CMSC: Hang Seng Technology has great allocation value at the current position. It is recommended to buy on dips and hold during the holidays.

CMSC released a research report stating that recently, the overall decline in technology stocks represented by the Hang Seng Technology Index has been significant. Weak market conditions often serve as a breeding ground for various pessimistic narratives. After a brief liquidity shock, narratives across various aspects from regulation to industry trends have reached an extremely pessimistic level. Hang Seng Technology at its current position has great allocation value. First, the recent market volatility is merely a severe liquidity shock; second, there is nothing new under the sun, the significant market volatility at present is essentially no different from November 2025; finally, looking ahead, positive factors are continuously gathering, and it is advisable to buy on dips and hold the stock for the holiday season. Here are the main points of CMSC: Fundamentals: On the economic data front, both the PMI and demand have slowed down, with prices continuing to strengthen. The structural contradiction of insufficient domestic demand still exists, and expanding domestic demand will continue to be the main focus of policy efforts. At the same time, PPI is expected to further rise. Liquidity and funding: In January, the Federal Reserve did not cut interest rates as scheduled, and the nomination of Powell as the new Fed chairman; in terms of funding, domestic and Hong Kong funds continued to increase their holdings in the Hong Kong stock market in January. Valuation: The relative valuation of Hong Kong technology stocks has reached historically low levels. When measuring the AH premium of the technology sector with the Hang Seng Technology Index/A-share Double Innovation Index, it is currently close to historically low levels, with previous lows in March and October of 22 (rapid outflow of foreign capital), and the end of 23 (gaming regulation). However, the current regulatory environment for Internet companies is significantly better than in 2022 and 2023, in an era of rapid development of AI and technological rejuvenation. Obviously, Hong Kong technology stocks are significantly undervalued. Looking ahead, the odds and win rate of being long on Hong Kong technology stocks are both high. Policy: Strict control of IPO quality will to some extent boost market sentiment, as excessive IPOs have previously become a "consensus narrative" explaining the weak performance of Hong Kong stocks. Allocation strategy: Technology (AI and Internet, high-end manufacturing), non-banks (insurance), dividends. AI and Internet: (1) The investment paradigm is shifting from "arms race" to "profit witnessing," and Hong Kong Internet companies are experiencing value discovery. (2) The AI ecosystem in Hong Kong is becoming increasingly complete, covering AI hardware computing power, underlying large models, and vertical scene application of the entire industry chain. (3) Immediate retail business losses are narrowing and gradually being priced by the market. (4) Hong Kong technology stocks are approaching historical lows, and Hang Seng Technology still has a significant "high adjustment, low configuration" advantage. Non-banks: Asset side "bullish stock, bearish bond," liability side kick-off, operating side high leverage, strong beta varieties. Dividends: The Hang Seng High Dividend Yield Index has a dividend yield of about 6%, with stable dividend payment capabilities. Insurance funds and "fixed income +" in the southbound funds continue to increase their allocation to high dividend assets. Risk warning: 1) Changes in the monetary policy of the Federal Reserve; 2) Significant liquidity fluctuations; 3) Black swan events.