Hong Kong investors should be cautious about sustainability of stock market rally: DBS

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Effects of China fiscal policies and corporate earnings should be assessed before judging staying power of rally, Singaporean bank says

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A DBS Treasures branch in Hong Kong. Photo: DBS Hong Kong

Mia Castagnonein Shanghai

Published: 8:00am, 9 Oct 2024

Investors in Hong Kong will need to assess the effects of China’s fiscal policies as well as corporate earnings before getting excited about the sustainability of the stock market rally, according to DBS Private Bank.

The bank’s in-house target for the Hang Seng Index at the end of 2024 is 20,300, which was set before surprise policy announcements from Beijing last month pushed the benchmark to a 32-month high of 23,099.78 on Monday.

“The target can overshoot to 22,800 but that’s a technical overshoot,” Michelle Ho, the head of investment strategy at the chief investment office (North Asia), said at a briefing in Hong Kong on Tuesday. “Fundamentally we are waiting for more fiscal policies to come out and see how that turns into company earnings.”

“Beijing’s policy measures are unprecedented, and it is a booster for the sentiment,” Ho added.

Hong Kong’s market cooled off on Tuesday, with a record HK$620 billion worth of shares changing hands. It plunged 9.4 per cent in its worst day since 2008, wiping out all the gains it made while markets on the mainland were shut for a long holiday.

Meanwhile, mainland-listed stocks rallied after Chinese markets reopened. The CSI 300 Index, which tracks the largest companies in Shanghai and Shenzhen, closed 5.9 per cent higher after surging as much as 10.8 per cent earlier.