East Asia: Hang Seng Index target for next year is 30,800 points, expects property prices to record high single-digit growth

Bank of East Asia (00023.HK) published its investment market outlook, setting a target level for the Hang Seng Index at 30,800 points in 2026, equivalent to a price-to-earnings ratio of 12.8 times. It focuses on three major sectors, including artificial intelligence, emerging industries, and consumer services.

The bank's investment strategist, Eric Wu, pointed out that the mainland's anti-involution measures and optimized supply policies can reduce irrational competition and enhance industrial capacity utilization, which will help improve the profit margins of Chinese enterprises. The policies suggested in the "14th Five-Year Plan" are expected to be implemented during the National People's Congress in March next year, benefiting from the gradual release of national industrial policies.

The bank anticipates that the Federal Reserve may have the opportunity to cut interest rates 3 to 4 times in 2026, totaling 75 to 100 basis points. Currently, the Hong Kong dollar's best lending rate has fallen to a low level and will not be adjusted downward in line with the Federal Reserve's rate cuts. In contrast, the Hong Kong dollar interbank offered rate still has room to decline.

The bank expects that the economies of the mainland and Hong Kong will continue to grow in 2026, with growth rates of approximately 4.8% and 2.5% to 3%, respectively. At the same time, it is anticipated that private residential property prices in Hong Kong will grow at a high single-digit rate year-on-year next year, supported by the Federal Reserve's restart of the interest rate cut cycle