Huatai Securities Hong Kong Stock Strategy: The gradual release of market downside risks

People’s Finance Network, April 7 — Huatai Securities’ Hong Kong equities strategy notes that the current market’s baseline is one of choppy, back-and-forth trading. On the one hand, uncertainty from the Middle East conflict remains, and unlocking upside room requires waiting for developments; the key focus is monitoring changes in aviation status and expectations for Federal Reserve rate cuts. On the other hand, the Hong Kong equities sentiment index has been operating within panic territory for some time, and the risk of downside declines has been gradually released. Getting the structure right is the key focus at this stage, and Huatai Securities offers two recommendations. First, the market’s pricing of growth being revised down may still be insufficient; therefore, continue to keep a defensive exposure, focusing on allocating to operational dividend-type stocks, such as banks, railways, highways, and Hong Kong local utilities. For cyclical dividend-type sectors such as oil and gas, pay attention to the risks of overcrowding and rising volatility. Second, rebalance and optimize the portfolio structure along internal and external demand. Reduce allocation to sectors with larger income and supply-chain exposure in Asia-Europe regions for external-demand selections, such as consumer electronics. Continue to hold mid-term external-demand beneficiaries whose China advantages in midstream manufacturing and the broad energy chain may not fall and could even rise. Increase allocation to some positions that are cleared out and where expectations for downside revision are relatively more complete, including domestic-consumption names such as dairy products.