HK - Market Strategy 03 (Dec 17 - Dec 25)

[winston]

<News Alert> China/HK equity strategy: near-term caution warranted amid geopolitical tension and HKD weakness

US’ strikes on Iran triggered concerns on the block of Strait of Hormuz

A negative development on global risk assets, including HK stocks, due to potential stronger USD and a possible brief return of US exceptionalism trade

HKD touching weaker end of trading band may also raise the prospect of HKMA intervention and a subsequent rebound in HIBOR

Stay cautious on HK stocks in the near term

How to position. Potential corrections in 3Q25 – possibly triggered by weaker macro condition, ongoing US-China tension and profit taking - could present opportunities for dip buying.

We prefer HK-listed shares over A-shares due to its higher concentration of tech stocks, more attractive valuations, and greater sensitivity to foreign investment flows.

Our key investment themes are
1) tech stocks,
2) resilient industry bellwethers, and
3) high-yield stocks with stable earnings.

Source: DBS

https://www.dbs.com/insightsdirect/coun ... ecid=26128

[winston]

Standard Chartered and UBS bullish on Hong Kong, China stocks on policy support, earnings

Standard Chartered is overweight on allocations to Chinese equities, while UBS expects the premium between A and H shares to narrow further

Mainland Chinese and Hong Kong stocks, will rise in the second half as Beijing’s policy support is expected to revive earnings growth, according to Standard Chartered and UBS Group.

Standard Chartered was overweight on allocations to Chinese equities due to the de-escalation of tariff tensions with the US following the signing of a framework agreement last week, the UK bank said in a report on the second-half outlook on Monday.

The bank said it preferred Chinese offshore stocks to onshore ones because many of them were growth companies that had strong upside potential and their valuations were lower than their peers in the US and Europe.

Source: SCMP

https://www.scmp.com/business/china-bus ... pe=section

[winston]

Chinese money fires up Hong Kong shares

Institutional money is gushing in too, causing the gap in dual-listed stocks to compress, although China’s capital controls ensure some variance remains

A record US$90 billion of cash from the mainland has driven a stellar 21 per cent rally in Hong Kong stocks in the first half of 2025.

Mainland investors via Stock Connect now contribute to 50 per cent of Hong Kong’s daily stock turnover, up from around 30 per cent at the beginning of 2024.

High-dividend bank shares in Hong Kong have attracted yield-focused investors such as Ping An Insurance and China Life, as long-term treasury yields flirt with record lows.

Source: Reuters

https://www.businesstimes.com.sg/compan ... ong-shares

[winston]

<Research>CICC: Investors Shall Moderately Reduce Positions in HK Stocks in ST, Keep 'Bullets' for Future Opportunities

The macro environment for industry rotation in Hong Kong stock market is characterized by 'abundant capital + asset scarcity = index volatility + extreme structure', CICC recently released a research report saying.

The reason why the market is characterized by index oscillations but with active market structure was due to the lack of overall economic returns, the existence of structural highlights and the strong abundance of capital.

At the industry level, the above analysis shows that new consumption and innovative drug unite was also very evident.

In this context, tightened short-term liquidity margin, tariff negotiation variables, weakening data and delayed policy launch may cause market volatility.

Therefore, CICC suggested investors can
1) moderately reduce positions in the short term,
2) switch to stable dividends,
3) wait for future opportunities for AI internet, which is expected to have significantly slowed since the beginning of the year.

If significant fluctuations occur, investors can instead intervene more aggressively to buy back quality assets at a lower cost, but only if they can keep the “bullets”.

Source: AASTOCKS Financial News

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

[winston]

<Research>Guotai Haitong Expects Southbound Capital Inflow to Exceed $1T This Yr w/ Clear Differences in Sectors Preferred by Different Institutions

Dissecting the southbound structure from various types of investment subjects, historically, retail investors and other funds are the main force of southbound capital, Guotai Haitong Securities issued a research report saying.

However, in 1Q25, insurance funds, publicly offered funds and other institutional funds, promoted the net inflow of Southbound Trading of Stock Connects to a new high.

Different types of investors have significant differences in their preferred sectors for Hong Kong stock market, with Chinese public offering of funds favoring tech and pharma, and insurance funds liking premiums.

For the whole year, against the backdrop of asset shortage, there is still room for institutional funds to increase their allocation to scarce Hong Kong stock assets.

The broker quantitatively estimated the 2025 net inflow of southbound funds to exceed $1 trillion.

There were obvious differences in the preferred sectors of Hong Kong stocks among different organizations.

This year, southbound funds mainly flowed into internet technology and banks, such as retail, software services and banks. The driving force behind this may vary.

As the positions of private equity funds in Hong Kong stocks are relatively opaque, Guotai Haitong Securities mainly researched the incremental size of active public offerings, ETFs and insurance funds in various sectors.

Source: AAStocks Financial News

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

[winston]

Positioning for potential fund rotation

Hang Seng Index has rebounded to its Mar 25 peak, while Hang Seng TECH Index remains 5.9% below its March high.

