As weak trade data battered stocks on Hong Kong and mainland bourses on Tuesday, global investment bank Goldman Sachs has assumed a negative tone, downgrading the performance of markets on both sides of the border for next year.

The US-based financial powerhouse says it expects suppressed earnings for Hong Kong and mainland businesses as economic headwinds intensify, fueled by an imminent hike in US interest rates for the first time in a decade.

While forecasting a 5-percent total return on US dollar basis for the Asia ex-Japan region in 2016, the bank downgraded the mainland market to "market-weight" and the Hong Kong market to "under-weight".

The rating reflects expectations of investments in the MSCI (Morgan Stanley Capital International) China Index to deliver 9 percent return on dollar basis next year and those in the MSCI Hong Kong Index presenting no return on dollar basis.

Goldman Sachs, however, recommended an "overweight" for equities in India, the Philippines and Indonesia, pointing to 13-percent, 10-percent and 9-percent dollar-based total returns for 2016, respectively.

For the SAR, the bank earmarked 24,000 points for the benchmark Hang Seng Index (HSI) by the end of next year, representing 7-percent growth from the current level. It also expected the CSI 300 Index, which tracks mainland-listed large caps, to pick up by 7 percent to 4,000 by late 2016.

The HSI shed 1.34 percent on Tuesday to close at 21,905.13, with large-cap State-owned enterprises pacing the fall. The Hang Seng China-Affiliated Corporations Index declined 1.48 percent, while the CSI 300 lost 1.75 percent to 3,623.02.

The General Administration of Customs reported on Tuesday that the nation's exports dropped by 6.8 percent on year in November. Imports shrank by 8.7 percent on year, compared with an 18.8-percent fall in October. In the first 11 months of 2015, the country's exports fell 3 percent and imports plummeted 15.1 percent - far below the 6-percent trade growth target.

"Sluggish exports will remain a drag on economic growth. In the meantime, the gravity in investment growth remains intact, suggesting that economic growth probably will continue to weaken," said BNP Paribas economist Jacqueline Rong on Tuesday.

The People's Bank of China said on Monday the mainland's foreign-exchange reserves shrank $87 billion to $3.43 trillion in November - the lowest level in more than two years. The decline fueled concerns over capital outflow from the mainland.

In the onshore market, the renminbi lost 0.14 percent on Tuesday to close at 6.4172 yuan per US dollar - the lowest point for over four years. The offshore yuan also weakened against the greenback at 6.4929 yuan per US dollar as of 8:48 pm Beijing time.

The last meeting of the US Federal Reserve's Federal Open Market Committee this year is scheduled for Dec 15 to 16 to vote on whether to kick off the interest-rate normalization cycle this year.

emmadai@chinadailyhk.com

(HK Edition 12/09/2015 page10)