China International Trust and Investment Corporation: Expected Hang Seng Index to test 23,000 points this year, current dividend yield is attractive.

CITIC BANK (International) Personal and Business Banking Investment Manager Zhang Haoen stated that the global stock markets will still face various risks in 2025, but there are also positive factors, including the profit performance of certain markets and the decrease in interest rates from high levels. However, market expectations are that Trump's policies may stimulate inflation, leading to an increase in bond yields, and the bond market will face certain volatility. Therefore, it is advisable to diversify bond portfolios into different types of fixed income to control interest rate risk. Overall, effective risk management will help investors seize potential returns in volatile market conditions. He pointed out that it is expected that the Hang Seng Index may test 23,000 points this year, lower than the prediction of 24,000 points made in October last year. It is still necessary to observe the effectiveness of mainland related policies, and the current dividend yield of the Hang Seng Index is 4.3%, which he believes is attractive. Regarding stocks, he mentioned that the market expects the S&P 500 index to record a 9.6% growth in overall profit for the new quarter. If Trump implements a reduction in corporate taxes, it will benefit the US stock market. However, in the current context of high valuations, the US stock market needs a healthy adjustment. Chinese government bond yields are at historic lows, which will help drive funds to seek other high-yield assets. Starting in 2025, China Securities Depository and Clearing Corporation Limited will halve the dividend distribution fee for A shares, in order to encourage listed companies to increase dividend payouts, benefiting "China concept" stocks and high-yield stocks. Regarding foreign exchange, he pointed out that Trump's "America First" policy may lead to inflation, and estimates that the dollar will remain strong until his policies are implemented. He also mentioned that China's mainland is returning to a policy of "moderate easing" of monetary policy, and will increase countercyclical adjustments, which may stabilize the economy, with the expectation that the Renminbi exchange rate will be more stable than other major non-dollar currencies. CITIC BANK (International) Chief Economist Zhuo Liang stated that the basic forecast for the number of rate cuts by the Federal Reserve this year is relatively optimistic, and it is expected that there will be three to four rate cuts in 2025, with a magnitude ranging from 0.75% to 1%. It is expected that rate cuts will begin in the second quarter of this year at the earliest, and the mainland GDP growth for this year is also expected to be 4.8%. Zhuo Liang said that although the Federal Reserve is in a rate-cutting cycle, the Hong Kong dollar's most favorable interest rate has also been lowered, but the HKD interbank rates fluctuate. Referring to the experience of past interest rate cycles, there may be only 25 basis points of downward room for the most favorable HKD interbank rate, which implies significant downward potential for interbank rates.