Julius Baer's China Research Strategist and Head of Hong Kong Research Department, Tang Kai-chi, noted that funds have recently rotated to A-shares, and Hong Kong dollar interbank rates have risen significantly since mid-August, impacting investment sentiment. However, from an earnings perspective, Hong Kong stocks' fundamentals remain solid. Given the previously rapid and prolonged rally in Hong Kong stocks, the current correction is normal. Additionally, Tang maintains the target of 28,000 points for Hong Kong stocks by mid-next year. He expressed optimism toward gaming and video stocks.
Tang noted that while the US-China tariff grace period approaches again by year-end, the tense atmosphere may bring volatility to the broader market. However, unless US stocks or global markets experience significant declines, the impact on Hong Kong stocks will be limited. Semiconductor news only affects specific sectors, and by year-end, Hong Kong stock trends are expected to be primarily driven by domestic Chinese factors.
On another note, with northbound capital flows to Hong Kong exceeding 1 trillion yuan, he estimates that southbound capital inflows will slow down. However, foreign investors remain underweight in Chinese stocks and will continue to increase positions, benefiting Hong Kong stocks more. Therefore, he maintains the target of 28,000 points by mid-next year.
Regarding allocation, Tang recommends that 6 to 12-month investments must include high-dividend stocks due to their better resilience and dividend income as a buffer, making portfolio returns more robust. The other allocation should be in growth stocks. He proposed three criteria for growth stocks: first, low correlation with economic cycles; second, stable competitive landscape; third, overseas growth potential.
Among technology stocks, he does not particularly recommend e-commerce, as e-commerce consumption is easily affected by economic cycles and competition remains fierce. Instead, he favors gaming and video stocks.
Regarding anti-involution concept stocks, he noted that if positive news emerges, the rebound momentum of related sectors may be short-lived, "more likely over the next two to three months rather than 6 to 12 months." This is because the current anti-involution differs from past supply-side reforms. Beyond capacity reduction, competitive pricing also needs to be controlled, which is difficult to execute. Moreover, the demand side has not shown strong recovery, limiting the upside potential of related themes. Therefore, his outlook will not be overly optimistic.