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Bloomberg
Hong Kong’s underperforming stocks will likely rebound in 2022, with a border reopening with mainland China to benefit gaming and retail shares while rising yields hold banks up,
according to UBS Group AG.
The city’s benchmark Hang Seng Index may gain as much as 13% next year, analysts led by Angus Chan wrote in a note, targeting a level of 27,000 points. The forecast puts UBS as the latest global bank predicting 2022 gains for Hong Kong stocks after Deutsche Bank AG and HSBC Holdings Plc.
Stocks in Hong Kong and the mainland have rallied this week after China’s central bank said Monday it will cut the amount of cash most lenders must keep in reserve, providing a liquidity boost and helping restore the
investor confidence.
The advance came after Beijing’s regulatory crackdown on private enterprise and the Covid-19 pandemic sent the city’s equities down 25% from a February peak through Monday. The Hang Seng Index is the worst performer among major world stock gauges this year.
UBS expects border policy across Hong Kong, Macau and the Chinese mainland to normalize after the Winter Olympic Games and China’s annual top legislature meeting in March. That should drive a “significant†recovery in revenues of casino operators and boosting sales at Hong Kong retailers, it added.
Rising real interest rates as global central banks taper should be a boon for Hong Kong banks, while some high-dividend-yield stocks are also favoured, such as AIA Group Ltd. and CK Hutchison Holdings Ltd., according to the Dec. 8 note.
Cheap valuations of Hong Kong shares and a quieter regulatory environment have prompted global banks to turn bullish on the city’s market. Deutsche Bank in October forecast the Hang Seng Index to reach 37,000 points by the end of 2022 while HSBC predicted last month a double-digit jump in the gauge by then.
The climb puts the Hang Seng on track for a third straight day of rebound from a 14-month low hit earlier this week. China’s onshore traders have accumulated the city’s shares for 12 days in a row, set for the longest streak since a buying frenzy earlier this year.