According to a research report from Bank of Communications International, the main disruption for Hong Kong stocks in March did not stem from fundamentals but rather from geopolitical uncertainties in the Middle East. In the absence of stabilizing conditions, the indices faced downward pressure. If conflicts do not escalate further in April, the accumulated risk premium from the previous period is expected to gradually unwind, providing room for valuation recovery in the market. Hong Kong stocks are likely to transition slowly from a phase of high volatility to a stage of bottoming and stabilization.
Bank of Communications International pointed out that with the fading of geopolitical uncertainty premiums and the catalyzing expectations of a meeting between the Chinese and U.S. heads of state, previously oversold technology stocks have room for mean reversion and recovery. The focus is on leading internet platforms whose valuations remain at historically low to medium levels and which are consistently increasing share buybacks and cancellations. Attention should also be given to sectors with industrial catalysts, such as artificial intelligence (AI) applications and autonomous driving.
Additionally, if Middle East geopolitical uncertainties persist, high oil prices will continue to provide direct profit support for mainland energy sectors, while gold benefits from global risk aversion and U.S. dollar pressure, maintaining a strategic overweight position. If geopolitical uncertainties quickly subside, it is recommended to shift from high-priced to low-priced energy stocks and realize premiums.
Furthermore, before external uncertainties fully dissipate, high-dividend telecommunications operators, utility stocks, and bank stocks remain core holdings for southbound capital, serving as tools for managing portfolio volatility. However, these can be gradually reduced and reallocated to more flexible sectors once geopolitical risks clearly decline.
In terms of stock selection for April, Bank of Communications International recommends Fortune REIT (00778), Hesai Group (02525), HUTCHMED (00013), China Mengniu Dairy (02319), NVIDIA (NVDA.US), Broadcom (AVGO.US), and Sungrow Power Supply (300274.SZ), all with "Buy" ratings. The target prices are HKD 5.92, HKD 269.66, HKD 36.6, HKD 21.51, USD 260, USD 460, and CNY 220, respectively.