Credit Suisse Group AG remains bullish about the prospects for mainland companies listed in Hong Kong due to stronger-than-expected earnings growth.
After lifting its mainland GDP growth forecast earlier this month, the Swiss bank raised its 12-month forecast Monday for the Hang Seng China Enterprises Index (H-share index) to 16,000 points from 14,000, according to report released by analysts Peggy Chan and Vincent Chan.
They also raised their forecast for the MSCI China Index from 64 to 81 on strong growth and the fact that much of the index has sectors less prone to cycles such as telecoms and consumer plays.
Although figures show that mainland economic growth continued to decelerate in the third quarter, many companies nevertheless posted strong results.
Yanzhou Coal Mining Co, the listed unit of China's fourth-biggest coal miner, Monday said it has more than tripled its third-quarter profit to 3.68 billion yuan compared with a year earlier as production rose to meet increased domestic demand.
Datang International Power Generation Co, China's biggest publicly-traded electricity producer by market value, also said on the same day that net profit in the third quarter has more than doubled to 766.62 million yuan compared with the same period last year due to higher electricity generation.
The revised target for the H-share index follows Credit Suisse's upgrading of its mainland GDP forecast. The bank raised its projections for 2010 and 2011 to 9.8 percent and 8.9 percent from the 9.7 percent and 8.8 on October 1.
However, another bull market similar to that during 2004 to 2008 is unlikely due to structural adjustments in the economy, the report added.
Economists at HSBC are also optimistic about the outlook for the mainland economy.
"The mainland's firm domestic demand is likely to support around 9 percent growth next year, despite slower global economic growth reducing external demand," Qu Hongbin, co-head of Asian Economics Research at HSBC said in an email report Monday.
The H-share index Monday rose almost 1 percent to close at 13,626.08 points. It has gained over 800 points, or 6.5 percent, in 2010.
(HK Edition 10/26/2010 page2)