Goldman Sachs Says Hong Kong to Benefit Most From QE2 (Update3)
By Nick Gentle
Nov. 3 (Bloomberg) -- Goldman Sachs Group Inc. raised its 12-month target for Hong Kong’s Hang Seng Index to 29,000, saying the city has the most to gain from extra liquidity released by quantitative easing programs and China’s growth.
Hong Kong will benefit most from a capital relocation away from developed to emerging markets, Goldman analysts led by Kinger Lau wrote in a report today. Inflation and low economic growth are reducing the allure of developed-market assets, the analysts said. Goldman analysts forecast in December the Hang Seng Index may reach about 27,000 by the end of 2010. The gauge climbed 2 percent to 24,132.38 as of today’s trading break at 12:30 p.m. local time.
The U.S. Federal Reserve is likely to announce a plan today to purchase a further $500 billion of long-term securities to stimulate the economy in a program known as QE2, according to economists surveyed by Bloomberg News.
“We suspect the resulting liquidity impact could go beyond many investors’ expectations,” the analysts wrote. “The overwhelming importance of China to the growth in Hong Kong may mask the unfolding trend of gravitational attraction of international capital.”
Easy liquidity and Hong Kong’s stable regulatory environment make the city’s real estate market attractive, and values, which are at 13-year highs, are likely to appreciate, the report said. Property oriented stocks provided a better investment option than the physical market, they said.
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