SPDB International: Short-term Hong Kong stock market sentiment may enter a volatile recovery period, and the “technology+dividend” barbell strategy is still effective

The Zhitong Finance App learned that SPDB International released a research report saying that since November, the Hong Kong stock market sentiment index has fluctuated quite a bit due to repeated expectations of the Federal Reserve's interest rate cuts and a correction in the US stock AI sector. Currently, the Hong Kong Hang Seng Index's forward-looking price-earnings ratio is 12.7 times, down 5% from its highest point during the year. In the absence of new catalysts, short-term sentiment in the Hong Kong stock market may enter a period of volatile recovery, but there is no need to be blindly pessimistic, or the time has not reached a complete bottom. Short-term style and main investment lines may rotate, and the “technology+dividend” barbell strategy is still effective.

SPDB International's main views are as follows:

Liquidity factors and the correction in the US AI sector put pressure on Hong Kong stock market sentiment

As of December 10, the reading of the Hong Kong Stock Market Sentiment Index constructed by SPDB International was 59.1, which is a marked drop from the November high of 83. It is near the standard deviation of its moving average of minus 0.5 times over the past year, but it did not touch extreme weakness (negative 1 times standard deviation), nor did it enter a pessimistic range (below 40).

SPDB International said that since November, the sentiment index has fluctuated quite a bit. Due to repeated expectations of the Federal Reserve's interest rate cuts and the correction in the AI sector of US stocks, the sentiment index has weakened rapidly. Since then, although concerns about the AI bubble have not been resolved, the sentiment index has recovered due to the Fed cutting interest rates as scheduled. Currently, the Hong Kong Hang Seng Index's forward-looking price-earnings ratio is 12.7 times, down 5% from its highest point during the year. In the absence of new catalysts, short-term sentiment in the Hong Kong stock market may enter a period of volatile recovery. Investors need not be blindly pessimistic, but it may not be time to completely bottom out.

Recently, most indicators have weak momentum

Overall, out of the 13 indicators that make up the sentiment index, only 2 have strong momentum for improvement (weight: 15.4%), namely an increase in the amount of Hong Kong stock repurchases and a decline in the place/subscription ratio for Hang Seng Index options. Nine indicators have weakened (weight: 69.2%), namely a decline in main board turnover, a decline in the amount of capital raised in IPOs, a decline in the RSI index, a decrease in total AH discount/premium levels, a slight increase in risk premiums in the Hong Kong market, a narrowing in net inflows of foreign capital, an increase in the short selling ratio, and a narrowing of the positive gap between 1-month contract Hang Index futures and Hang Seng Index prices. Two indicators remained basically unchanged: the Hang Seng Index Volatility Index and the equity yield difference (weight: 15.4%). Next, if more factors turn to improvement, it is expected to drive the market sentiment index upward.

Short-term investment trading strategy: barbell strategy, both offense and defense

In the short term, it is expected that the market will maintain a volatile trend, and styles and main investment lines may rotate. The lack of a new catalyst in the short term, and the uncertainty of the Fed's interest rate cut next year will affect external liquidity, incremental capital allocation, or focus more on scarce assets, and limited room for valuation expansion. These factors will all increase market fluctuations, so profit side performance will be more likely to determine market trends. Short-term investment and trading strategies suggest a combination of offense and defense; the “technology+dividend” barbell strategy is still effective.

Dividend side: In addition to traditional dividend sectors such as highly defensive banks, insurance, telecom operators, utilities, and energy, the consumer sector is also worth paying attention to.

Technology side: Focus on leading AI Hong Kong stock companies with reasonable valuations, strong AI attributes, and moats. At the same time, the A-share computing power industry chain and AI application opportunities are also worth paying attention to.

investment risk

Statistical analysis data is based on third party databases and may be biased. The model conclusion is based on historical data. The ability to predict the future is limited, and there is a possibility that it will fail. Market sentiment can be affected by unpredictable events.