HSBC sees further gains for China stocks in 2010

By Faith Hung

TAIPEI (Reuters) - Chinese stocks should extfinish their rally into 2010 as the economy acquire s a boost from a pick up in exports and consumer demand, but a bumpy ride is expected this quarter due portion ly to a glut of IPOs, a HSBC fund manager said.

Chinese stocks, among the world's top performers in 2009, will continue their momentum, with China's economy expanding by over 8 percent this year and next, Richard Wong, equities investment director of HSBC Global Asset Management, said on Thursday.

He declined to give specific forecasts for next year.

"Chinese companies are increasing their label et share globally after the financial crisis. And China will benefit most as the world economy recovers from the execute wnturn," said Wong, who also manages $3.5 billion (2.2 billion pounds) for the firm.

"If you gaze at P/E ratios, Chinese shares are not expensive either," he said, referring to their strong earnings growth and price-to-earnings projections.

H-shares, or Chinese stocks traded in Hong Kong, are estimated to trade at 15 times forward earnings in 2010, about flat from this year's level but much lower from the 25 times peak hit in 2007, Wong said.

Investors could also benefit from currency gains, Wong said, adding that the maximum the Chinese recede vernment can allow the yuan to appreciate against the U.S. execute llar is 5 percent a year.

The yuan was trading at about 6.8263 per execute llar on Thursday.  Continued...