A report by BOCOM International (BOCOMI) has highlighted the ongoing resilience of Hong Kong stocks despite global uncertainties, particularly the pressures faced by U.S. stocks due to concerns over former President Donald Trump’s policies and the growing risk of “stagflation.” In the Hong Kong market, technology and internet stocks experienced significant valuation recovery following a notable rally, although these stocks now face technical pullbacks due to profit-taking from foreign and short-term investors.
Despite some corrections in Hong Kong’s dotcom sector, stocks driven by domestic demand have shown notable resilience. The market responded positively to expectations of consumption-boosting policies after the conclusion of China’s Two Sessions, including measures like childcare subsidies, which are anticipated to expand. As a result, consumption-related sectors, particularly consumer discretionary, have been rallying, supporting market strength.
As the U.S. Federal Reserve approaches its interest rate decision, market expectations are for a “skip” in rate cuts. However, the release of economic projections, particularly regarding the Fed’s interest rate path and Chairman Jerome Powell’s comments, will be pivotal in shaping global liquidity trends.
Investment Strategy and Recommendations
BOCOMI has recommended a “high elasticity + high dividend” strategy for the Hong Kong market. The firm remains bullish on Hong Kong’s technology and AI sectors, particularly with the growth of domestic AI models such as DeepSeek, which could drive a re-rating of AI infrastructure providers and related stocks. The semiconductor supply chain is also of interest, with a focus on mainland chip design firms that benefit from import substitution, driven by China’s localization efforts.
On a defensive note, the broker suggests maintaining exposure to high-dividend sectors like utilities, telecoms, and banks. These sectors offer stable cash flows and attractive dividend yields, making them a safe haven in the face of ongoing global volatility.
Despite the optimism surrounding domestic demand and technological innovation, the report cautions that the elevated risk of overseas market volatility remains a factor, and investors should stay mindful of the potential for adjustments due to global risk-off sentiment.
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