Societe Generale Securities Zhang Yidong: The 2026 Hong Kong stock bull market will continue to focus on “growth, power and restructuring dividends”

The Zhitong Finance App learned that Societe Generale Securities released a research report saying that the 2026 AI wave will benefit from the Federal Reserve's interest rate cut, and that the bubble theory may drive AI towards differentiation and value transformation. The bull market for Hong Kong stocks will continue, and profits and liquidity are expected to co-drive the market. There is still great potential for both profit and valuation increases, especially market growth and dividend assets. In terms of investment strategy, the bank believes that excess income will come from “growth leveraging power and value restructuring dividends”, and is optimistic about the new logic and momentum of AI investment, military technology, the derivative demand of AI technology, new consumption, and pharmaceuticals. Furthermore, in a low interest rate environment, dividend assets, as a scarce stable and high-yield variety, are expected to receive a continuous inflow of allocation-type capital seeking absolute returns represented by mainland insurance funds. It is recommended to focus on opportunities in industries such as insurance, banking, energy, property management, public environmental protection, etc. Traditional industries can pay attention to: supply chain restructure+going overseas+anti-domestic involvement.

Societe Generale Securities's main views are as follows:

1. The AI wave is the fire of the times. 2026 will benefit from the Federal Reserve's interest rate cut

(1) US liquidity easing in 2026, the Fed's interest rate cuts and a weak dollar will improve global liquidity

1. The US easing in 2026 may exceed expectations, and the federal government's debt pressure has become a core variable affecting interest rates in the medium to long term. 1) The Federal Reserve's interest rate cut in 2026 is likely to exceed current market expectations. 2) The restart of asset purchases (QE) or unconventional operations similar to yield curve control (YCC) is worth looking forward to.

2. The US dollar will continue to weaken in 2026, which is conducive to continuing the loose pattern of global liquidity. The difference between situations is only the magnitude of depreciation rather than the direction of devaluation. 1) Scenario 1. The Federal Reserve cut interest rates exceeded expectations, and the US economic recovery slightly exceeded expectations. Then, the US dollar remained weak in sideways trading and depreciated less than in 2025. 2) Scenario 2. The Federal Reserve has only limited easing, and the US economy is relatively weak, then the depreciation of the US dollar may be more obvious, and the improvement in liquidity in non-US markets will be more obvious.

(2) Will the wave of AI technology be a “rigid bubble” in the era of power games? Bubble questions may drive the AI market to diverge and value transformation in 2026

1. The wave of AI technology will become America's “Noah's Ark” to maintain long-term economic competitiveness in the era of great power games. 1) Use history as an example and refer to the Star Wars plans in the 80s. In an environment of great power games and high debt, the current US is less able to withstand the impact of a recession or the bursting of an asset bubble than in the past 30 years. 2) Whether the AI wave can continue will directly determine whether the US can maintain its lead in global technology, which in turn affects global confidence in the US economy and the US dollar. The US government has a stronger will to use national efforts to win the AI technology competition, similar to the enhanced and extended versions of the Internet wave in the 90s.

2. The Fed's interest rate cut will boost the popularity of AI technology, and the bubble theory may drive AI towards differentiation and value transformation. 1) The core reason for the collapse of the Sci-Net bubble in 2000 was that the Federal Reserve raised interest rates and continued tightening of liquidity, leading to the bursting of the Internet bubble, which relied on debt financing to “burn money” but continued to find no effective business model. 2) Looking ahead to 2026, the AI boom is likely to be more like the 1996-1998 Internet wave. The macroeconomy, the Federal Reserve's policies, and the progress of AI technology itself are all very different from around 2000.

2. The “Fifteenth Five-Year Plan” is the spark of policy. China is united in the year 2026 starts

(1) The “burning structure” of the Chinese economy in 2026 is also a source of opportunity for the stock market. In 2026, China is in the beginning of the 15th Five-Year Plan. It will still adhere to the strategic direction of high-quality development. Thus, investing in the Chinese stock market should still focus on structural highlights, medium- to long-term development and hope, and dilute short-term economic experiences.

Hot spot 1: Self-reliance and self-improvement in high-level technology to promote breakthroughs in the optimization and upgrading of the economic structure.

Hot Topic 2: Stimulate domestic demand in 2026 and further focus on service consumption.

Hot point 3: Traditional industrial transformation and upgrading. Leaders benefit from anti-domestic influence, technological empowerment, and overseas travel.

