Shenwan Hongyuan’s Research Director and Chief Strategist Wang Sheng recently stated in an interview that the firm places significant emphasis on Hong Kong stocks. Early on, Shenwan Hongyuan categorized all Hong Kong Stock Connect-listed companies according to its industry classification system, enabling standardized cross-sector comparisons critical for investment decisions.

Given the absence of daily price limits, Hong Kong stocks exhibit higher volatility than A-shares, compounded by information asymmetry, making individual investing challenging. Wang advises retail investors to participate via diversified approaches, such as professional institutions, southbound capital-heavy products, or ETFs for more stable exposure.

He also highlighted that during the peak of this bull market, China’s capital markets—whether A-shares or Hong Kong stocks—could produce the world’s largest company by market capitalization.

**Key Interview Excerpts:**

**Q1: What risks should investors be wary of?** Wang Sheng: The global order is undergoing restructuring. While China shoulders greater international responsibilities amid uncertainties, the core question is the source of demand. Historically, the U.S. drove global demand, but now China’s 「domestic demand boost」 is a long-term strategy, not a short-term fix. Geopolitical tensions, though notable, shouldn’t overshadow China’s rising global role.

Tactical risks include Japan’s rising long-term rates affecting yen carry trades, European industrial competition triggering trade frictions, and equity-bond market interactions. However, a bond bear market is unlikely.

**Q2: Will the tech rally rebound after recent weakness?** Wang Sheng: Q4 markets price in next-year expectations. If PPI recovers, cyclical assets may outperform, but tech will resurge during the Spring躁動 (seasonal rally). Foreign investors, now keen on China’s tech (e.g., AI competition with the U.S.), will drive January reallocations (「January Effect」).

**Q3: What underlies the 「new vs. old economy」 divide?** Wang Sheng: China’s 「modern industrial system」 thrives on 「great ordinary」 sectors like advanced manufacturing—globally competitive yet domestically underappreciated. For instance, rare-earth refining, a high-tech hurdle for the U.S., showcases China’s supply-chain dominance. While pricing power lags, systemic revaluation looms as cultural influence (e.g.,潮玩, *Black Myth: Wukong*) grows.

**Q4: Traits of a 「financial powerhouse」 market?** Wang Sheng: Two features: 1. **Pricing future industries** (beyond emerging sectors), using metrics beyond PE (e.g.,算力/token data). 2. **Lower equity risk premium (ERP)**: China’s 5% ERP (vs. U.S.’s near-zero) should decline as patient capital (e.g.,匯金’s 「stabilization fund」 role) rewards dip-buying, improving Sharpe ratios.

**Q5: Are Chinese stocks expensive?** Wang Sheng: No. Despite higher PEs, historically low risk-free rates make valuations attractive. High-dividend assets (e.g.,滬深300’s yield spread over bonds at 90th percentile) offer absolute returns.

**Q6: Advice for Hong Kong stock investors?** Wang Sheng: Prefer diversified exposure via ETFs or institutional products. The bull market peak may crown a Chinese firm as global市值 leader.

**Q7: Is the new消費 narrative broken?** Wang Sheng: No. Rising cultural influence drives消費升級, though next-wave trends are unclear. Traditional消費 faces generational shifts (e.g.,低調luxury preferences) and fading property wealth effects, offset by equity-driven新wealth.

**Q8: Outlook for USD and gold?** Wang Sheng: USD may weaken long-term but stays strong versus euro/yen. Gold, as a consensus store of value, has enduring appeal despite volatility. For a 1M-yuan portfolio, Wang suggests 10–15% gold, with equities outweighing bonds as China’s financial maturity progresses.