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News from the Financial Associated Press on May 31 (edited by Zhou Xinyang)On May 30, the Hong Kong stock market finally stopped falling and stabilized. Inched up 44 points or 0.24%, to close at 18,595 points. The Hang Seng Index rose 1.5% to close at 3,702 points. The market turnover decreased to more than 94.5 billion Hong Kong dollars, and Hong Kong Stock Connect recorded a net inflow of 1.404 billion Hong Kong dollars. The consumer, technology and healthcare sectors recorded large gains, among which Tencent (00700.HK), Meituan (03690.HK), Alibaba (09988.HK) and JD.com (09618.HK) rose 1.0%, 0.5%, 1.3% and 1.6%. The performance of US AI giant Nvidia continued to drive investment sentiment in the AI industry, of which Baidu (09888.HK) and SenseTime (00020.HK) rose 3.3% and 1.8% respectively.
There are huge differences between the market and the top management’s assessment of the economy and expectations of policy introduction, and the tightening of overseas liquidity is the main reason for the adjustment of Hong Kong stocks. The current 23-year and 24-year profit forecasts of both the Hang Seng Index and the MSCI China Index are lower than those in November last year, indicating that the market’s expectations for China’s economic recovery after the restart have cooled, but it also reflects that investors are moving from one extreme to the other. . Geopolitics, the U.S. debt ceiling and the rebound in the U.S. dollar continue to restrict the risk appetite and liquidity of Hong Kong stocks, and the Hang Seng Index may even hit another low for the year.
However, the Hong Kong stock market is providing more risk compensation through the decline. According to multiple indicators, Zhongtai International found that the Hong Kong stock market is not far from the bottom.
In terms of valuation, regardless of benchmarking against U.S. stocks or other emerging markets, the relative valuation of Hong Kong stocks is already at a relatively low level. In terms of absolute valuation, the Hang Seng Index predicts PE and risk premiums to be in the 0.7% and 83.2% quantiles since 2016, respectively. Considering the re-revision of US interest rate hike expectations, the geopolitical tension between China and the US, and the slowdown in the economic recovery in the Mainland, Hong Kong stocks still need to fall to increase more risk compensation. However, according to the profit-to-yield spread model, if there is no financial systemic risk in the United States, it is estimated that the reasonable high and low volatility of the Hang Seng Index in the second half of 2023 will be between 17,745 points and 22,313 points.
In addition, Zhongtai International’s unique indicators point to 17,000 points at the same time, which is a strong support. Since there is not much downside for Hong Kong stocks, there is no need to be overly pessimistic at present.
Based on the current macro-environment and sector valuations, Zhongtai International is optimistic about telecommunications and energy with high interest rates and high dividends that are defensive; power, insurance and semiconductors with low valuations and fundamentals at an inflection point in the cycle; high prosperity but gradual valuations Cost-effective gaming, catering, tourism, food and beverage, traditional Chinese medicine, and games; a quarterly report that exceeded expectations and an undervalued Internet leader.