(Yicai Global) Nov. 23 -- The Hang Seng Index, which has been on the rise since the beginning of the year, surpassed 30,000 points for the first time in 10 years on Nov. 22, leading some institutions to believe it could break its all-time high of 31,958.41.
After surging 1.91 percent on Nov. 21, the index rose another 1 percent yesterday to reach 30,199.69 before closing at 30,0007.68, up 0.64 percent. The Hang Seng has risen more than 36 percent year to date.
There are four reasons for investors to be bullish about Hong Kong stocks, analysts said. These include global economic recovery, undervalued stocks in the region, promising fundamentals of the Chinese economy and huge capital inflow brought in by the connection of the Hong Kong and mainland markets.
Despite the significant rise, some institutions believe that Hong Kong stocks are still underpriced. The overall profit-earnings ratio on the index is about 12.7, compared to figures of 23 on the S&P 500 and 39 on the Nasdaq. In Europe, the overall ratio is between 17 and 24, meaning Hong Kong is still the cheapest market in the world.
There is still room for Hong Kong stocks to rise over the next couple of years, some institutions said, forecasting the Hang Seng could reach 32,000 points next year.