The central government's economic stimulus measures and the prospect of a mild US interest-rate hike later this year have strengthened analysts' confidence in equity markets. Edmond Tang / China Daily

The Hong Kong Securities Association (HKSA) is bullish on the outlook for the H-share market in 2015, and sees the city's benchmark Hang Seng Index hitting 26,000 points within the year.

The 1,300-member association, which represents some 350 brokerages, says the technology, new energy and banking sectors would lead the way, but believes the property sector would remain underperformed.

"On one hand, the prospective money easing policy by the central government will bring ample liquidity to Hong Kong's stock market," said Ben Kwong Man-bun, a director at KGI Asia Ltd.

"On the other side, the pace of the US Federal Reserve's lifting interest rates will not be rapid, so any adverse impact on the Hong Kong market will be reduced," he said.

According to the HKSA, nearly 60 percent of its members said they are confident that the H-share daily turnover will reach HK$70 billion to HK$90 billion this year, while 65 percent believe that the H-share market will benefit from the Shanghai-Hong Kong Stock Connect program. About 84 percent of respondents are convinced that northbound trading will surpass southbound trading under the cross-trading program.

Old Mutual Global Investors, an asset management firm, said it saw many possibilities in the Hong Kong stock market as the H-share market will be trading on just 7.3 times prospective price to earnings with earnings growth of 12.8 percent in the forward 12 months.

Joshua Crabb, head of Asian equities at Old Mutual Global Investors (OMGI), is optimistic about the H-share market in the medium and long term due to declining commodity prices and the People's Bank of China likely to cut interest rates further.

He also expects the share prices of banking stocks in Hong Kong to catch up with the rally on the Chinese mainland.

As for mainland stock market, OMGI says it will remain attractive.

"The mainland's relative cheap stock prices compared with other Asian markets reflects investor fears that while the country tries to rebalance away from growth in Fixed Asset Investment to consumption-led growth, the overall rate of GDP growth remains vulnerable," said Crabb.

"However, infrastructure investment niches, as highlighted by the (central) government's pledge to modernize its New Silk Road rail network, linking eastern and western parts of China, will benefit select companies in the capital goods sector," he said.

OMGI said that years of spending on research and development is also culminating in increases in intellectual property rights filings. This, together with the manufacture of more advanced products and more flexible export financing, is creating globally competitive companies at reasonable valuations.

Hong Kong's benchmark Hang Seng Index gained 0.7 percent at the close of trading on Thursday to 24,522.6, while the Shanghai Stock Exchange Composite Index picked up 0.6 percent to 3,343.3.

celia@chinadailyhk.com

(HK Edition 01/23/2015 page7)