Source: Dang Chongyu Investment Notes
Author: Dang Chongyu
On January 30, 2023, the Hang Seng Index of Hong Kong stocks fell 2.73%, a big drop, and some investors may have three major concerns.Our comments are as follows.Overall, we are still bullish on February 2023. We have repeatedly stressed the importance of the spring market of Hong Kong stocks in 2023 in a series of research reports, and now we do not think it is necessary to adjust our views because of the decline in Hong Kong stocks on January 30, 2023.
One is the worry about the news of international relations events. On January 27, 2023, the political News Network (POLITICAL) reported that US House of Representatives Foreign Affairs Chairman Michael McCall (Michael McCaul) described considering a ban on high-tech investment in China, involving AI, quantum, 5G, network, advanced semiconductors and so on. However, we do not think that this reason is the core reason affecting the decline of Hong Kong stocks, because on January 30, 2023, the A-share high-tech industry did not fall, while the non-technology industry of Hong Kong stocks also fell, and the decline of the Hang Seng Index is more likely to be due to short-term profit-taking by some investors.With regard to Sino-US relations, we believe that the spring market of Hong Kong stocks needs to pay attention to whether Pelosi's successor McCarthy and other US politicians will visit Taiwan in the spring; there has been no official report on the evolution in recent days.
The second is the concern that economic expectations cannot be verified, which we think was considered too early in February 2023, because February 2023 is still a performance vacuum, and many expectations cannot be falsified. Investor sentiment and economic expectations can still have a positive effect on the stock market.Several angles of thinking are very important: first of all, after the peak of the epidemic in many places, travel is exuberant and consumption picks up. Whether the high-frequency data of the Spring Festival in 2023 exceed expectations is difficult for some specific industries to have the only answer. What standards are in line with expectations? what standards exceed expectations, there may not be no differences. Secondly, the short-term economic operation during the Spring Festival in 2023 cannot change the general trend of gradual repair of the economy throughout the year. As far as consumption is concerned, there will be May Day holidays and summer travel peak after the Spring Festival in 2023. Travel chain and offline consumption will also have a continuous logic throughout the year. In addition, whether it is based on the spring market in which economic expectations are reversed due to changes in epidemic prevention policies, or in terms of calendar effects, on the premise that the big logic has not been destroyed, the stock market is still in a performance vacuum, and the first quarterly report of 2023 is more likely to affect the stock market from March to April 2023, and it is unlikely that February will begin to affect the stock market, because what is more important in the first quarter is economic expectations, which are often accompanied by investor sentiment. Even if the performance cannot be verified, it is not yet close to the performance.
The third is the worry that Hong Kong stocks will continue to rise and rise too fast without bad luck, especially when Hong Kong stocks reach the high resistance level of the second quarter of 2022, but we think that after measuring that Hong Kong stocks still have room to rise from the target point, Hong Kong stocks are likely to return to the level before the Russia-Ukraine conflict in 2023.Although Hong Kong stocks have rebounded since November 2022, the November rally in 2022 has an emotional logic to repair the October sell-off. December 2022 is horizontal, and Hong Kong stocks have risen about 12% since January 1, 2023. It is still a long way from our previous estimate that the Hang Seng Index has a potential 21% rising space of 32%. What needs to be emphasized in particular is that the liquidity of Hong Kong stocks is weaker than that of A shares, and both rise and fall may be relatively volatile, so it is not advisable to be blindly bearish before the logic of the rise is destroyed.
To sum up, we think that the three major worries of some investors about Hong Kong stocks may not affect the continued rise of Hong Kong stocks. We think that the overall risk of Hong Kong stocks before the two sessions in March 2023 is relatively manageable. Instead, we need to worry about whether the Hong Kong stock market can be sustained from March to April 2023, but not February 2023.Although we believe that February 2023 may be the second half of the Hong Kong stock market in the first quarter, we should not worry too much in early February 2023. The financial market is huge, not to mention that foreign investors have pricing power in Hong Kong stocks. From the northward investment, we can see that foreign investors are optimistic about China's economy. We are not worried about "I expected your expectations." although reverse thinking and "advance" of investment are very important, but the trend is also very important.
Risk Tips:The risk of overseas recession is higher than expected; the change of global monetary policy is higher than expected; the change of international geopolitics is higher than expected; the change of global epidemic is higher than expected; and the repair of domestic economy is less than expected.
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