(2) The macroeconomic economy recovered weakly in 2026, and inflation ushered in a “starfire” of improvement. Compared to 2025, macroeconomic changes in 2026 are expected to improve the year-on-year growth rate of nominal GDP and moderate recovery in inflation.

3. Capital outlook for Hong Kong stocks in 2026: A period of friendship between China and the US, joint efforts at home and abroad

(1) Expectations for RMB appreciation increase in 2026. In 2026, with multiple favorable support, the RMB exchange rate is expected to appreciate against the US dollar to return to the “beginning of six” era. First, under the dispute between the two parties and the high debt situation in the US, the Federal Reserve is easy to relax and difficult, and the US dollar is likely to continue to weaken. Second, with the restructuring of the market's perception of the power balance between China and the US, and the restoration of the nominal economy driven by price improvements, the RMB exchange rate is expected to achieve a systematic recovery. Third, attracted by the strengthening of expectations of RMB appreciation and a recovery in the return on domestic assets, capital such as unsettled trade surpluses accumulated over the past three years and net outflows under capital may return in the future.

(2) The trend of foreign capital returning to the Chinese stock market is expected to increase in 2026. 1) Under the combined effects of the RMB appreciation cycle and the improvement in the price-performance ratio of Chinese assets, the momentum for foreign investment to increase the allocation of the Chinese stock market in 2026 will be stronger or stronger. 2) In 2026, the improvement in China's nominal GDP will be an important driving force for attracting more allocative foreign capital back to China's assets. 3) The technology and non-essential consumer goods sector. These fields have always been the preferred investment direction for foreign investors, and the first half of 2026 is expected to see a market driven by bearish back-up.

(3) China's social wealth will continue to trend up stock market allocation in 2026

1. In 2026, China's huge medium- to long-term capital is expected to further increase the scale of equity investment. The supporting policy system for medium- and long-term capital entry is becoming more and more perfect. In an environment of low inflation and low interest rates, the allocation cost ratio of A-shares and Hong Kong stocks clearly exceeds that of the bond market and the property market; Hong Kong stock dividend assets are particularly attractive to medium- to long-term capital.

2. In 2026, China's social wealth, particularly residents' savings of around 160 trillion dollars, still has the potential to increase the stock market. Historically, the ratio of residents' deposits to the total market value of stocks fluctuated in the 1-2 range, and is currently still at a high level in the history of 1.53. As the money-making effect of the stock market improves, residents' deposits are expected to accelerate the allocation of equity assets.

(4) 2026 Hong Kong Stock Connect capital will continue to be the main source of incremental capital for Hong Kong stocks

1. In 2026, with the recovery of new partial equity funds, the energy to increase their holdings in Hong Kong stocks will further increase. Active equity fund shares are expected to pick up in 2026. Referring to historical experience, active equity fund shares often bottomed out two to three quarters after the market bottomed out. Hong Kong stocks have become an important component of public fund allocation. As the issuance of partial equity funds picks up, Hong Kong stocks will continue to gain momentum from “North Water” to increase their holdings.

2. In 2026, insurance capital will continue to systematically increase equity assets. Based on new accounting standards and low interest rates and the continuing poor asset environment, Hong Kong stock high-dividend assets are still highly attractive to long-term capital such as mainland insurance capital.

4. The outlook for the Hong Kong stock market in 2026: the “new consensus” is driven by turns, and the market fluctuates upwards like a torch

(1) Consolidating and enhancing Hong Kong's status as an international financial center is the policy driving force for Hong Kong stocks. Consolidate and enhance Hong Kong's status as an international financial center. In recent years, it has been reflected in mainland China's policy support, collaborative development of onshore and offshore markets, and the active IPOs or refinancing of Chinese new quality productivity-related companies represented by technology, advanced manufacturing, and new consumption in Hong Kong. In 2025, the scale of IPO financing in the Hong Kong stock market returned to a historically normal level and was in a leading position in the world. The breadth and depth of Hong Kong stocks increased greatly, consolidating the foundation of the Hong Kong stock bull market. In the medium to long term, the Hong Kong stock market will become a key force and an important engine for China's new productivity.

(2) The Hong Kong stock bull market will continue in 2026, benefiting from mainland recovery expectations and the Federal Reserve's interest rate cut

1. In-depth analysis of the market structure of the rise in Hong Kong stocks in 2025 can be deduced that there is still great potential for both profit and valuation increases in 2026, especially market growth and dividend assets. In 2025, the division of various sectors of Hong Kong stocks was quite remarkable. Judging from static valuations, although the valuation of the Hang Seng Index tends to be reasonable, many industry valuations are still historically low, such as information technology, consumption, pharmaceuticals, utilities, energy, finance, etc.

