Societe Generale: Maintains "Overweight" Rating on Chinese Stock Market, Optimistic about the Prospects of Tencent and Other Tech "Seven Giants"
Société Générale maintains an "overweight" rating on the Chinese stock market, focusing on advanced manufacturing and industrial technology, believing that H-shares outperform A-shares. It lists Tencent and six other technology companies as the "7 Giants," considering their valuations more attractive. It points out that the risk premium in the US stock market is low and advises investors to diversify their asset allocation. Recent outflows from US dollar assets may flow into other markets, with Hong Kong stocks supported by southbound capital, and the low HIBOR is favorable for the stock market, but this is not expected to last
According to the Zhitong Finance APP, Frank Benzimra, Head of Asian Equity Strategy at Societe Generale, stated that the bank maintains an "overweight" rating on the Chinese stock market, particularly favoring advanced manufacturing and industrial technology sectors, with a preference for H-shares over A-shares. He has identified seven leading technology companies as the "Seven Giants," including Tencent (00700), SMIC (00981), BYD (01211), Xiaomi (01810), CATL (03750), Alibaba (09988), and NetEase (09999), believing that the valuations of these stocks are even more attractive than those of the "Magnificent Seven" in the U.S. stock market.
Frank Benzimra pointed out that historical data shows that stocks that performed well in the past decade rarely continue to outperform in the next decade, and investors need to diversify their asset allocation. Currently, the risk premium in the U.S. stock market is only about 3%, indicating that holding stocks does not yield much return, while the risk premium in Asian emerging markets continues to widen.
Frank Benzimra also mentioned that the market has recently seen a trend of de-dollarization in assets, with net outflows recorded in U.S. foreign direct investment. If funds leave dollar assets, there is a possibility they will flow into other markets. However, he believes that the funds currently supporting the Hong Kong stock market are still primarily from southbound capital, and the recent low HIBOR is indeed favorable for the stock market, but this situation is not expected to last long
