CICC Advises Investors to Stick to Swing and Structure Strategies in Hong Kong Stocks
In a recent research report, CICC (China International Capital Corporation) advised investors to stick to the two strategies of swing and structure during the key policy window period of Hong Kong stocks. The report highlighted that the overseas Chinese stock market has gradually stabilized at a relatively low level due to underestimation and expectations of more policy support in the future.
According to CICC, there are positive signals indicating a potential shift in policy tone. The central bank has reiterated the wording of “counter-cyclical adjustment,” which was removed in the first quarter of this year, suggesting that more measures to release liquidity may be taken when necessary. While this change in tone is expected to boost market sentiment and possibly lead to further reductions in funding costs, the bank emphasized that increasing overall return on investment expectations is crucial for boosting growth momentum.
CICC cautioned that relying solely on monetary policy may have limited impact and suggested that the central government’s increased leverage or further relaxation of real estate policies could be the main drivers of growth. Without substantial changes in these aspects, the current growth and market pattern may be challenging to reverse. Therefore, the bank maintains its view for the second half of 2023, suggesting that the market as a whole may remain volatile and that investors should pay more attention to structural opportunities.
In light of this outlook, CICC advised investors to adopt two strategies. Firstly, investors should trade volatility by buying on dips when the market is oversold and taking profits when expectations are sufficient. Secondly, investors should focus on structural opportunities and employ a “dumbbell” strategy, which involves investing in state-owned enterprises with the potential to increase dividend ratios and growth sectors such as the Internet and technology. The healthcare sector may also benefit from greater flexibility after the Federal Reserve’s easing shift.
Overall, CICC believes that sticking to swing and structure strategies is the prudent approach for investors during the key policy window period of Hong Kong stocks. As the market remains uncertain, these strategies will help investors navigate the volatility and capitalize on potential opportunities in specific sectors.