Eoin Treacy's view

This is an ambitious target by any measure particularly since the market has been rangebound for the last couple of years. However, the historical precedent of medium-term capital flows from property to the stock market and vice versa is certainly relevant as prospects for the Hong Kong market are assessed.

The Hang Seng's P/E has risen from 8 to 11 over the last six months but is still attractive when compared to most international markets. The H-Share Index of Hong Kong listed Chinese companies P/E has risen from 7.5 in September to its current 9.15. The respective indices yield 3.22% and 3.4%.

In sympathy with the impressive rebound by mainland China indices both the Hang Seng and H-Shares posted upside key day reversals today. Clear downward dynamics would be required to question potential for a further unwinding of short-term oversold conditions. Sustained moves above 25,000 and 14,000 respectively would confirm returns to medium-term demand dominance and add further credence to the bullish view espoused in the above report. .