 2025. If the Hang Seng Index closes at 19,700 points by the end of the year, the potential increase would be about 17.8%.

From a valuation perspective, the market predicts that next year's earnings per share will grow by 5.1% year-on-year, thus the forecasted price-to-earnings ratio corresponding to 23,200 points is 10.50 times, slightly higher than the 10-year average of 10.26 times.

KGI explains that the target price of 23,200 points is based on: (1) the scale of economic stimulus measures meeting expectations and targeting private consumption; (2) the Hang Seng Index's earnings per share maintaining growth of over 5%; (3) Sino-U.S. conflicts being limited to trade.

Zhu Yanmin, Chairman of KGI Investment Advisory, stated that the overall global economic growth in 2025 is expected to be similar to that of 2024. Although the U.S. economy shows a downward trend, it remains relatively strong among mature markets. The biggest variable for economic performance in 2025 will still be the implementation of policies after Trump's return to power. It is expected that the Federal Reserve will reduce interest rates by 0.75% to 1% in the future, with this round of rate cuts possibly reaching a low of 3.75% to 4.0% by 2025, and may restart rate hikes in 2026.

After being driven by the wave of artificial intelligence for two consecutive years, U.S. stock valuations are no longer cheap, but there are opportunities for sector rotation. It is expected that the S&P 500 index will still see mid-to-high single-digit growth in earnings in 2025, with an estimated annual return between 6% and 12%, which is a decline compared to the previous two years.

He expects that U.S. stocks should maintain the current post-election gains in the first quarter, while the second quarter will begin to reflect the risks of Trump's policies and expectations of economic downturn, leading to potential market volatility; risks are expected to further increase in the second half of the year, thus the performance in the first half is expected to outperform that in the second half