In March, the Hong Kong stock index showed a V-shaped trend
Hong Kong stocks continued to decline in March, mainly affected by the conflict between Russia and Ukraine and the negative impact of the foreign company Accountability Act. On March 8, the US Securities Regulatory Commission included five Chinese Listed Companies in the us into the temporary identified list in accordance with the foreign company Accountability Act, which increased the risk of delisting of China concept shares listed in the US, seriously frustrated the share price, and indirectly dragged down the sharp decline of Hong Kong shares. The rebound in the middle of the month was due to the special meeting held by the Finance Committee of the State Council. On March 16, the financial stability and Development Commission of the State Council held a special meeting to study the current economic situation and capital market issues. Vice Premier Liu he chaired the meeting. The meeting released heavy signals for macro-economy, real estate enterprises, China concept stocks, platform governance and financial market stability, and Hong Kong stocks rebounded sharply.
“Steady growth” policy supports the recovery of Hong Kong stocks
The social finance data in February was lower than the market expectation, but the weak social finance data may not need to be worried. Looking forward to the future, the policy level will still provide support for credit repair. The economic growth target of about 5.5% in 2022 also needs to be moderately boosted by credit. In the future, social finance may still show a trend of continuous improvement.
Real estate risks have been mitigated, and financial real estate is expected to continue to pick up. The continuous fermentation of real estate risks in March dragged down the trend of Hong Kong stocks. It can also be seen from the recent restructuring of Evergrande that the policy support has actually been implemented. Since March, real estate enterprises have set off a wave of repurchase of US dollar bonds. In the future, with the marginal easing of the financing environment, the financial and real estate industry with a high proportion of Hong Kong stocks is expected to continue to pick up.
The impact of external disturbance is weakening, and Hong Kong stocks are expected to repair
The situation in Russia and Ukraine has eased, and the two sides are expected to reach a compromise, but it will take time. On the evening of March 29, the fifth Russia Ukraine talks made significant progress, in which Russia made major concessions and announced a significant reduction in military operations. At the same time, Ukraine has also proposed to exchange neutral non nuclear status for security. Russia and Ukraine are expected to reach a compromise.
Sino US economic and trade relations may ease to a certain extent. Judging from the recent resumption of tax exemption for some Chinese goods by the United States, the direction of Biden government’s economic and trade policy, and various economic problems faced by the United States, China US economic and trade relations are likely to ease to a certain extent.
However, the risk of global stagflation still exists, which suppresses the repair space of Hong Kong stocks to a certain extent. At present, both Europe and the United States are facing the problem of high inflation. If the global energy price continues to rise under the conflict between Russia and Ukraine, the market’s concern about global stagflation is also an important factor to suppress the repair space of Hong Kong stocks.
The Hong Kong stock market will rebound moderately, but the repair space is limited.
After the external risk factors are gradually cleared out, the “steady growth” policy will promote the recovery of Hong Kong stocks. The conflict between Russia and Ukraine is expected to ease, and Sino US relations may ease. Under the background of the gradual clearing of external risks and the improvement of the macro environment in the mainland, the risk appetite of Hong Kong stocks is expected to rebound in April. However, before global inflation improves significantly, the Hong Kong stock market has limited repair space in the short term, and the rebound is expected to be relatively mild.
Suggestions on industry configuration: 1) Hotel, catering, tourism, gambling and other industries that benefit from the gradual convergence of Omicron’s global spread and the recovery of demand. 2) Construction companies benefiting from China’s “steady growth” policy and real estate companies with excellent assets. 3) The intensive period of antitrust policy has passed. Internet technology stocks with low valuation and cost-effective allocation advantages.
Recommended portfolio of Everbright Hong Kong stocks in April: Vanke enterprise (2202. HK), Xincheng Yue service (1755. HK), China energy construction (3996. HK), China Communications Construction (1800. HK), CIMC Enrico (3899. HK), Mengniu Dairy (2319. HK), Shanghai Junshi Biosciences Co.Ltd(688180) (1877. HK) and Shijiazhuang Pharmaceutical Group (1093. HK). See the text for details and logic of the subject matter.
Risk analysis: 1. Escalation of the conflict between Russia and Ukraine; 2. The pace of monetary policy tightening of the Federal Reserve exceeded expectations; 3. Fluctuations in overseas markets.
