The rally in Hong Kong stocks may slow and the market may even surrender some of its gains in the coming weeks as equities have been overbought and mainland investors will be absent over the seven-day National Holiday which kicks off tomorrow.
The 13 percent surge took the HSI to levels last seen in mid-April 2023.
Kenny Ng Lai-yin, a securities strategist at Everbright Securities International, expects the HSI will continue to rise this week, citing the gains posted by the American depositary receipts of Hong Kong-listed firms.
Ng gave the HSI a short-term target of 21,000 points, which is only 1.8 percent higher than last Friday's close, and warned that the index may retreat after the one-day break tomorrow in Hong Kong."Hong Kong stocks have been overbought," Ng said.
He added that the turnover will contract after mainland markets suspend trading during the National Holiday through October 7.Dickie Wong, executive director of research at Kingston Financial Group, also sees the possibility that HSI could decline to 19,500 points as the market's optimism about China's commitment to its economic recovery has been "fully reflected" in the gains and investors are now in a state of euphoria.
Wong said he would and see whether more details on the stimuli will be rolled out, while it remains to be seen as to what extent these measures will improve China's economy.Meanwhile, investors are likely to extend stimulus-fuelled gains in Chinese equities and the yuan as well the decline in the country's bonds, said Stephen Jen of Eurizon SLJ Capital.
He added that Chinese equities are extremely undervalued and a lengthy rally is entirely possible.
