Date
24 January 2017
Profit forecast revisions by sell-side analysts have led to an over-correction in share prices of Chinese firms, according to HSBC's Steven Sun. Photo: HKEJ
Profit forecast revisions by sell-side analysts have led to an over-correction in share prices of Chinese firms, according to HSBC's Steven Sun. Photo: HKEJ

H-shares seen rebounding after ‘over-correction’

The Hang Seng China Enterprises Index (HSCEI), the benchmark for mainland stocks listed in Hong Kong, could surge by 15 percent from the current level and reach the 10,000 points mark this year, a market expert says.

H-shares will benefit from improving sentiment in the A-share market in China and expected rise in fund inflows, according to Steven Sun, head of China equity strategy at HSBC. 

Downward adjustment by sell-side analysts with regard to profit forecasts on Chinese companies has come to an end, Sun said.

The downward revisions have led to an over-correction in H-shares, setting the stage for a rebound, the Hong Kong Economic Journal quoted Sun as saying.

Sell-side analysts have slashed the profit forecasts on MSCI China Index and HSCEI constituents by around 10 percent on average over the past four months.

Combined with the earlier revisions, Chinese firms have seen their earnings revised downward by 20-30 percent.

A 25-percent cut is already an extreme, Sun said, noting that some oil plays have even seen 50-60 percent reduction in earnings forecasts.

Given the potential launch of the Shenzhen-Hong Kong Stock Connect program and the inclusion of A-shares into the MSCI Emerging Market Index, HSBC has tagged the Shanghai Composite Index at 3,200 and the CSI 300 Index at 3,500.

Sun expects mainland firms to boost their holdings in Hong Kong-listed entities after the launch of the Shenzhen stock link.

[Chinese version中文版]

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