BOCOM INTL: DeepSeek's positive impact continues, as technology growth leads Hong Kong stocks to a strong start.

date
12/02/2025
avatar
GMT Eight
BOCOM INTL released a research report stating that mainland China's artificial intelligence, represented by DeepSeek, has made breakthrough progress, leading to a reshaping of AI valuation narrative. It continues to spread in the Hong Kong stock market's technology and semiconductor sectors, driving the Hang Seng Index and the Hang Seng Tech Index to lead the global market. It is worth noting that the recent rise in the Hang Seng Index has been primarily driven by valuations. The current position has recovered sufficiently from the lows in early January, and the short-term upward trend is fast, indicating that the index has entered the overbought territory. Meanwhile, the rise in the index is mainly concentrated in the information technology sector, with limited spread to other sectors, suggesting a potential risk of adjustment in the short term. Investors may consider adjusting their positions accordingly and observe profit updates. BOCOM INTL's main points are as follows: DeepSeek leads the reshaping of AI valuation in mainland China, Hong Kong stocks achieve a good start, and the Hang Seng Index leads major global indices: The positive impact of DeepSeek continues, with the technology growth trend leading to a good start. Mainland China's artificial intelligence, represented by DeepSeek, has made breakthrough progress, reshaping the narrative of AI valuation, and continuing to spread in the Hong Kong stock market's technology and semiconductor sectors, driving the Hang Seng Index and the Hang Seng Tech Index to lead the global market. The high yield on 10-year US Treasury bonds has fallen from its peak, easing overseas liquidity pressure. Despite the overall hawkish tone of the January Federal Reserve FOMC meeting, concerns such as the US fiscal deficit have eased, bringing the yield on 10-year US Treasury bonds back to a relatively neutral level of 4.5%, easing liquidity pressure. Trump has postponed imposing tariffs on Canada and Mexico and the 10% tariff on China falls below market expectations, leading to a return of global risk appetite. Despite the uncertainty of tariffs, internal expectations still provide support: Although Trump's new round of tariffs is expected to create short-term uncertainty for mainland exports and the yuan exchange rate, the market has already anticipated the tariffs. Additionally, the overall valuation levels of Hong Kong stocks are low, providing a certain resistance capacity. The market is currently boosted by two major favorable factors. First, under the leadership of DeepSeek, the technology sector has experienced a reshaping of valuations, leading to an increase in risk appetite. Secondly, the National People's Congress and the Chinese People's Political Consultative Conference are scheduled to convene on March 5th, 2025, with expectations for a more positive fiscal policy that could support the stock market. It is worth noting that the recent rise in the Hang Seng Index has been primarily driven by valuations. The current position has recovered sufficiently from the lows in early January, and the short-term upward trend is fast, indicating that the index has entered the overbought territory. Meanwhile, the rise in the index is mainly concentrated in the information technology sector, with limited spread to other sectors, suggesting a potential risk of adjustment in the short term. Investors may consider adjusting their positions accordingly and observe profit updates. The technology growth trend is strengthening, with the Hong Kong information technology sector continuing its rebound momentum, and the AI and semiconductor sectors are performing well. Traditional sectors such as energy and utilities are lagging behind. Specifically: Information Technology: Market sentiment has improved significantly driven by DeepSeek, with large technology and semiconductor stocks continuing to rebound. During the Spring Festival, the influence of the DeepSeek-R1 model expanded, causing the market to reevaluate mainland assets, especially the value of technology assets. With the rapid improvement of domestic AI models to match global elite models, and the significant reduction in model usage costs, the deployment of AI on software and hardware is expected to accelerate. Investors can focus on AI applications, AI computing power hardware, consumer electronics, domestic semiconductor, and other related themes. The catalyzing effect of the AI concept is expected to spread to other sectors for a revaluation of valuations. AI has a wide range of application scenarios, with many investment opportunities available in niche vertical areas, especially in the innovative B-end AI applications. Industries such as healthcare, finance, and education, which produce/consume large amounts of data, are well-suited for AI applications and are worth focusing on. In the current environment, a recommended strategy is a high-resilience and high-dividend allocation strategy for Hong Kong stocks: In terms of the technology innovation trend, bullish on the AI and technology sector of Hong Kong stocks, especially with the push of domestic large models like DeepSeek, AI infrastructure providers and related subjects are undergoing a valuation reconstruction window. The semiconductor industry chain is also worth watching, especially with the acceleration of the localization of the industry chain, there are opportunities for mainland chip design companies with import substitution potential. It is advisable to still focus on high-dividend sectors as a defensive core, with a focus on stable cash flow, attractive dividend yield sectors such as electricity utilities, telecommunications operators, and banks.

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