HK - Market Strategy 04 (Apr 25 - Dec 27)

[winston]

Hong Kong 2026 Investment Outlook: Embracing Reflation and Technology Growth

Consumer Discretionary: Look Beyond Delivery Price War

Materials: Anti-Involution Drives Reflation and Rising Corporate Earnings

Information Technology: Domestic Products Remains the Main Theme for AI Investments

Source: iFast

https://secure.fundsupermart.com/fsmone ... rcms348720

[winston]

<Research>Daiwa: Mkt Preference Shifts from AI to Cyclical Industries; Mkt Gradually Turns to Stimulus-Related Sectors After LNY

Mutual funds’ interests in the Hong Kong market cooled slightly in 4Q25, with strong capital inflows into non-ferrous metals and financial sectors, Daiwa said in its China market strategy report.

The broker said that equity and hybrid mutual funds diversified their holdings by the end of 2025.

The proportion of their shareholding value in top-50 stocks to total stock investment decreased from 25.8% to 25.1%.

Although the proportion of the top 10 stocks increased from 12.4% to 12.9%, the broker attributed this to stock price upsurge rather than funds’ stock accumulation.

As a matter of fact, fund managers reduced holdings in some “most popular” names over the past three months, such as CATL (300750.SZ), ZHONGJI INNOLIGHT (300308.SZ) and LUXSHARE PRECISION (002475.SZ).

In Daiwa’s past three quarterly reviews, there was an increase in funds’ interests in Hong Kong stocks, but this trend briefly reversed in recent months, Daiwa noted.

The proportion of Hong Kong stocks in fund heavy-weight stocks dropped from a peak of 17.8% to 16.3%.

Among the top ten heavy-weight stocks in funds, TENCENT (00700.HK) and BABA-W (09988.HK) ranked 6th and 9th respectively in 4Q25, down from 5th and 6th in 3Q25.

Propelled by global metal market trends, Chinese mutual funds drastically increased their holdings in non-ferrous metal stocks in 4Q25 (up 1.7 ppts QoQ), mainly purchasing YNALCO (000807.SZ), ZANGGE MINING (000408.SZ) and SINOMINE RESOURCE (002738.SZ) .

As market preference shifts from AI to cyclical industries, fund managers also turned positive about banks (+0.7 ppts) and diversified financials (+0.8 ppts), with strong capital inflows into INDUSTRIAL BANK (601166.SH) and ICBC (601398.SH) during the period.

For the 1Q26 outlook, as seasonal profit-taking concludes, mutual funds will become more risk-tolerant in 1Q26, Daiwa said.

AI (such as application and memory) and metals remain key investment themes in the short term, but the broker considered investor interest may gradually shift to stimulus-related sectors after the Lunar New Year (LNY) holiday.

Source: AASTOCKS Financial News

http://www.aastocks.com/en/stocks/news/ ... -news/AAFN

[winston]

China tightens cross-border fund scheme, Bloomberg reports
 
China has tightened a cross-border investment scheme that allows mainland and Hong Kong investors to buy each other’s funds, potentially curbing flows into popular overseas markets such as the United States.

The curbs apply to the decade-old Mutual Recognition of Funds programme, which has assets of up to US$86 billion (HK$670.8 billion) and enables offshore funds to tap mainland Chinese capital.

Under the new approach, regulators are placing limits on where funds raised from mainland investors can be invested, the people said.

Source: The Standard

https://www.thestandard.com.hk/market/article/323039/

[winston]

JP Morgan Private Bank sees 5 to 8 pc market dip as buying opportunity for Chinese stocks

by Helen Zhong

JP Morgan Private Bank remained cautiously constructive outlook towards the equity market in offshore China, suggesting investors add holdings when the market pulls back 5 to 8 percent, or in the range of around 25,000 to 26,000 points in the Hang Seng Index.

China still saw soft consumer activities and negative earnings growth in companies recently.

He suggested focusing on the Chinese tech stocks, high-dividend stocks, and some of the underperformed consumer stocks that have reasonable valuations.

The private bank said the Indian share market will outperform the market this year, with an expected double-digit return, due to its earnings recovery, consumption growth, and attractive valuations.

