BOCOM INTL: Low H-share valuations show resistance to tariffs, tech stocks valuation repair, policy expectations continue to boost the overall market.

BOCOM INTL stated that the new round of tariff policies by Trump has sparked another trade war, and the Hong Kong stock market may face fluctuations due to tariffs. However, unlike in 2018, the market now has expectations regarding tariffs, limiting emotional impacts. Additionally, the overall valuation level of the Hong Kong stock market is currently low, providing some resistance. BOCOM INTL pointed out that the Hong Kong stock market is still expected to be boosted by two favorable factors: (1) the valuation reshaping of the technology sector led by DeepSeek; (2) the upcoming Two Sessions scheduled for March 5, with expectations of a more positive fiscal policy providing support to the stock market. It is recommended to focus on high dividend sectors as defensive positions. Although the landed 10% tariffs are much lower than the initially proposed 60% plan, there is a general expectation in the market that with negotiations and changing circumstances, there will be further pressure to increase tariffs on China. Trump's demands for tariffs on China also involve broader factors such as the reshoring of manufacturing, the TikTok controversy, and the de-dollarization of BRICS countries, all of which could potentially act as catalysts for future tariff increases. In terms of industry allocation, BOCOM INTL pointed out that during the 2018 trade war, sectors with higher dividends like communication, energy, and utilities were less affected, while sectors with higher elasticity like technology, healthcare, consumer goods, and industries experienced greater fluctuations. Therefore, in the face of current market uncertainties, it is recommended to focus on high dividend sectors as defensive positions, particularly in stable cash flow sectors such as electric utilities, telecommunications operators, and banks with attractive dividend yields. In terms of technology stocks, the bank continues to be bullish on AI and the technology sector, especially with domestic large models like DeepSeek driving AI infrastructure providers and computational related assets undergoing a valuation reshaping window. It is recommended to focus on leading companies with technological accumulation and commercialization capabilities. The semiconductor industry chain is also worth paying attention to, especially with the acceleration of localization in the industry chain, where opportunities for domestic chip design companies with import substitution potential are evident.