In the past March, Hong Kong stocks began to break out of the “mud” of decline. As the Hang Seng Index recently repeated at the 17,000 mark, south-bound capital is low and enthusiasm for fund-raising is rising.

However, the agency's desire to take more is not strong, and a pot of “cold water” is being poured out one after another: in April, the Hang Seng Index will fluctuate between 16,000 and 17,000 points.

Moreover, since Hong Kong stocks have already reached the end of the earnings season, there don't seem to be many surprises in the market right now; only the Federal Reserve is “throwing an eagle” from time to time.

Hong Kong stocks may be mainly volatile in April

CCB International believes that the annual profit forecasts for most industries have been lowered, and the profit prospects for Hong Kong stocks are still not very visible. The Hang Seng Index is expected to fluctuate between 16,000 and 17,000 points in the short term. It is recommended to adopt a range trading strategy and barbell allocation to maintain a balanced allocation of value stocks and growth stocks.

Zheshang International pointed out that the fundamentals of the current market have not improved significantly, and the financial environment is highly uncertain amid repeated expectations of interest rate cuts. The mood stabilized after the rapid rebound after the holiday season, and the valuation repair market has basically come to an end. In the current Hong Kong stock annual report performance period, the market is expected to cut to fundamentals-driven markets.

Guotai Junan International said that the domestic economy has recently picked up, overseas institutions have improved domestic economic prospects, and sentiment in the Hong Kong stock market has recovered. The economic recovery has helped improve the overall profit expectations of the Hong Kong stock market. However, in a situation where overseas risk events have not been fully resolved and may disrupt the Hong Kong stock market, the high-dividend style with low risk characteristics still has allocation value.

According to Everbright Securities's analysis, there is still a lot of uncertainty about overseas factors in the second quarter. This will affect the trend of Hong Kong stocks to a certain extent, and the market may remain volatile in the medium to long term. First, interest rate cuts in the US market are expected to be repeated in the second quarter. There is a risk that US bond yields will fluctuate at a high level, which will also affect the Hong Kong stock market. Second, the relationship between China and the US was affected by the election year. The US policy towards China may continue to be introduced intensively before October, which will suppress the risk appetite of the Hong Kong stock market. The market style or bias is pro-cyclical, focusing on high-dividend sectors and procyclical sectors.

Simply put, there is still a lot of uncertainty about overseas factors in the second quarter. Hong Kong stocks are likely to remain volatile in the medium to long term, while low risk, strong fundamentals, and high dividends are still the main lines of the market.

High dividend strategies continue to be sought after

Currently, the Hong Kong stock market is still a market dominated by institutions and foreign investors. Changes in external factors such as the Federal Reserve's monetary policy have an impact on the financial situation of Hong Kong stocks. Therefore, when observing the financial aspects of Hong Kong stocks, it is necessary to pay close attention to US economic data and the trend of the Federal Reserve's interest rate hikes or cuts.

On April 10, the US CPI for March exceeded expectations across the board, leaving the global capital market in turmoil, and Hong Kong stocks pulled back across the board. Currently, the probability that the Federal Reserve will cut interest rates by June is only 22.9%. Agencies expect that in 2024, when the US cycle transition from interest rate hikes to interest rate cuts will only arrive in the middle to late stages, and the release of liquidity pressure on Hong Kong stocks will show a “slow first, then fast” trend.

In terms of investment methods, stable high-dividend strategies are still mainstream.

So-called high-dividend stocks are mainly concentrated in traditional industries such as banking, transportation, and utilities. They have major characteristics such as large market capitalization, high debt ratios, and sufficient cash flow. They are still very attractive to prudent investors.

In fact, since July 2023, Southbound Capital has continued to bottom out high-dividend stocks in Hong Kong. Among them, high-dividend sectors such as energy, telecommunications, and utilities are favored by capital. It can be seen that in an environment where macroeconomic uncertainty is high and market sentiment is relatively sluggish, high-dividend stocks have more allocation value.

In addition to traditional industries, there are also a few Hong Kong stock companies, such as$SY HOLDINGS (06069.HK)$. Based on firm confidence in industry trends and company development, it has attracted the attention of many valuable investors in order to positively return investors, share development dividends with investors, and greatly increase dividends.

SDIC Securities released a research report stating that Shengye plans to pay a final dividend of HK$0.269 in 2023, a year-on-year increase of 259% compared to HK$0.075 in the same period last year, and the dividend rate reached 90%, demonstrating that the company actively gives back to shareholders and shares development results. If the proposed dividend amount is included in the calculation, the company's cumulative dividend payment amount is 461 million yuan. The agency believes that the scale of Shengye's business has grown steadily and dividends have increased dramatically, and reiterated that it maintains a “buy” rating.

CICC also pointed out in a research report that in 2023, Shengye's asset-light transformation went smoothly. In order to better give back to shareholders, it announced a dividend of HK$0.269 per share, increasing the annual dividend rate to 90%, corresponding to the current dividend rate of about 6.5%. Shengye's high dividend ratio returns shareholders, enhances long-term investment attractiveness, maintains Shengye's “outperforming the industry” rating, and gives a target price of HK$6.01, with room for an increase of about 40% compared to the current stock price.