Source: The Standard

https://www.thestandard.com.hk/wealth-a ... le/323613/

[winston]

vested in 3033 (HS Tech ETF)

Hang Seng Tech Index expected to continue decline

The current drawdown for the Hang Seng Tech Index is likely to persist in the near term with a breakdown of key support levels amid outflows from China’s sovereign wealth fund and investor concerns of higher tax on internet firms.

by Zane Aw Yu Xuan

The selloff in Chinese technology shares pushed the key index to the brink of a bear market, with a 20 per cent decline from the October 2025 peak.

This underperformance is largely due to several factors, including concerns over a tax on internet firms and outflows from China’s state-backed institutions.

Investor sentiment deteriorated amid fears that the authorities may impose higher value-added tax on internet firms following a tax increase on telecommunication companies.

Also weighing on sentiment is Tencent’s decision to hand out cash through digital red packets to drive traffic towards its artificial intelligence app, Yuanbao, which mirrors similar promotional campaigns by peers.

The ETF outflows have coincided with regulators’ efforts to tighten rules on margin financing, signalling unease over rapid gains in sectors such as rockets and AI applications, where profitability is unclear.

The index could continue to pull back towards the 5,100 level, representing a further 6 per cent downside from the current price at the time of writing.

Source: Business Times

https://www.businesstimes.com.sg/compan ... ue-decline

[winston]

China/HK Market Strategy: Result preview: Soft FY25 but stable outlook for FY26

A-share earnings alerts and China/HK benchmarks’ consensus revision indicate a soft FY25 result season

In HK, Insurance, Consumer Services, and Materials lead FY25 EPS upward revisions, while Real Estate and Software are the primary laggards

FY26 EPS trend remains largely steady

Our sector analysts identify stocks that may deliver earnings surprises on page 7

Early signals of FY25 results indicate a weaker baseline As we approach the result season, preliminary A-share profit alerts and YTD EPS revisions in China/HK stock benchmarks suggest a soft FY25 earnings:

A-share alerts: Among 3,066 A-share firms that have issued earnings alert as of Feb 23, 35.9% firms saw FY25 net profit turnaround or growth, an 8.4ppt decline from 44.3% in 1H25.
Consensus drift: FY25 EPS consensus in both CSI 300 and HSI also portrait a similar picture with downward revision of 1.2% and 0.3% YTD, respectively.

Source: DBS

https://www.dbs.com/insightsdirect/coun ... ecid=29805

[winston]

Michael Burry Exposes 'Vulnerability' In Chinese Tech, Warns Of Hong Kong's 'Cayman Islands Shell' Trap

by Rishabh Mishra

Nearly all major Chinese firms, the securities held by international investors are merely shares in offshore entities.

“The actual shares bought by investors are shares of a Cayman Islands shell company with no operations.”

Source: Yahoo Finance

https://finance.yahoo.com/news/michael- ... 06831.html

[winston]

STOCKS | CICC Report Highlights Factors Influencing Hong Kong Stocks

On May 21, CICC released a report indicating that uncertainties in overseas markets, coupled with downward revisions in performance expectations for certain Hong Kong stock sectors and underwhelming domestic macroeconomic data from April, have led to a renewed decline in Hong Kong stocks since May 14.

According to Jin10, despite these challenges, liquidity in the Hong Kong stock market remains robust, with average daily transactions exceeding 250 billion Hong Kong dollars.

On May 15, southbound net inflows reached 24.96 billion Hong Kong dollars, marking the highest level since March 23 this year.

The report suggests that the MSCI quarterly rebalancing at the end of May could bring additional funds to Hong Kong stocks, and ongoing Sino-U.S. trade negotiations may support short-term valuation expansion.

However, starting in June, attention should be paid to the pressure on liquidity in the secondary market due to stock unlocks.

CICC recommends focusing on sectors such as technology, where performance expectations have been fully adjusted, including internet, semiconductors, and robotics; consumer sectors with bottomed-out fundamentals, low valuations, and high dividends; and energy, telecommunications, and utilities, which may benefit from the spread of dividend trading in Hong Kong stocks.

Source: Binance

[winston]

China trading curbs may hit US$32 bil of Hong Kong assets, Citic says

Under the plan’s two-year transition period, existing investors may continue to access their accounts but will only be allowed to sell assets and withdraw funds. Purchases and fund deposits are prohibited.

Source: Bloomberg

https://theedgemalaysia.com/node/804844