Hang Seng Index underperforms against world peers: Analyst

This was partially attributed to the absence of cyclicals in the index.

The Hang Seng Index has struggled in terms of performance, compared to other North Asian economies, Jefferies reported in its equity research.

This was linked to the absence of cyclicals in the index as well as the earnings downgrades recorded in its new constituents.

“The bottom line is that the HSI has underperformed its peers for the very good reason of a lack of cyclical earnings growth and the idiosyncratic pricing of regulatory changes,” the report read.

Despite this, Jefferies remains bullish on the Hang Seng Index, noting that the current macro conditions remain highly supportive for the index.

“Macro conditions have remained benovelent,” it said. “We remain Bullish on the HSI with a target price of 32,500.”

According to Jefferies, the Hong Kong dollar has been relatively well behaved; whilst consensus forecasts for Hong Kong’s gross domestic product in 2021 have climbed over the past quarter to 6.1% and 3% in 2022.

More importantly, there are no signs of deteriorating credit quality on the mainland as observed by the HKMA’s half yearly survey of domestic banks.