The HSI fell 446 points to 18.754.60 at midday Friday. SHK Financial says the market is “infused with uncertainties and investor confidence remains fragile.” But on the other hand, Hong Kong shares is falling for the 11th session out of 12 Friday, and technically, the HSI is testing the support zone of 17,600-19,200 formed from mid-November 2011 to January 2012, according to SHK Financial. “The 17,600 level is on the long-term uptrend formed since October 2008 at 10,676 through to October 2011 at 16,170, and represents very strong support. We see a fall below 17,600 as very unlikely and recommend buying in stages over 17,600-19,200.” The HSI slid 0.3% to close Thursday at 19,200, and has fallen 9.9% over the past 11 sessions.
Chinese equities are beginning to enter a new bull market despite macroeconomic uncertainties, says Morgan Stanley. The investment bank writes in a recent note that the bear market, as defined by the performance of the Shanghai Composite, ended on January 5, 2012 after 884 days, with the index down 38% from the peak. “Average bull market lasts 414 days for 245% return,” it says, adding that Chinese equities are now 130 days into this bullish phase with returns of 11% so far. From the fundamentals perspective, Morgan Stanley cites stronger consumption-related sectors and stabilizing real estate as some of the factors underlying a new bull market. With an average price-to-earnings ratio at 11.4 times, the A-share market in Shanghai looks cheap in terms of valuation, it says.
Deutsche Bank downgraded West China Cement (WCC) (Hong Kong Stock Code 02233) to “hold” from “buy”, and lowered its target price to HK$1.31 from HK$2.16. It noted that disappointing 4Q 2011 should drag FY2011 results. The house turned more cautious on WCC after a slowdown in infrastructure projects, inventory clearing from heavy rainfall and a continued price war led to weak pricing in 4Q 2011. Deutsche Bank expects 4Q ASPs to have fallen 16% QoQ, as high-grade cement demand remains suppressed. While a general price recovery is likely in 2H 2012, the house thinks near-term share price upside will be capped until price hikes materialize.
HSBC sets its Hang Seng Index’s end goal at 18,000 points, higher than today’s index at 17,000 by only 5.9%. The house predicts HSI at 20,000 in 2012 and maintain its overweight rating on Hong Kong market, as China is still relatively more stable than Europe and America, and the economy is no longer over-relying on exports.
Separately, UBS Securities expects the Hang Seng Index to hit 19,000 by year end because in the long run, China’s economic outlook is favorable.
