Hong Kong stocks have experienced their fourth "break below net asset value" in the past decade! What does this mean? Opportunity has arrived!
Hang Seng Index's price-to-book ratio has returned to the bottom range, and the price-to-earnings ratio is also approaching its historical low, entering a "valuation bargain"! Subsequently, as the expectation of the Federal Reserve's interest rate hike slows down and the tightening of US dollar liquidity eases the pressure on Hong Kong stocks, Hong Kong stocks may have a higher long-term allocation value.
Guolian Securities noticed that, after the three main factors of the mainland economy, mainland policy catalysts, and overseas monetary policies weakened marginally at the beginning of the year, Hong Kong stocks have once again fallen below net asset value, and valuations are at the bottom!
"Fall below net asset value" refers to the stock price falling below the net asset value. Since April 20, against the backdrop of weak domestic recovery and strengthened expectations of overseas interest rate hikes, the Hang Seng Index's price-to-book ratio (PB) has fallen to a minimum of 0.87, returning to the bottom range of the price-to-book ratio. The market's pessimistic sentiment has been fully reflected, indicating a relatively high safety margin.
In terms of price-to-earnings ratio, Hong Kong stocks are also at historically low levels. The lowest valuation of Hong Kong stocks is around 8 times, and it is currently close to the historical lowest valuation level. With the expectation of a slowdown in the Federal Reserve's interest rate hikes and the tightening of US dollar liquidity, the pressure on Hong Kong stocks may ease, and Hong Kong stocks may have a higher long-term allocation value.
Outlook
Based on history and future prospects, Guolian Securities believes that Hong Kong stocks are expected to fill the "valuation gap" in the short and long term, and attention should be paid to opportunities in Hong Kong stocks.
Starting from July 10, with positive statements at the domestic platform economy symposium, the "shoe dropped" for Alibaba's punishment, and the unexpected slowdown in US CPI, all three influencing factors have shown marginal improvement, and Hong Kong stocks have experienced a significant increase. From July 10 to July 14, the Hang Seng Tech Index rose by 8.39%, leading the global equity market.
Guolian Securities predicts that the three influencing factors may still be in the early stages of improvement, and subsequent optimization is expected to continue, which may support the rebound of Hong Kong stocks (especially the Hang Seng Tech Index).
In addition, the performance of mainland-listed companies in Hong Kong stocks is at the bottom. With the end of the high base effect, the continuation of domestic recovery, and continuous policy support for the platform economy, the performance of Hong Kong stocks in the second half of the year is expected to stabilize and rebound.
Moreover, in the Hang Seng Tech Index, many are mainland internet platform companies. With the catalysis of ChatGPT, both domestic and foreign giants are actively participating in the layout of AI large models. In the long run, it is expected to create new growth curves for relevant targets.