Where will Hong Kong stocks go in 2022? UBS: Valuation still attractive

Looking back on 2021, the overall correction of the Hong Kong stock market is relatively deep, standing in the present looking forward to 2022, what kind of market will Hong Kong stocks perform? At the same time, do you have any suggestions on the allocation of large categories of assets? In response, Roddy, director and asset allocation fund manager of UBS, the world's leading asset manager, expressed his latest views in a small-scale exchange.

In terms of Hong Kong stocks, the premium index of Hang Seng Shanghai-Hong Kong Stock Connect H share gradually reached a high in the second half of 2021, which is still attractive from a valuation point of view. The key is that the market needs to find confidence.

The market is more worried about the high valuations of U. S. stocks, which will affect the interest of capital to a certain extent. The Fed's tightening still has a negative impact on some growth assets and long-term assets. However, on the whole, we think that there will still be a good environment for risky assets next year.

Here are some excerpts from the roadshow's point of view:

In terms of Hong Kong stocks, the premium index of Hang Seng Shanghai-Hong Kong Stock Connect H shares gradually reached a high in the second half of 2021, which is still attractive froma valuable point of view. The key is that the market needs to find confidence.

From this year's northbound capital data, we also found that the largest outflow in 2021 occurred in the middle of the year, which is a strategic adjustment to regulatory policies such as the education industry. Overseas capital is uncertain about its future development and China's strategic direction, coupled with the fact that it has been in an anti-monopoly regulatory environment this year, so foreign investors will have this sentiment.

But fora share, there is no such impact. China's Internet is not listed in A-shares or directly affected by the industry, mainly not in A-shares, so foreign capital in A-shares is very stable this year.

We can see several of these changes because of the epidemic, which has had a significant impact on production and economic activities.

In addition, the sudden concentration of foreign capital inflows as a result of China's reserve cut are traditional ways to influence foreign sentiment. The macroeconomic environment and the impact of macroeconomic policy changes are understandable.

Therefore, this also reflects that foreign investment is not partial to the whole, and there are not only two attitudes towards Chinese assets: optimistic and not optimistic. They still judge the logic behind the phenomenon.

In addition, the portion of high-yield bonds fell sharply in 2021, but the impact of China's high-yield bonds was very small. So from this level, overseas funds are viewed separately. If we say that the monetary environment and liquidity will tighten next year, it will certainly have a negative effect.

There may be some good environments for risky assets

Risky assets will have a good environment.

If the economy gets better, it will be a big loss if money is withdrawn fromhigh - growth assets that may bring you higher returns. Therefore, everyone will not sell risky assets because of the tightening of liquidity, which depends entirely on whether the economic environment is sufficiently supportive at that time.

Therefore, from this point of view, the concern about the market is that US stocks have relatively high valuations, which will affect the interest of funds to a certain extent. The Fed's tightening still has a negative impact on some growth assets and long-term assets. However, on the whole, we think that there will still be a good environment for risky assets next year.

Finally, the macro relationship between gold and China is not particularly great, and the biggest pricing factor of gold is the real interest rate in the United States. So, to some extent, you can also think of gold as a diversification of Chinese assets, because its pricing factor is not domestic, but it provides a different source of risks and returns.

Historically, we havebeen slow down in a slowdown most of the time in 2021, and all risky assets are supposed to perform poorly. In fact, what we see is that MSCI China and Hang Seng China are not very good, and the industrial metal chemical industry is doing very well.

What does that mean? Explainthat we can't simply look at it like a textbook.These historical trends.

This year not the standard slowdown, or the slowdown of the past 11 years.StageIt's not exactly the same. I have my own this year.Characteristics, for example, the epidemic leads to an imbalance between supply and demand, which leads to the price of goods.Rise，it didn't exist in the past, so industrial metals and chemicals .This year performed very well.Similar A manifestation of the prosperity phase.

In addition, for example, the performance of the China Securities 500 gem is relatively good this year, and it is obvious that the growth style is still good this year. In addition, some themes related to industry and industrial materials have also performed well this year.

In a macro environment in China, we are in the bottom area and have encountered policy support, which means that the future may change from the bottom to the recovery, whether it is three months, six months or one year.It depends on the strength and rhythm of the policy.

Edit: sabrina