Tech and Internet May Emerge as Main Themes in Hong Kong Stocks
Amidst a global interest rate cut cycle and a flurry of domestic policy releases, the Hong Kong stock market once experienced a "surge," but has recently shifted towards volatility. Whether the Hong Kong stock market can continue its upward trend has become a topic of market concern.
"The fluctuations following the rapid short-term rise in Hong Kong stocks are a normal technical adjustment. At present, whether from the perspective of short-term liquidity or long-term flexibility, Hong Kong stocks still have the momentum to rise overall, and their future performance is worth looking forward to," said Qu Shaojie, Deputy General Manager of the International Business Department of Great Wall Fund and Fund Manager of the Great Wall Hong Kong Stock Connect Value Selection Multi-Strategy Fund. He believes that the "technology and internet" sector is expected to continue to be the main theme of Hong Kong stocks in the future.
From the perspective of institutional investors, Qu Shaojie has been focusing on overseas investment fields, including the Hong Kong stock market, throughout his 15-year investment research career, accumulating rich overseas investment experience. Regarding how to find good companies, Qu Shaojie has his own standards and persistence.
Firstly, he focuses on the sustainability of the listed company's performance growth, rather than short-term high growth. In his view, if a company only has a short-term performance explosion, it may suffer losses in the following years, with a lot of uncertainty, and he basically will not consider such companies. Secondly, he pays attention to the company's financial indicators and has high requirements for gross profit margin, return on equity, cash flow, and other indicators. In Qu Shaojie's view, good companies usually have very good financial performance, which can be analyzed and judged through financial data. "After selecting good companies, we tend to hold them for a long time, striving to earn profits brought by performance growth, and will not pay special attention to the increase or fluctuation of valuation, because valuation fluctuations are something we cannot control." Thirdly, he pays attention to the company's position in the industry, and companies with deep "moats" and high barriers may have higher gross profit margins. "The position of an enterprise is created by people. According to my experience, the depth of an enterprise's moat mainly depends on the level of the management team and whether the enterprise's business model is good."
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Hong Kong stocks still have upward momentum overall. Recently, the Hong Kong stock market has shifted from a "surge" to a volatile correction. Regarding the future performance of Hong Kong stocks, Qu Shaojie holds a more optimistic attitude. He believes that Hong Kong stocks may have certain profit-taking correction risks in the short term, but the overall upward trend remains clear.
He analyzed that, from a short-term logic, since the middle and late September, there have been significant positive news in both internal and external environments of Hong Kong stocks, and the market's risk appetite has been boosted. Overseas, the pace of the Federal Reserve's interest rate cuts may continue and the intensity will not decrease, forming a global liquidity easing pattern, with funds flowing into Hong Kong stocks, bringing abundant liquidity; domestically, since September 24, a package of policies such as reserve requirement ratio reduction, interest rate cuts, and reduction of existing housing loan interest rates have been密集出台, which is fundamentally beneficial to the improvement of the domestic economic environment and the development of the real economy, and Hong Kong-listed companies are also expected to benefit.
From a long-term logic, after reaching a high point in 2018, Hong Kong stocks have entered a period of fluctuation and digestion, and there is still ample room for upward movement. In addition, the domestic economy is in a recovery channel, and the prosperity of Hong Kong-listed companies is gradually rising with the recovery of the domestic economy, and the fundamentals have shown structural improvements. From a large cycle perspective, since the beginning of this year, Hong Kong stocks have shown an upward trend, showing characteristics of recovery in fluctuations, and the market may have reached the end of the fluctuation and accumulation phase, with rebound momentum.
The "technology and internet" sector is expected to become the main theme of the market trend.Among various sectors of Hong Kong stocks, Qu Shaojie particularly favors the internet technology sector, mainly due to its early fundamental recovery and the relative independence of the technology industry from the economic cycle.
Qu Shaojie stated that against the backdrop of liquidity flooding into the market, industries with significant profit improvement and early fundamental turnaround will first attract capital attention. Recently, the substantial inflow of funds into Hong Kong technology ETFs serves as evidence. At the same time, the development of the technology industry has its unique logic and is to some extent independent of the economic cycle. Under the new wave of AI innovation and development, technology and internet companies are expected to chart a new growth curve, opening up higher price and volume spaces.
The preference of overseas funds is an important support factor for being optimistic about Hong Kong stocks. "The Hong Kong stock market has always been a recipient of global liquidity overflow. Under the broad pattern of loose liquidity, overseas liquidity may prioritize choosing high-quality assets in Hong Kong stocks, and technology assets are likely to become the preference of overseas funds," Qu Shaojie pointed out. Currently, many "internet technology" companies listed in Hong Kong are leading companies in their respective niches, with prices and elasticity both possessing strong competitiveness.
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