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Morgan Stanley says Hong Kong stocks may trail China shares for fourth year in a row
- US investment bank ‘continues to prefer A shares to offshore China’, given their better positioning to benefit from potential easing and long-term growth opportunities
- Investors should take a cautious and selective approach in picking up Hong Kong stocks, CCB International says
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Hong Kong stocks will probably lose out to China’s yuan-traded shares in 2022 for a fourth straight year, with the onshore market set to benefit more from Beijing’s policy loosening and a flurry of government drives ranging from infrastructure investment to carbon neutrality and data security, Morgan Stanley said.
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The city’s US$5.1 trillion stock market, despite being the world’s second-cheapest after Brazil, will continue to reel from a regulatory overhang arising in China and policy tightening in the United States, the US investment bank said. Mainland Chinese shares are, on the other hand, relatively isolated from overseas flows, it added.
In its base-case scenario, the CSI 300 Index of onshore stocks will gain 10 per cent through the end of June next year, while the Hang Seng Index will rise 7 per cent and the MSCI China Index of mostly Chinese companies trading in Hong Kong and the US will advance 9 per cent in the same period.
A bear scenario suggests that the Hang Seng will fall 15 per cent versus a 13 per cent decline by the CSI 300.
“We continue to prefer A shares to offshore China, given their better positioning to benefit from potential easing in the near term and alignment with long-term growth opportunities, such as the green economy,” said Laura Wang, a strategist at Morgan Stanley in Hong Kong.
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