UBS keeps Hang Seng Index at 30,000 points, hopes for trade collaboration in US-China meeting

UBS analysts maintain their year-end target for the Hang Seng Index at 30,000 points and are optimistic about the tech hardware and export sectors, noting that the US-China meeting will boost the stock market.

Angus Chan Chi-lap, head of Hong Kong strategy at UBS Global Research, said the target is supported by the surge of Chinese Mainland companies seeking to raise capital through Hong Kong initial public offerings, as well as Northbound investment flows through Hong Kong.

He said the stock valuation has returned to the historical average, driven by technology hardware and the export sector boom, adding that upstream raw material and oil-related industries are more favorable than downstream sectors.

Eric Lin, head of APAC Research at UBS, said that easing in US-China relations, improved trade cooperation, and potential technological collaboration would be constructive for both Hong Kong and Chinese stock markets.

He expects the US Federal Reserve to cut interest rates once in the fourth quarter this year, but the bank will adjust its forecast accordingly as the US consumer price index is released this week.

Lin noted that while market valuations have risen to relatively high levels, they have not yet fully reflected the risks of potential interest rate hikes. 

He also mentioned that UBS remains bullish on artificial intelligence hardware, which will benefit from increased capital expenditure by technology firms. 

Moreover, Lin said semiconductor demand from Korea and Taiwan remains robust and unaffected by the Middle East conflicts, as well as energy transition, renewable energy, and energy security.

In the Hong Kong property market, UBS head of Asia property research, John Lam Chun-hung, said that, depending on the decision to cut interest rates, residential property prices are expected to increase by 10 percent this year, and rental prices are also expected to push residential property prices up by 5 percent.

He also noted that Hong Kong's current rental yield is 3.4 percent to 3.5 percent, while the new mortgage rate is 3.25 percent. If the US cuts interest rates by another 0.25 percent this year and Hong Kong follows with a 0.125 percent cut, the property market would become more attractive.
 

 

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