2. Looking ahead to 2026, the Hong Kong stock market will continue, and profits and liquidity are expected to co-drive the market. 1) Profits in Hong Kong stocks are expected to pick up, but due to structural differentiation, industry leaders that benefit from overseas demand or are more competitive are expected to gain greater profit flexibility. 2) The risk-free return rate anchored by Hong Kong stocks will decline, and liquidity in Hong Kong, China is expected to be looser than in 2025.

(3) The 2026 market rhythm may be like torch climbing — we need to run during the “new consensus sprout” period, and rest during the “old consensus rampant” downwind period.

1. The pace of the 2026 market will be mainly affected by changes in the risk appetite of Hong Kong stocks. Currently, the valuation of Hong Kong stocks has left the absolute low range, the risk premium has left the high level, and the weak economic recovery suppresses the flexibility to improve profits.

2. Changes in the risk appetite of Hong Kong stocks in 2026 may present “rise first, then decline, then decline”. Just as the torch of mountaineering will encounter various trends, and investors' “consensus on the dominant narrative logic” will continue to change at different stages.

Consensus 1: The Federal Reserve cut interest rates beyond expectations. However, the consensus on the US economy and inflation continues to change.

Consensus 2: With Trump's visit to China, Sino-US relations may gradually improve, the RMB is expected to appreciate, and the attractiveness of allocating China's equity assets will increase. However, the risk spillover effects of the US midterm election year continued to bring about twists and turns in market expectations, and even reversed the consensus on improving Sino-US relations.

Consensus 3: Consensus brought about in the year the “Fifteenth Five-Year Plan” was launched. Pay attention to the favorable policies of the “Two Conferences” in various regions and the national “Two Conferences” in March, new developments in Chinese science and technology, and the transformation and upgrading of traditional industries.

Consensus 4: Weak recovery of China's economy and improvement in inflation in 2026. Focus on whether the improvement in inflation can exceed expectations? On the contrary, be wary of the continuing strengthening of misunderstandings and negative opinions among overseas investors about the Chinese economy.

Consensus 5: The wave of AI technology will not end easily. However, we need to be wary of the impact of bubble theory.

5. Hong Kong stock investment strategy in 2026: be patient and calm, stop being arrogant and impatient. Excess returns come from “growth and cohesive+value restructuring dividends”

(1) Growth takes advantage of momentum: The direction of new quality productivity is the general trend, but only a direction that can forge new consensus can attract joint efforts from domestic and foreign investors. 1) New logic and new momentum for AI investment in 2026 — Internet, end-side AI, media; 2) Military technology, the “15th Five-Year Plan” is expected to usher in a new boom cycle, focusing on opportunities in aerospace, etc.; 3) Derivative demand for AI technology - energy technology (energy storage+solid state batteries), resource revaluation (copper); 4) New developments in new consumption in 2026 -- Macau gaming, beauty care, fashion, tradition Consumption transformation; 5) Alpha opportunities in the main line of “innovation+internationalization” of pharmaceutical nuggets.

(2) Dividend assets: Strategic high-yield interest-bearing assets in the era of low interest rates. In a low interest rate environment, dividend assets, as a scarce stable and high-yield variety, are expected to receive a continuous inflow of allocation-type capital seeking absolute returns represented by mainland insurance funds. It is recommended to focus on opportunities in industries such as insurance, banking, energy, property management, public environmental protection, etc.

(3) Discovering the value of traditional industry restructuring: supply chain restructure+going overseas+anti-internal volume. First, global supply chain restructuring, global value chain redistribution opportunities, and focus on steel leaders. Second, the offshore chain is still a highly deterministic business direction, focusing on overseas leaders such as machinery, home appliances, textiles, and construction. Third, under the guidance of anti-domestic policies, traditional industries are transformed and upgraded to improve the competitive pattern and supply and demand pattern. The profits of leading companies are expected to gradually recover, and leaders in the brokerage, chemical, photovoltaic, cement and other industries will be selected.

(4) Strategic assets: Core assets in the era of global order restructuring, and should be invested in reverse. 1) Gold: Monetary attributes support the medium- to long-term upward trend in gold prices, and the positive reverse layout in 2026. 2) Rare earths: Strong barriers to the industrial chain+strong overseas demand realized as high profit elasticity.

Risk warning: The risk of a game between major powers, the risk of US monetary policy exceeding expectations, and the risk of a decline in global economic growth exceeding expectations.