Everbright Securities: The overall valuation of Hong Kong stocks is still relatively low. Continue to focus on technology growth and high dividend superiority with a "dumbbell" strategy

According to Zhitong Finance APP, Everbright Securities released a research report stating that the Federal Reserve's interest rate cut cycle is expected to begin, and the Hong Kong stock market may continue to fluctuate upward in the future. The overall profitability of the Hong Kong stock market is relatively strong, while assets in sectors such as the internet, new consumption, and innovative pharmaceuticals are relatively scarce. In addition, although the Hong Kong stock market has risen for several consecutive months, the overall valuation remains low, and the long-term cost-effectiveness of allocation is still high. With the continued implementation of domestic policies to stabilize growth and the expected start of the Federal Reserve's interest rate cut cycle in September, the Hong Kong stock market may continue to fluctuate upward in the future. Attention can continue to be paid to the "barbell" strategy that favors technology growth and high dividend yields.

The main viewpoints of Everbright Securities are as follows:

August A-shares and Hong Kong stocks continue to rise warmly

Major A-share indices generally rose in August. Affected by improved market sentiment and policy catalysts, the major A-share indices generally saw an increase in August (as of the 27th), with the STAR 50 index rising the most, up 21.4% in August, while the Shanghai 50 index rose the least, up 5.1%. The fluctuations of other major indices were 6.4%, 7.6%, and 10.1% for the Shanghai Composite Index, CSI 300, and CSI 1000, respectively.

Almost all sectors saw gains, with telecommunications, electronics, and comprehensive sectors leading. In August, almost all sectors saw gains, with only the banking sector experiencing a decline. Influenced by industry events and elevated market sentiment, sectors such as telecommunications, electronics, and computers performed well, while defensive and cyclical sectors, such as banking, steel, oil and petrochemicals, and pharmaceuticals, performed relatively poorly.

The Hong Kong stock market fluctuated upward in August. In August, influenced by rising expectations of overseas interest rate cuts and a warming domestic risk appetite, the overall trend of the Hong Kong stock market fluctuated upward. As of August 27, 2025, the increases for the Hang Seng Technology Index, Hang Seng Composite Index, Hang Seng Index, Hang Seng China Enterprises Index, and Hang Seng Hong Kong 35 Index were 4.5%, 3.2%, 1.7%, 1.5%, and 0.6%, respectively.

A-share viewpoint: Maintaining a bullish outlook on the market

Looking ahead, the market is still expected to continue rising. Currently, the logic supporting the rise of the stock market has not changed, and the market valuation is also relatively reasonable, without significant overextension. In addition, some new positive factors are emerging, such as the potential start of the Federal Reserve's interest rate cut cycle and a warming of public fund issuance. Overall, the market is expected to continue rising in the medium to long term.

On the one hand, the logic supporting the rise of the stock market has not changed. The economic fundamentals may not have much elasticity, but stability is expected to be maintained in the future; Sino-U.S. tariff frictions are still in a period of easing, and there may not be significant frictions within the 90-day extension; the national team’s support for the stock market may exist for a long time; medium to long-term funds represented by insurance capital are expected to continue flowing in; the proportion of financing balance is still not high, leaving significant room for growth.

On the other hand, some new positive factors are emerging. The Federal Reserve's interest rate cut cycle may begin in September, which is expected to be beneficial for the market; the issuance of public funds is also warming up, and public funds may gradually shift from net outflows in previous years to net inflows, which will also have a positive impact on the performance of the stock market Currently, the overall valuation level of A-shares is at a historical medium level, and there is no excessive overextension.

In terms of allocation direction, short-term focus on stagnation. Historically, in markets where the Shanghai Composite Index has risen significantly with small pullbacks, industry performance sometimes reflects "the strong get stronger," and at other times, it reflects "rotating supplementary gains." Currently, this round of market may primarily feature "rotating supplementary gains," making the opportunities for supplementary gains more worthy of attention. Among the first-level industries of Shenwan, focus on machinery and equipment, and power equipment; among the second-level industries, focus on construction machinery, chemical fibers, automation equipment, and commercial vehicles.

In the medium to long term, focus on three main lines: technological self-reliance, domestic consumption, and dividend stocks. In terms of technology, the current development speed of new momentum industries in China is significantly faster than the overall economy, and during the stock market's upward process, the elasticity of the technology growth sector is usually greater, focusing on AI, robotics, semiconductor industry chain, and low-altitude economy; in terms of consumption, promoting consumption is the current policy focus, and the fundamentals of the consumption sector are expected to remain resilient, focusing on subsidy-related and offline service consumption; for dividend sectors, focus on some high-quality targets.

Hong Kong stock outlook: continue with a "dumbbell" type allocation.

The Federal Reserve's interest rate cut cycle is expected to begin, and Hong Kong stocks may continue to fluctuate upward in the future. The overall profitability of Hong Kong stocks is relatively strong, while assets such as the internet, new consumption, and innovative drugs are relatively scarce. In addition, although Hong Kong stocks have risen for several consecutive months, the overall valuation remains low, and the long-term cost-performance ratio is still high. Against the backdrop of continuous domestic stable growth policies and the expected start of the Federal Reserve's interest rate cut cycle in September, the Hong Kong stock market may continue to fluctuate upward in the future.

Continue to focus on the "dumbbell" strategy that favors technology growth and high dividend yields. 1) Focus on concepts related to self-control, chips, and high-end manufacturing that are expected to continue to be supported by domestic policies under the backdrop of the US-China great game. 2) Pay attention to certain internet technology companies with their own independent prosperity. 3) Continue to focus on high dividend low volatility strategies, including industries such as telecommunications, utilities, and banking. The high dividend strategy can still serve as a stable income base.

Risk Warning

1. Policy advancement may fall short of expectations; 2. Significant deterioration in US-China relations; 3. Occurrence of unexpected risk events