Zhongtai International: Hong Kong stocks may experience a short-term surge followed by profit-taking, and the subsequent upward trend still needs to rely on corporate earnings support
Zhongtai International strategy analyst Yan Zhaojun pointed out that Hong Kong stocks may rise in the short term due to the Federal Reserve's dot plot indicating expectations for interest rate cuts, but profit-taking will follow. The subsequent upward trend will need to rely on corporate earnings support. The Hang Seng Index fell 272 points last week, and if it rises to 25,000 points, the price-to-earnings ratio will be close to 11 times, requiring fundamental support. Geopolitical issues remain a concern, but China can better cope with trade frictions. It is recommended to pay attention to infrastructure and high-yield Chinese telecom stocks
According to the Zhitong Finance APP, the Hang Seng Index fell by 272 points or 1.1% last week, continuing to be constrained by the 24,000-point level. Yan Zhaojun, a strategy analyst at Zhongtai International, believes that although the chances of a rate cut by the Federal Reserve in March are slim, if the authorities release a dot plot indicating a potential rate cut due to an economic recession, it could lead to a short-term surge in Hong Kong stocks. However, profit-taking is expected to follow, and the subsequent rise in Hong Kong stocks will need to rely on corporate earnings.
He pointed out that the chances of a rate cut by the Federal Reserve in March are low, and attention should be paid to the dot plot released after the meeting, which will reflect whether the authorities anticipate a recessionary rate cut. This could lead to a short-term surge in Hong Kong stocks. However, he also noted that if the Hang Seng Index rises to 25,000 points, the forecasted price-to-earnings ratio (PE) would be close to 11 times, nearly returning to the high levels of 2019, reaching a valuation resistance zone. Further upward adjustments in valuation will require support from fundamentals and corporate earnings.
He also mentioned that the opportunities in Hong Kong stocks are more driven by bottom-up industrial logic rather than top-down macroeconomic factors, and Chinese technology stocks are expected to enter a new upward cycle. As the earnings season begins and important meetings conclude, the market focus will return to corporate earnings and the macro economy, making profit-taking adjustments in Hong Kong stocks unsurprising.
Yan Zhaojun continued to state that geopolitical issues remain an underpriced concern, posing a significant risk for the market. However, it is expected that China can better cope with trade frictions. In terms of sectors, attention can be paid to the underperforming infrastructure sector and the defensive high-yield Chinese telecom stocks