HSI set to take a year in return to 30,000

Top News | Samantha Wong and Reuters 18 Dec 2018

HSBC Private Banking forecasts the Hang Seng Index will climb to 30,000 points by the end of next year, as peaking US interest rates, easing US dollar strength, and China's policy stimulus will offer positive tailwinds for Asian assets.

"The global slowdown we are seeing should be mild, and we expect global equity markets to sustain decent earnings growth at 10 percent," said Fan Cheuk-wan, chief market strategist, Asia, HSBC Private Banking.

"After a turbulent 2018, bearish expectations, lower valuations, and conservative investor positioning should help see an equity market bottom in the coming months, and recover later on in 2019."

The bank forecasts the US Federal Reserve to raise rates by 25 basis points at its meeting tomorrow, with two more hikes in March and June - followed by a pause before a rate cut in September 2020.

It also expects 10-year US Treasury yields to stay below 3 percent in 2019-2020.

"The higher US interest rates that triggered recent market sell-offs are now largely priced in, and US treasuries should start to trade in range," Fan said. "Further significant market corrections from current levels would require large shocks such as a recession, a European sovereign crisis, or a Fed policy mistake. But we do not believe these risk events will materialize."

Hong Kong shares finished flat at 26,087.98 yesterday amid low volumes, as investors await the Fed outcome as well as Beijing developments.

That may be in a speech by President Xi Jinping today to mark the 40th anniversary of China's reform and opening up or as top leaders map out plans for 2019 in a Central Economic Work Conference this week.

The Fed is seen as almost certain to raise rates at its two-day policy meeting starting today. Many market players also expect it to lower projections for future rate hikes, given rising economic headwinds.

The top HSI gainer was WH Group (0288), up 1.69 percent, while the biggest loser was Geely Automobile (0175), down 2.62 percent.

Automotive shares suffered after China said on Friday it will temporarily suspend additional 25 percent tariffs on US-made vehicles and auto parts starting January 1, following a truce in the trade war.

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