Economists hold conservative views on Hong Kong's stock market performance for next year amid the ongoing illegal protests, possible US rate hikes and a slower mainland economy. Parker Zheng / China Daily

Hong Kong's property prices could fall by between 10 and 15 percent next year, UBS has predicted while adopting a cautious view of the city's equity market and a "neutral" outlook for the local stock market in 2015.

The global financial services company warned that a further deterioration in the city's retail sales and a decline in property prices would be major risks for the SAR's equity market in 2015, although the local market has slightly outperformed other Asian markets this year.

"The ongoing protests will drag Hong Kong's retail sales performance," Patrick Ho, chief investment officer of UBS Wealth Management, said on Wednesday. "Expectations of another US interest-rate rise will also put Hong Kong's property market under pressure next year," he said.

Amid concerns over home prices coming down, Ho said he's negative on Hong Kong's property stocks, but utility stocks and those closely related to exports are favored.

Pu Yonghao, managing director of UBS Wealth Management, also made a conservative forecast, saying the benchmark Hang Seng Index would be adversely impacted by a continuously rising US dollar in 2015.

But the divergence between the Hong Kong and mainland equity markets' performance has been apparent recently, Pu said. The Hang Seng Index continued to tumble while the mainland stock market has remained bullish.

UBS would not project a long-term improvement for the mainland stock market, expecting the mainland's economic growth to slow down to 6.8 percent in 2015. "But, in short term, the market has great potential underpinned by the mainland's interest-rate cuts," Pu said.

UBS said it expected the mainland to cut interest rates twice in the first half of next year. "Cutting the reserve requirement ratio twice is possible in the second half of the year," said Ho.

"Insurance stocks listed on the mainland will be direct beneficiaries," he said. "With solid core business development and rate-cut policies, insurance stocks can be expected to be in a bullish mode. But, the profits of mainland banks will be impacted by these policies."

UBS overweighed for markets in Taiwan and India, while saying the Japanese property market would be worthy of investment, particularly in the office sector.

With an imminent US interest-rate surge, both UBS and JP Morgan share the view that the risk of renminbi appreciation will be diluted.

"The yuan, actually, should undergo a slight devaluation next year as rising US interest rates will exert greater pressure on the currencies of emerging markets to devalue," Pu said.

On the current oil price situation, Pu painted an optimistic picture. "I don't expect oil prices to continue falling," he said.

"Some oil production projects will shut down due to the limited profits to be made if prices keep declining. I believe oil consumption will increase at the same time because the mainland may raise its oil reserves level and more US residents will buy cars when oil prices come down," Pu said.

celia@chinadailyhk.com

(HK Edition 12/04/2014 page8)