Morgan Stanley's Research department on Thursday upgraded Hong Kong stock market view from "cautious" to "in-line" after recent weeks sharp downwards corrections.

 

In its research report published here on Thursday, Morgan Stanley said the benchmark Hang Seng Index has now fallen to slightly below "our current fair value" and the correction is "healthy."

 

Hong Kong stock on Wednesday recorded its worst single-day loss after Sept. 11, 2001, by diving 1,386.93 points, or 5.4 percent, to 24,450.85 as mounting worries towards a possible recession in the United States following the subprime mortgage crisis triggered panic selling.

 

According to the Morgan Stanley report, the Hang Seng Index has corrected 22 percent off its peak in 2007 so near-term downside is limited.

 

"Going forward, a U.S. recession is not a problem if the local economy remains resilient, which we believe it will," the report said.

 

Private consumption should remain strong in Hong Kong, given the positive income and wealth effects from a tight labor market and rising property prices, while the Hong Kong economy has a far higher correlation with China, where we expect 10 percent growth this year than with the United States, according to the report.

 

Morgan Stanley's research team expected in the research report than Hong Kong's real gross domestic product (GDP) growth of 5.8 percent this year, similar to the investment bank's economics team 's forecast of 5.5 percent.

 

"Using our 5.8 percent real GDP growth forecast for Hong Kong and 10 percent in China for 2008," the report said, adding "we derive an HSI target of 30,000 by the end of 2008, an increase of 22 percent from the current levels."

 

"We are not getting more aggressive on the HSI market yet because near-term uncertainty is high, and we would like more transparency and/or a better entry level before backing up the truck," it said.

 

(Xinhua News Agency January 18, 2008)