Morgan Asset Management: The valuations of the mainland and Hong Kong stock markets are reasonable, and there is still considerable room for optimism
Morgan Asset Management expert Shen JiaoJiao stated that the valuations of the mainland and Hong Kong stock markets are reasonable, with low risks and still room for optimism. Although the market is concerned about geopolitical risks and the US-China tariff war not being resolved in the short term, only 10% of the revenue from the MSCI China Index constituents comes from overseas, and mainland policies will dominate the long-term direction of Hong Kong stocks. The Hang Seng TECH Index rose 2.3% last week, and there is room for absorption in AI concept stocks. The valuations of the seven major US stocks exceed 30 times, while the price-to-earnings ratio of Chinese tech stocks is only 15 times, indicating room for expansion. The automotive industry is facing a price war, and it is expected that concentration will strengthen in the future
According to the Zhitong Finance APP, Vice Premier He Lifeng will visit the UK from Sunday (June 8) to Friday (June 13), during which he will hold the first meeting of the China-U.S. economic and trade consultation mechanism with the U.S. Morgan Asset Management's emerging markets and Asia-Pacific equity investment strategy expert Shen Jiao Jiao believes that the market continues to worry about geopolitical risks, and the China-U.S. tariff war may not be resolved in the short term. However, the risks in the mainland and Hong Kong stock markets are not too great, and valuations remain at reasonable levels, leaving plenty of room for optimism.
Shen Jiao Jiao believes that the market continues to worry about geopolitical risks and that the short-term resolution of the China-U.S. tariff war is uncertain. However, from an income analysis perspective, only 10% of the revenue of the MSCI China Index constituent stocks comes from overseas, with only 3% from the U.S., indicating that the risks are not too significant.
Moreover, the strength of mainland policies will also dictate the medium to long-term direction of Hong Kong stocks. If economic challenges arise in the future, there will still be opportunities for policy easing in industries such as real estate. Additionally, with the valuations in the mainland and Hong Kong markets still within the long-term average range, improvements in the macro economy will benefit corporate profit growth.
The Hang Seng TECH Index rose by 116 points or 2.3% last week, outperforming the broader market. She believes that there is currently room to absorb artificial intelligence (AI) concept stocks.
The capital expenditure of large U.S. tech companies on AI is twice as high as in 2020, reaching $300 billion, while large Chinese tech companies currently have related expenditures of only $50 billion, indicating significant upward potential.
From a valuation perspective, the valuation of the Magnificent 7 in the U.S. stock market has exceeded 30 times, while the price-to-earnings (PE) ratio of Chinese tech stocks is only around 15 times, which also has room for expansion.
On the other hand, she also analyzes the automotive industry trends, pointing out that there has been a price war in the industry for the past 20 years, and the phenomenon of internal competition is not new, nor is it limited to the automotive industry; similar situations exist in the photovoltaic and consumer goods industries. Currently, industry inventory has reached a high point this year, resulting in low average profitability across the entire industry, with only single-digit profit margins, reflecting a supply-demand imbalance. It is expected that the industry will strengthen its concentration in the future
