Hong Kong shares will rise more than 11 percent by the end of 2013, driven by hopes of policy reforms from China's new generation of leaders and by corporate earnings, a Reuters poll predicted. The Chinese territory's Hang Seng Index is seen finishing 2013 at 25,000, which is up 11.1 percent from Wednesday's close at 22,503.35, according to the median of 24 equity market strategists surveyed in the past week.
The index will gain almost 6 percent by the end of June to reach 23,800, higher than the 22,000 predicted in September, after analysts upgraded earnings forecasts as data supported the view that economic activity in China is picking up.
"Cyclicals will lead the rally in the first half of next year as earnings recover, but start getting more defensive in the second half when they realise Beijing is not moving as much on policy," said Hong Hao, chief strategist at Bank of Communication International.
Easing by major central banks globally to kick start their economies has sparked a rush of capital into Hong Kong, prompting the territory's monetary authority to repeatedly intervene in currency markets to defend the HK dollar's peg.
With part of that money flowing to the stock market valuations have recovered from mid-year lows and spurred a rally that has left Hong Kong shares up 22 percent so far this year and poised to post one of the best returns in Asia.
The Hang Seng currently trades at 10.3 times forward 12-month earnings, about 10 percent more than where it was trading mid-year, according to Thomson Reuters I/B/E/S.
A series of comments last week from new Chinese Communist Party chief Xi Jinping gave investors some clues on how his government will operate, with a key emphasis placed on tax reform and urbanisation.
Xi is expected to become China's next president at the annual National People's Congress meeting in March, the end of a once-in-a-decade political transition.