Since mid-Mar 25, we have observed pronounced sector divergence:
Biotech has clearly outperformed, while Retailing (Alibaba, JD.com and Meituan) and Consumer Services (catering, education) have underperformed (Figs 6-7), reflecting investor concerns over weak household consumption and intensifying involution-style competition in e-commerce platforms.

Amid the current liquidity environment, policies and hunting-for-laggard trades could drive meaningful fund rotation.

i) Among the laggards, we prefer catering names such as Yum China (Add, TP: HK$459.0, CP: HK$383.2) and smartphone supply chain stocks such as BYD Electronics (Add, TP: HK$46.8, CP: HK$33.6) and AAC Tech (Add, TP: HK$63.0, CP: HK$39.3).

ii) “Anti-involution” regulatory measures for food delivery/instant delivery and new energy vehicle sectors could bring significant upside for Alibaba (Add, TP: HK$153.0, CP: HK$120.9), Meituan (Add, TP: HK$161.0, CP: HK$133.2) and XPeng (Add, TP: HK$123.8, CP: HK$74.1).

Meanwhile, even among the outperforming sectors, we believe valuations are undemanding for insurance and “soft tech” names (games, short videos, music streaming, AI applications) and hence could bring near-term upside potential.

Our high conviction names include Tencent (Add, TP: HK$654.0, CP: HK$552.0), Bilibili (Add, TP: HK$233.0, CP: HK$197.5), Prudential (Add, TP: HK$142.0, CP: HK$98.1) and AIA (Add, TP: HK$103.0, CP:HK$71.3).

We are also positive on the biotech sectors despite YTD strength.

We suggest investors retain exposure to large caps with FY25-26F breakeven potential such as BeOne (Add, TP: HK$197.7, CP: HK$180.9), and those with 2H25F catalysts from out-licensing deals.

Source: OCBC

[winston]

Bullish outlook seen for Hang Seng Tech Index

by Zane Aw Yu Xuan

Staged a significant breakout above the 5,500 level in the latter half of July.

Firstly, market sentiment has been lifted by the government’s promises to tackle price wars and curb overcapacity in industries such as solar panels, electric vehicles and online food delivery.

Secondly, the planned resumption of Nvidia’s H20 AI chips supply to China also boosted optimism over the country’s tech development efforts.

Thirdly, a surge in mainland Chinese investors’ purchases of Hong Kong-listed technology stocks has provided a strong tailwind.

This year’s total to HK$800 billion, a figure just shy of the 2024 record of HK$808 billion.

Source: Business Times

https://www.businesstimes.com.sg/compan ... tech-index

[winston]

China, HK garner net fund inflows over US$44b

China and Hong Kong attracted about US$44.3 billion (HK$345.5 billion) in net fund inflows between April and late July.

This reversed earlier net outflows of approximately US$10.6 billion recorded between January and March.

Uncertainties are prompting international investors to adopt more proactive diversification strategies, with China-related and yuan assets increasingly taking up a larger share of their portfolios.

A large portion of the inflows came from traditional funds in Europe and the US, mainly targeting Chinese bonds, with about 50 to 60 percent channeled via Hong Kong’s Bond Connect.

The city is aiming to become the world’s largest wealth management center by 2028.

Source: The Standard

https://www.thestandard.com.hk/wealth-a ... le/308172/

[winston]

Temasek fine tunes Chinese stock portfolio as PIF exits Alibaba in sovereign fund tweaks

Temasek slashed its holdings of JD.com by 87 per cent, cut its Alibaba stake by two-thirds and cut NetEase by 38 per cent, according to its 13F disclosure

by Yulu Ao

Two of the world’s largest sovereign wealth funds have adjusted their stakes in Chinese equities, trimming their exposure to technology stocks while going long on consumer companies as they mirrored Bridgewater Associates in reacting to volatile markets and rising US-China tensions.

Singapore’s Temasek Holdings cut its stake in Alibaba Group Holding by two-thirds to 1.85 million shares in the quarter that ended in June, according to its 13F disclosure on Thursday.

It slashed its JD.com holdings by 87 per cent to 589,256 shares, cut NetEase by 38 per cent to 1.45 million shares and pared H World Group by 8 per cent to 6.24 million shares.

Temasek went long on PDD Holdings, increasing its stake in the Pinduoduo discount e-commerce platform by 28 per cent.

It raised its investments in Yum China, which operates the KFC and Pizza Hut franchises in the country, by 30 per cent.

It invested in some companies for the first time, buying 1.23 million shares of the real estate brokerage KE Holdings and 1.19

Source: SCMP

https://www.scmp.com/business/china-bus ... pe=section

[winston]

Mainland Chinese traders sell record amount of Hong Kong stocks

Investors in mainland China sold a record HK$20.4 billion (S$4.1 billion) worth of Hong Kong-listed stocks on Thursday (Aug 28), a sign the country’s army of investors are returning to their local market amid a breakneck rally.

“There may be some funds reverting back to the mainland in a re-balancing of positions after the strong inflows lately” .

Source: Bloomberg

https://www.businesstimes.com.sg/compan ... ong-stocks