Car, Internet, and Zhongtegu! May Hong Kong stocks, four major themes!

May Mid-Estimate and Q1 Internet Report Expected to Drive Index Upward

Currently, overseas interest rate hikes are coming to an end, but the message of interest rate cuts is still somewhat unclear, so the high interest rate environment will continue. In terms of sector allocation:

1. Operators, large financials, infrastructure, raw materials and other sectors under the Mid-Estimate, these companies have a median dividend yield of 5%, ROE of 11%, and a future 2-year compound revenue growth rate of 8.6% and a compound profit growth rate of 16%. They are relatively high-quality in the Hong Kong stock market, and there is still room for about 20% upward movement.

2. Internet: It is estimated that the overall performance of Internet companies in Q1 will be good. Currently, the adjustment is relatively sufficient. With the recovery of the economy, they are expected to be further repaired. However, it is unlikely that the valuation will rise rapidly like in October-December last year before the interest rate cut.

3. Consumption and Medicine: Consumption may show a relatively differentiated trend. Previously, consumption stocks with high economic recovery expectations, including tourism, hotels, airports, and airlines, had a large upward trend but better fundamentals than other industries, so they had less callback in the first quarter compared to technology and need time to digest valuation. Some catering has already fallen out of good value for money. Medicine CXO is short-term affected by demand and valuation of US pharmaceutical companies, and traditional Chinese medicine is relatively more certain.

4. Automobiles and Electronics: Automobiles and electronics are industries with greater opportunities in the future, but short-term demand is not strong enough. With the release of new machines from Apple and Huawei at the end of the third quarter, and the expected positive PPI in August, it is expected that the end of the second quarter and the beginning of the third quarter will be the time window for layout of the industrial chain.

Why is "Mid-Estimate" more likely to become the investment theme of Hong Kong stocks in May?

1. Good performance: Good performance in Q1 report.

2. Policy support: The assessment requirements for the ROE of central enterprises at the beginning of the year are a rare change in many years; in addition, operators can make efforts in the direction of the digital economy, and construction central enterprises are in the direction of the Belt and Road.

3. Strong risk resistance: In the context of the changing global situation, the demand autonomy of Mid-Estimate enterprises is higher, and they are less affected by overseas influences.

4. Style adaptation to the current environment: The risk of the United States still exists, and the valuation of growth stocks is difficult to rise in the short term. Bond and quasi-bond equity assets are favored by investors.

Mid-Estimate has obvious comparative advantages in the early stage of economic expansion, mainly because their valuation is low, dividend is high, and performance stability is strong, which can directly benchmark high-yield bond assets, so this type of investment direction can be recognized by overseas investors.

As the economy gradually recovers and the market enters the middle stage of expansion, their growth will no longer have an advantage, and the market will gradually return to the familiar growth + consumption track for investors.

To judge whether the middle stage of expansion has arrived, several signals can be used as reference:

1. The signal sent by the "New Cycle Dove" of the US stock market; 2. The Federal Reserve's description of interest rate cuts is clearer; 3. Observing the turning point and turning positive of China's PPI, the comparative advantage of the middle and lower reaches has once again formed.