Analysts said yesterday the Hong Kong stock market was looking attractive at current prices, after yesterdays record rally wiped out some of the recent losses.
They also expressed confidence that the local dollars peg to the US dollar would hold, given the massive combined reserves of the territory and China.
The markets never been cheaper. The fair value is at least 12,000, Brian Parker, head of Hong Kong Research at Credit Lyonnais Securities Asia said.
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Goldman Sachs said in a report that it was expecting a 12-month target of 13,500-14,000 against its August forecast of 17,288 points.
The Hang Seng Index has plunged 4,284.00 points, or 28.5 per cent, since the beginning of October.
Yesterday, the index surged 1,705.41 points or 18.82 per cent to close at 10,765.30, its biggest gain in both points and percentage terms. The powerful rally reversed Tuesdays plunge of 1,438.31 points the indexs largest ever point drop.
Russell Napier, Credit Lyonnais regional strategist, attributed the stock fall to a pullout of overseas funds. The recent stock market collapse was because of the huge liquidation by UK pension funds and overseas investors, he said.
Analysts also sought to allay fears that the Hong Kong dollars peg with the US dollar might not hold. The local currency came under speculative attack last Wednesday, forcing the local monetary authority to sell US dollars and push up interest rates to defend the peg.
Top Hong Kong officials have vowed to draw again from the territorys US $88.1 billion reserves if needed.