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Hong Kong stock market
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Citigroup, HSBC lower Hong Kong stock targets with questions hanging over corporate earnings, China policy tonic

  • Liu at Citigroup unit in Hong Kong trims his midyear target to 19,000 points from 23,000, citing lower forecasts for earnings
  • Other regional markets may have more exciting earnings outlooks, BNP Paribas strategist Lui says

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A man takes pictures of stock prices outside the Exchange Square in Central, Hong Kong in September 2023 Photo: Elson LI
Jiaxing Li
Citigroup has reined in its forecasts for a rally in Hong Kong’s most valuable stocks following a dismal start to the new year, with higher borrowing costs and China’s weak economic recovery undermining the outlook for corporate earnings.
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The Hang Seng Index, which tracks 82 blue-chip members, may climb to 19,000 points by midyear, according to Ka Liu, head of investment strategy and portfolio advisory at the US banking group’s unit in Hong Kong. His previous target, made in July, was 23,000.

“We revised the target mainly due to lower earnings growth forecasts”, as the broader economic environment remains weak, he said in a phone interview. At the same time, higher-for-longer interest rates could also weigh on stock prices, he added.

The Hang Seng Index logged its worst start to a year since 2005 after losing 4.8 per cent through January 8, extending a record four-year slide. Sentiment weakened with forecasts showing China’s economy struggled with deflation and slower external trade-in the final month of 2023.

Investors have also pared back bets on rate cuts as Federal Reserve officials suggested borrowing costs would need to remain higher for longer to keep a lid on inflation in the US. The Hong Kong Monetary Authority follows the Fed’s policy in lockstep under the city’s linked exchange rate system.

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The Fed has raised its key rate by 525 basis points since the policy lift-off in March 2022 in its most aggressive tightening cycle in more than 40 years. There is a 95 per cent chance the Fed will keep its rate on hold at the first meeting this year on January 30-31, according to Fed fund futures compiled by CME group.

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