Zhang Yidong shouted, "Hong Kong stocks hit bottom!" How to survive the bottom? Where are the opportunities? Trade with reverse thinking!

After a pullback in August, there have been voices in the market shouting: Hong Kong stocks have reached the bottom!

Zhang Yidong, the most accurate analyst of Hong Kong stocks and the global chief strategist of Industrial Securities, also sees that multiple indicators show that Hong Kong stocks have bottomed out. Moreover, the continuous accumulation of China's economic policies and stock market policies, which are favorable to the market, will gradually alleviate investors' overly pessimistic sentiment towards the Chinese stock market and solidify the bottom area of Hong Kong stocks.

Zhang Yidong also believes that it will be difficult for the Hong Kong stock market to experience significant ups and downs in the coming months. It is expected to repeatedly bottom out around the 18,000-21,000 point range, which has been the bottom area of the Hang Seng Index for many years. It is not ruled out that there may be a short-term drop below 18,000 or a rapid rebound in the form of short covering. However, it is currently difficult for Hong Kong stocks to experience sustained and systematic bull markets.

To break out of this bottom area, we still need to patiently wait for two factors: first, overseas factors, such as when the Federal Reserve turns dovish, at least when the yield of 10-year US Treasury bonds can continue to decline; second, waiting for clear signs of stronger growth momentum in the Chinese economy.

Multiple indicators show that Hong Kong stocks are in the bottom area

1. The return from dividends and buybacks far exceeds financing, highlighting the value of Hong Kong stocks.

2. Sentiment indicators show that risk appetite for Hong Kong stocks is at a historical low.

3. The AH share premium index has reached 150, which, based on historical experience, often corresponds to the bottom area of the Hong Kong stock market.

Hong Kong stocks may also adjust stamp duty!

The recent combination of policies in the A-share market highlights China's determination to revitalize the active capital market, which will help rebuild investor confidence in Hong Kong stocks. The optimization of stock market policies in Hong Kong is also worth looking forward to.

The overseas financial team of Industrial Securities believes that there are two possible paths for increasing market liquidity in the Hong Kong stock market:

1. The Hong Kong Stock Exchange continues to promote IPO reforms to attract new economy companies and Chinese concept stocks for secondary listings in Hong Kong.

2. The Hong Kong government considers adjusting the level of stamp duty in the Hong Kong stock market at the appropriate time.

Currently, the stamp duty rate in the Hong Kong stock market is the same as in 1993. Reducing the stamp duty rate may help boost confidence, reduce transaction costs in the medium to long term, and enhance market liquidity.

In addition, positive economic policies continue to accumulate domestically, but it will take time to stimulate strong economic growth. It is necessary to maintain patience and avoid excessive pessimism.

Outlook for Hong Kong stocks: A tug-of-war at the bottom, suggesting a contrarian approach to seize correction opportunities

First of all, based on the deep value of Hong Kong stocks and the continuous accumulation of China's stock market policies and economic policies, especially the policies related to real estate and comprehensive debt, the excessive risk premium in the Hong Kong stock market is expected to improve in stages and will not continue to significantly deteriorate. Next, in the coming months, there may be a period of easing in geopolitical risks, especially with the G20 summit in September serving as a milestone. Additionally, the visit of the US Secretary of Commerce to China may also contribute to a temporary easing of US-China relations.

Thirdly, it is important to be cautious as both internal and external economic factors may continue to suppress the Hong Kong stock market before the Federal Reserve enters an interest rate cut cycle. On one hand, concerns among overseas investors regarding the risks in the Chinese economy, particularly in the real estate sector, may persist until the growth momentum of the Chinese economy strengthens once again. On the other hand, the hawkish stance of the Federal Reserve in maintaining higher interest rates for a longer period of time has resulted in high funding costs in Hong Kong.

Investment Advice: Stick to long-term value and select high-quality listed companies that have been undervalued due to pessimistic sentiment. Accumulate small victories to achieve big wins and endure the bottom area.

Zhang Yidong's perspective:

Investment Opportunity 1: Select industries and individual stocks with high short-selling ratios for short cover opportunities, and adopt a contrarian approach to invest in high-quality Hong Kong-listed real estate, biopharmaceutical, and internet industry leaders.

The proportion of outstanding short positions in the Hong Kong real estate construction industry and healthcare industry has risen to a high level since 2020, and the short-selling turnover ratio in the information technology industry has reached a one-year high. These industries have already reacted to various risk factors to an extreme extent, and once expectations improve, they are expected to experience a short-cover-driven rebound in the short term.

Investment Opportunity 2: Focus on industries that benefit from economic stimulus policies and maintain high prosperity or improve from a downturn, such as smart automobiles, finance, and real estate.

Among them, 1) automobiles: according to the analysis of the Xingzheng Auto Dai Chang team, the monthly prosperity of passenger cars is expected to continue to rise in September, October, and November, with the three main themes of "advanced intelligent driving + autonomous high-end + Tesla's third new cycle" driving the automotive market. 2) Chinese securities firms and insurance companies are expected to benefit from the domestic "active capital market" policy. 3) With the optimization of the real estate industry policies, the valuation of high-quality real estate stocks is expected to be reassessed. Among them, high-quality state-owned real estate companies have smooth financing, guaranteed sales and performance, and are expected to benefit from urban village transformation.

Investment Opportunity 3: Continual revaluation of low-volatility dividend assets, with high-quality state-owned enterprise value stocks being the core long-term allocation targets in the Hong Kong stock market, and local high-dividend Hong Kong stocks being the distinctive targets.

Focus on the allocation value of high-dividend, high-quality companies in sectors such as quality banks and insurance, real estate, telecommunications operators, energy (oil, coal), and utilities.