The Zhitong Finance App learned that Guotai Junan released a research report saying that the allocation of Hong Kong stocks focuses on three directions: leading Hong Kong stocks on the Internet, superior technology for Hong Kong stocks, and high dividends for Hong Kong stocks. 1) At the policy level, it is clearly stated that contractionary policies are carefully introduced. Hong Kong stock Internet companies have the earliest policy adjustments and the longest cycle, and the current uncertainty of expectations has declined. Moreover, the valuation adjustments have been sufficient, so it is possible to lay out leading high-quality Internet companies from a longer-term perspective. 2) Among Hong Kong stocks, it is mostly representative of China's new quality productivity. Next, China's investment opportunities are in the technology manufacturing industry, focusing on such as Hong Kong semiconductors, Hong Kong pharmaceuticals, Hong Kong automobiles, etc.; 3) The long-term investment value of high-dividend stocks is still quite prominent. It is recommended to focus on high-dividend industries of Hong Kong stocks such as communication operators, energy, and utilities.

Guotai Junan's main views are as follows:

The decline in uncertainty is an important foundation for the rebound in the Hong Kong stock market, bringing Hong Kong stock assets back into the investment perspective. On April 14, the Cathay Pacific Junan Stock Strategy Team released an important strategy report “Changes Are Emerging, Reversely Improving the Quality Asset Allocation of Hong Kong Stocks”. Before the launch of the Hong Kong stock market, we systematically discussed investment opportunities in the Hong Kong stock market. After three years of adjustments, the valuation fraction of the Hang Seng Technology Index is only 4.4%. The market has already calculated various uncertainties and risk factors. Such a low valuation level is rare in history. In 2024, several ministries and departments have made it clear “more policies conducive to stable expectations, steady growth, and stable employment, and prudently introduced contractionary and suppressive measures”. The regulatory orientation of the platform economy is undergoing more positive changes. The process of shrinking policies and valuations and declining risk appetite has come to an end. The bottom of valuation is clear, and investors need to re-evaluate and examine the positive impact of the above changes on stock valuations.

After uncertainty declined, the visibility of the expected returns on high-quality assets in Hong Kong stocks increased, and the allocation value increased accordingly. High-quality Hong Kong stock companies, especially Hong Kong stock internet companies, have lower valuations, lighter assets, and faster profit growth. These characteristics complement not only domestic investors but also a very important source of income for overseas investors. At the same time, the liquidity of Hong Kong stocks has also improved markedly due to the five major cooperative initiatives of the Securities Regulatory Commission with Hong Kong, as well as large-scale share repurchases and more active dividend payments by leading Hong Kong stock companies. Compared with the US, Europe, Japan, and India stock markets, Hong Kong stocks have a lower valuation level and a higher margin of safety; compared to A-shares, which are relatively crowded with dividend assets, the expected return on Hong Kong stocks is higher for deep value investors.

Peripheral currency fluctuations have increased, and Hong Kong stocks have become safe havens for global investors. Peripheral currencies are under high pressure to fluctuate, and we have indeed observed that overseas investors are more active in increasing the Chinese market. According to the latest report released by the International Finance Association (IIF), the Chinese stock market absorbed 9.6 billion/1.7 billion US dollars in capital in March and April 2024, respectively. The global investment market is changing highs and lows, shifting from US stocks to emerging markets, with a net inflow of foreign capital into emerging markets for the fifth month in a row.

We believe that the allocation of Hong Kong stocks focuses on three directions: leading Hong Kong stocks on the Internet, superior technology for Hong Kong stocks, and high dividends for Hong Kong stocks. 1) At the policy level, it is clearly stated that contractionary policies are carefully introduced. Hong Kong stock Internet companies have the earliest policy adjustments and the longest cycle, and the current uncertainty of expectations has declined. Moreover, the valuation adjustments have been sufficient, so it is possible to lay out leading high-quality Internet companies from a longer-term perspective. 2) Among Hong Kong stocks, it is mostly representative of China's new quality productivity. Next, China's investment opportunities are in the technology manufacturing industry, focusing on such as Hong Kong semiconductors, Hong Kong pharmaceuticals, Hong Kong automobiles, etc.; 3) The long-term investment value of high-dividend stocks is still quite prominent. It is recommended to focus on high-dividend industries of Hong Kong stocks such as communication operators, energy, and utilities.

Risk factors: 1) Domestic economic recovery fell short of expectations; 2) US economic slowdown caused recessionary transactions; 3) international geopolitical friction heats up; 4) Federal Reserve monetary policy easing falls short of expectations.