The Hong Kong-listed Chinese equities market is primed for a turnaround, with HSBC forecasting a 21% upside in the Hang Seng China Enterprises Index (HSCEI) for 2025.
HSBC’s strategists, including Herald van der Linde and Prerna Garg, attribute this optimism to favourable policy shifts in mainland China and improving economic conditions.
The bank’s year-end target for the HSCEI now stands at 8,800, a notable upgrade from the earlier estimate of 8,610.
This revised outlook reflects mounting investor confidence as Beijing takes decisive steps to stabilise its economy, counter deflationary risks, and stimulate consumer spending.
Measures such as lower interest rates and initiatives to revitalise the property sector have played a pivotal role in reshaping market sentiment.
Analysts believe this creates an environment conducive to a broader economic rebound, supporting both local and global investors’ interests in the region.
Hong Kong upgraded, India downgraded
HSBC’s strategists have adjusted their regional ratings, elevating Hong Kong to overweight while downgrading India to neutral.
This shift underscores contrasting outlooks for the two economies.
Hong Kong is seen as a beneficiary of Beijing’s stabilisation efforts, whereas India faces challenges such as slower domestic growth and stretched valuations that could hinder returns in the coming year.
Chinese stocks, despite their recent slump—evidenced by the MSCI China Index’s 19% drop from its October peak—are expected to gain momentum.
Investors are now closely monitoring the National People’s Congress meeting in March for growth targets and further policy announcements.
A better-than-expected roadmap from Beijing could spur renewed interest in Hong Kong-listed equities, analysts say.
Conversely, India’s rally in the Nifty 50 Index has waned amidst weaker corporate earnings and reduced foreign inflows.
The Indian government recently revised its growth forecast downward to levels unseen since the pandemic, further fuelling HSBC’s cautious stance.
Diverging market views
HSBC’s optimism for Hong Kong-listed Chinese stocks contrasts with the bearish outlooks of competitors like Goldman Sachs and Morgan Stanley.
Goldman Sachs downgraded Hong Kong to underweight in November, citing persistent weaknesses in the property and retail sectors.
Similarly, Morgan Stanley remains concerned about deflationary pressures and geopolitical tensions that could stifle growth in Chinese equities.
Along with Hong Kong, HSBC upgraded South Korean stocks to neutral, citing the recent market selloff as an attractive entry point.
Despite ongoing political changes, the bank believes these developments are unlikely to disrupt corporate earnings.
As policy initiatives in China continue to take shape, the debate among global investment firms reflects a broader uncertainty surrounding the pace and sustainability of the country’s economic recovery.
While HSBC highlights the $20 trillion in household cash savings as a stabilising force, sceptics remain wary of potential deflationary spirals reminiscent of Japan in the 1990s.
HSBC’s stance, however, signals its confidence in Beijing’s ability to navigate these economic headwinds effectively, potentially giving Hong Kong a strategic advantage.
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