Industrial: The current Hong Kong stock market has once again arrived at a good opportunity for "shedding tears and sowing seeds" and positioning oneself at low prices.

Industrial released a research report stating that after late January, overseas factors suppressing the Chinese stock market are expected to see a turning point. At that time, with the inauguration of Trump, the short-term impact of the rise in U.S. bond long-term interest rates and a strong U.S. dollar is expected to come to an end as negative news evaporates. Conversely, China's loose policy may strengthen, increasing the attractiveness of China's assets. Following this, pay attention to changes in U.S. inflation expectations and the impact of the policy mix after Trump's inauguration on January 20th. Currently, the dividend yields of leading stocks in the consumer and manufacturing industries in Hong Kong exceed 5% and are actively repurchasing. Following the landing of proactive policies in the domestic market in 2025, sectors such as technology growth (AI industry chain, semiconductors, autonomous driving, Siasun Robot & Automation, etc.), consumption (trendy products, cultural high-end goods, emotional consumption, dining and travel chains, food and beverages), internet, and outbound industry chains are expected to be reassessed. Main points of Industrial are as follows: After the late January, overseas factors suppressing the Chinese stock market are expected to see a turning point. At that time, Trump's inauguration, the short-term impact of the rise in U.S. bond long-term interest rates and a strong U.S. dollar are expected to come to an end as negative news evaporates. Conversely, China's loose policy may strengthen, increasing the attractiveness of China's assets. Following this, pay attention to changes in U.S. inflation expectations and the impact of the policy mix after Trump's inauguration on January 20th. 1) After January 20th, the "Trump trade" may decline, the momentum of the U.S. dollar index may slow down, which is beneficial for further loosening of China's monetary policy. Recently, the RMB has devalued against the USD, but has shown overall resilience. 2) After mid-January, there is a chance for a temporary decline in U.S. bond long-term interest rates. Firstly, pay attention to the impact of the U.S. federal debt reaching its limit. Secondly, pay attention to changes in inflation expectations and whether the Fed will release relatively dovish voices at the January 29th interest rate meeting. Thirdly, if the expectation of the Fed ending balance sheet reduction in the first half of the year continues to strengthen, it will also be favorable for a temporary decline in U.S. bond yields. 3) If Trump increases tariffs on China after taking office, the market's expectation for further loosening of China's policies will also strengthen. On January 13th, PBOC Governor Pan Gongsheng, in his speech at the ASIA FINANCIAL forum opening ceremony, stated that in 2025, they will strengthen the countercyclical adjustment of macroeconomic policies, correct the trajectory of economic growth, and maintain the stability of economic growth. Hong Kong stocks are at historical highs in terms of risk premiums relative to mainland risk-free interest rates, highlighting the attractiveness of Hong Kong stocks for domestic capital allocation. It is recommended to focus more on Hong Kong assets dominated by domestic capital. The Hang Seng Index's risk premium calculated based on China's 10-year government bond yield is still around 10%, an extremely high level. However, the risk premium calculated based on the U.S. 10-year government bond yield is historically low, and in the environment of high interest rates overseas, the attractiveness of Hong Kong stocks to foreign capital is much lower than to domestic capital. The "annual report season" is approaching, focusing on changes in fundamentals and the reevaluation opportunities brought about by increased dividend ratios. 1) High-quality Chinese companies are expected to continue to increase dividends in 2025 with objective conditions. With the Chinese economy in a period of transitioning between old and new growth drivers in recent years, the capital expenditure growth rate of listed companies has slowed down, and the ratio of free cash flow to operating cash flow of listed companies has significantly improved after 2017. 2) From February to April, Hong Kong stocks and A shares will enter the disclosure period for annual reports, and increased dividends and buybacks may become catalysts for the market. Regulatory policies in 2025 will continue to facilitate the improvement of the quality of Chinese listed companies, further guiding them to strengthen dividends and buybacks to reward shareholders. Investment strategy: sow seeds in tears, go against the trend, allocate a core position in dividend assets, and engage in short-term trading with excellent growth potential. The adjustment at the end of the year has released risks, and the Hong Kong stock market is expected to shake upwards again with positive economic policies following the Chinese New Year. The main incremental capital for the Hong Kong stock market in 2025 may come from wealth reallocation in the mainland under low-interest rate environment. With the release of overseas pressure, monetary and fiscal policies in the mainland in the first quarter will further strengthen, domestic risk appetite will recover, thus driving the Hong Kong stock market to experience a dynamic upward market in the spring. On January 13th, PBOC Governor Pan Gongsheng emphasized "continuing to fully support the construction of the Hong Kong international financial center" and "supporting the healthy development of capital markets in the mainland and Hong Kong." Go against the trend, it is recommended to actively allocate a core position in dividend assets. The dividend yield advantage of red-chip stocks in Hong Kong is significant, with Hang Seng's High Dividend Yield Index yield standing at 7.93% as of January 14, 2025, far exceeding the 10-year yield of Chinese government bonds. Investment strategy: First, continue to allocate to stable state-owned enterprises with high dividends, as dividend assets of state-owned enterprises are still worth considering as a core position in the Hong Kong stock market in 2025. Secondly, select dividend assets with potential for future dividend rate increases, focusing on consumption, energy, and some manufacturing leaders with high ratio of undistributed profits to net assets and low ratio of dividend payments to free cash flow. Engage in short-term trading with excellent growth potential, sow seeds when the market is pessimistic, and harvest when the market is optimistic. It is currently a time for sowing seeds in tears, investment strategy: select excellent growth opportunities based on safety margins. The dividend yields of leading stocks in the consumer and manufacturing sectors of Hong Kong currently exceed 5%, and they are actively repurchasing. With the landing of proactive policies in the domestic market in 2025, sectors such as technology growth (AI industry chain, semiconductors, autonomous driving, Siasun Robot & Automation, etc.), consumption (trendy products, cultural high-end goods, emotional consumption, dining and travel chains, food and beverages), the internet, and outbound industry chains are expected to be reassessed. Risk warning: Risks of big power games; Risks of U.S. monetary policy exceeding expectations; Risks of economic growth declining more than expected.