Industrial Zhang Yidong: Hong Kong stock market bull market is unimpeded, bullish on growth stocks, dividend assets and strategic assets.

Industrial stated in the article that the valuation of Hong Kong stocks is still relatively low, offering a high cost-performance ratio for global allocation. In the medium to long term, the strategic revaluation process of Chinese assets and the development of Hong Kong from governance to prosperity will drive the Hong Kong stock market into a long bull market. The bank predicts that Hong Kong stocks will trend upwards in the second half of 2025 and are expected to continue reaching new highs in the fall season. In terms of investment direction, the bank is optimistic about strategically allocating assets in Hong Kong stocks, new consumer goods, and innovative drugs. Additionally, in terms of growth stocks, the bank is more optimistic about technology in the third quarter. The main points of Industrial are as follows: 1. Since March 2024, "The Spring of Hong Kong Stocks" has been optimistic about Hong Kong stocks, and since "9.24", Hong Kong stocks have demonstrated a bull market, performing well among global stock markets. 2. Hong Kong stocks still offer high cost-performance ratio globally, and the bank advises a rational understanding of the decline in the AH premium rate. The change in the AH premium rate can only indicate that A-shares and Hong Kong stocks alike remain undervalued globally and continue to offer a high cost-performance ratio for global allocation. Based on the risk premium, the risk premium for US stocks remains around 0, while the risk premium for the Hang Seng Index relative to the 10-year Chinese government bond rate is as high as 8% and around 5% relative to the 10-year US bond rate. In terms of P/E ratio, the forecasted P/E ratio for Hong Kong stocks is currently at 10.7 times, representing the 36th percentile since 2015. 3. A significant change has occurred in the ecosystem of Hong Kong stocks, with southbound funds now dominating the market, prompting a rational understanding of the so-called pricing power. From the beginning of 2025 until June 23, the net inflow of southbound funds has exceeded 660 billion yuan, nearing the total inflow for the entire year of 2024 and far exceeding previous years. The main reason for this influx is a change in the market environment, as high-quality companies are listing in Hong Kong, injecting new vitality into the market and attracting the inflow of southbound funds. Investment opportunities: selective allocation to high cost-performance growth stocks, dividend assets, and strategic assets. 4. The bull market trend of Hong Kong stocks is unstoppable, and although there may be some challenges in the beginning of the third quarter of 2025, the upward trend remains unchanged. In the medium to long term, the strategic revaluation of Chinese assets and the development of Hong Kong will jointly drive the Hong Kong stock market into a long bull market. 5. Continuing to strategically allocate dividend assets in Hong Kong stocks. In a period of fluctuation due to great power competition and low interest rates in China, dividend assets in Hong Kong stocks possess strong appeal in asset allocation. The dividend yield for the Hang Seng High Dividend Yield Index is still at 7.6%, nearly 6 percentage points higher than the spread over China's 10-year government bonds. Specific sectors recommended for allocation include financial, telecommunications, utilities, as well as strategic national enterprise leaders that offer stable dividends. 6. Actively exploring more cost-effective growth stocks, with a relatively stronger focus on technology in the third quarter. Following a period of consolidation in the TMT sector in the second quarter, the sector now presents greater value in the growth sector, suggesting to strategically position following this consolidation. The price-earnings ratio for the Hang Seng Technology Index has returned to January 2025 levels, with focus on catalysts in areas such as semiconductors, intelligent driving assistance, AI, Siasun Robot & Automation, and stablecoins. 7. Hong Kong stocks in new consumer goods and innovative drugs are recommended for patience in investment. After a brilliant second quarter, maintaining a strategic outlook is advised, with a focus on distinguishing between long-term trends and short-term disturbances, and differentiating between genuine growth and thematic speculation in the market. 8. Strategic assets in the era of global order restructuring, such as gold, military, and digital assets, continue to be favored for the long term. However, attention needs to be paid to cost-effectiveness and crowding, as high crowding often leads to volatility in the short term. Therefore, short-term tactical adjustments can provide opportunities for positioning in the mid-term. Risk warning: risks related to major power competition, unexpected changes in US monetary policy.