2012 HSI (Hang Seng Index) Target For Hong Kong Securities Market

HSI (Hang Seng Index) is the well-known traditional stock market performance indicator for Hong Kong. By end-2011, HSI (Hang Seng Index) lost by -19.97% YoY to 18434 at its annual close. This reflects also a 5% deviation from our own target of 19456, but the direction (went downwards) was still an accurate forecast. Now our team, Mr China, formulate our own 2012 HSI (Hang Seng Index) target as 19481, representing a 5.68% YoY gain from 18434.

Our independent H.K. securities market expert team forecasted the fair values of different industry weightings and put these values into the Hang Seng Index Formula. From our stock valuations and index constituent calculations, HSI (Hang Seng Index) target shall be 19481 in 2012. Apart from the international market (eg.: European debt crisis) influences, our 2012 Hong Kong HSI (Hang Seng Index) target is forecasted as per the below local economic conditions:

(1) After the previous year, Chinese economy will continue to slow down in 2012 (Reference: 2012 GDP Growth Rate), but Chinese monetary policy has become not as tight as the previous level in 2011. This will benefit Hong Kong securities market that relies heavily on monetary liquidity and hot money inflows. Read also: Policy Tightening vs. Easing.

(2) As the new elected Hong Kong Chief Executive (HKCE) CY Leung and the new government administration is going to be on-duty in July 2012, there is a real uncertainty, not only for political policy risk but also economic policy risk, particularly in H.K. real estate market. Read also: New HOS (Home Ownership Scheme) in H.K..

(3) On the other hand, however, the new Hong Kong administration also determined to reinforce implementation of CEPA (Closer Economic Partnership Arrangement) that will surely benefit Hong Kong economic environment as a whole, thus helping a wide range of H.K. business sectors in 2012. Reference: CEPA Implementation is Vital for H.K..

(4) In addition to CEPA, there will be more and more benefiting policies going to be soon implemented specially for H.K. in 2012. Source: Ongoing Chinese Benefiting Policies.

As per our rating formula, the present HSI (Hang Seng Index) level of 18521 (as of 6 Jun 2012) is rated as "reasonable".



Current HK HSI Hang Seng Index trend

While we estimate that our expected gain in 2012 will just be a short-team rebound of HSI (Hang Seng Index), we cannot conclude that this gain can be sustainable in longer-term. Hong Kong economy, after all, is still heavily relying on outside markets (including mainland China of course) and not purely depending on local market condition. As a result, for better earning opportunities, investors must watch closely on mainland China stock market development instead of just focus on Hong Kong domestic market. Since both Hong Kong and mainland China are emerging markets, investors shall also closely monitor their investment portfolio performance at least once per week due to the higher market volatility concerned.

The 19481 is however our first release value of H.K. HSI (Hang Seng Index) target in 2012. Just like the past year, we will move on to downgrade/upgrade our 2012 HSI (Hang Seng Index) target subsequently if Hong Kong securities market condition should change.


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Summary Table: Full List of Our Targets for China Markets