The Hang Seng Index and the China Enterprise Index have a so-called “golden cross” trajectory.
That means a bull market is on the horizon, coupled with robust trading volumes.
More hot money has flowed into Hong Kong ahead of the launch of Shenzhen-Hong Kong Stock Connect expected in November.
Better interim earnings will set the stage for A shares’ inclusion in MSCI by the end of the year, some big investment banks say.
China is attractive again for global investors who are fed up with too much uncertainty in developed markets.
Meanwhile, Hong Kong is in party mode as mainland players seek diversification, but investors should keep their stock exposure at no more than 20 to 30 percent of their portfolio.
The Hang Seng Index might test 24,400 points which could encourage investors to bet on dual-listed stocks with huge price discounts.
Three leading airlines — China Southern Airlines (01055.HK), Air China (00753.HK), China Eastern Airlines (000670.HK) — are particularly attractive.
Stocks that might benefit from a Sino-US agreement eliminating excessive capacity include Angang Steel (00347.HK).
Power generators also offer big price discounts including Shanghai Electric Group (02727.HK), Xinjiang Goldwind Science & Technology (02208.HK), Huadian Power International (01071.HK) and Datang International Power Generation (00991.HK).
Mainland banking stocks such as New China Life Insurance (01336.HK), China Pacific Insurance Group (02601.HK) are highly sought-after.
So are infrastructure companies such as China Railway Group (00390.HK), China Communications Construction (01800.HK), CRRC Corp (01766.HK).
Heavyweights including Tencent Holdings (00700.HK) and HSBC Holdings (00005.HK) have surged nearly 20 percent amid an influx of capital.
The strong money inflow is expected to spur SOE (state-owned enterprises) stocks.
China Construction Bank (00939.HK) and Industrial & Commercial Bank of China (01398.HK) have benefited from ample liquidity in Shanghai-Hong Kong Stock Connect in recent months.
Meanwhile, the US Federal Reserve is holding fire on the next interest rate increase after US non-farm payroll rose by 151,000 in August, below an expected 180,000.
The Bank of England, on the other hand, has been criticized for cutting rates too soon while the Bank of Japan is reluctant to undertake further monetary easing.
Investors are looking for risk-off stocks that offer stable dividend income.
They have already cut their expectation for return after nearly 10 years of global monetary easing.
Corporates are unable to generate whopping profits like they used to amid slow growth and low rate.
But a number of local property stocks are good targets for short-term speculation as home sales have regained momentum in recent months.
However, property developers have yet to increase prices substantially for fear of a massive new supply hitting the market in the coming years.
Sun Hung Kai Properties (00016.HK), Cheung Kong Property Holdings (01113.HK), New World Development Co (00017.HK) and Henderson Land Development (00012.HK) are likely to benefit from a property market recovery.
This article appeared in the Hong Kong Economic Journal on Sept. 6
Translation by Julie Zhu
[Chinese version 中文版]
– Contact us at [email protected]