Jan. 6 (Bloomberg) -- Hong Kong’s Hang Seng Index will rise 20 percent this year to 17,200 after posting its biggest annual drop in 34 years, according to a forecast by Credit Suisse Group AG.

“After the sharp correction in the Hong Kong market, we think it’s now in a ‘fair value’ zone,” analyst Vincent Chan wrote in a note to clients.

The benchmark index climbed 3.5 percent to 15,563.31 yesterday, its highest close since Dec. 11. The measure tumbled 48 percent last year, the most since 1974, to 14,387.48, as the global financial crisis dragged the world’s largest economies into recessions. The gauge is valued at 11.3 times estimated earnings, down from 18.7 times at the start of 2008.

To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net

Last Updated: January 5, 2009 16:57 EST