Short-term value, medium-term growth! Has the risk preference of foreign investment in Hong Kong stocks changed?

Last week, the Hong Kong stock market experienced a volatile pullback. Has the risk appetite of foreign capital changed?

According to Dai Qing, an analyst at Guotai Junan, "there has not been a significant downward adjustment in the risk appetite of foreign capital yet. In the short term, geopolitical risk expectations will continue to cause disturbances in the market. It is recommended to focus on high-dividend and low-valuation central state-owned enterprises. In the medium term, the domestic economy is still in the process of upward repair, and overseas liquidity tightening transactions are expected to ease. Therefore, we are optimistic about the long position opportunities in the Hong Kong stock market in the second quarter."

Guotai Junan believes that the main reasons why the risk appetite of the Hong Kong stock market is less affected are:

1. The recent first-quarter economic data in China exceeded expectations, and the positive catalyst of real estate policy reappeared, which reduced the uncertainty of the domestic economy.

2. Recent US retail, labor and other data, as well as some leading indicators, all show that the economic downturn is accelerating, and the market's expectation of the Fed's interest rate hike has once again cooled down.

The combination of the two corresponds to the decrease in uncertainty in the economic and financial systems, which partially offsets the impact of geopolitical risks.

In the short term, "value stocks usually perform better when the Hong Kong stock market performs poorly or is biased towards volatility." At the same time, the market is still concerned about the reconstruction of China's characteristic valuation system. In the short term, it is recommended to focus on central state-owned enterprises with high dividends, low valuations, less capital expenditures, and potential ROE improvements.

Looking at the medium term, the logic of "rising in the east and falling in the west" may be re-enacted, which will benefit the growth sector of the Hong Kong stock market:

1. The effect of overseas interest rate hikes suppressing credit may begin to appear, and there is still downward pressure on exports in the second quarter. The intensification of measures to expand domestic demand is worth looking forward to, thereby driving up the profit expectations of Hong Kong stock companies.

2. The downward trend of the US dollar and US bonds will support the rebound of the Hong Kong stock market, as the trend is compounded by the credit contraction caused by liquidity risks in the banking industry.