HSBC has cut its end-year targets for China stock index by 14-18 percent as earnings forecasts fell. The good news? Stock may still finish higher from current levels.
Among its estimates for index levels by year-end, HSBC expects the MSCI China index at 60, the Shanghai Composite at 3,200, the Hong Kong China Enterprises Index (HSCEI) at 10,000 and the Hang Sang Index at 21,000 by year-end. That compares with current levels around 51 for the MSCI China, 19,422 for the Hang Seng Index, 8,183 for the HSCEI and 2,893 for the Shanghai Composite.
HSBC noted that implies potential gains of around 8-22 percent by the end of the year.
HSBC had set the previous targets in early December, but it noted that since then, consensus earnings forecasts for the MSCI China index and the H-share index have fallen 5-8 percent, with energy company forecasts cut as much as 40 percent for this year and 24 percent for the next.
That accounts for around 60 percent of the cuts to the MSCI China index earnings-per-share (EPS) forecast cut.