Source: Dai Qing Strategy Research
Author：Dai Qing，Huang Kaihong

Last week, overseas liquidity expectations disrupted the Hong Kong stock market, and the high dividend strategy outperformed the market.Last week, UK inflation stickiness exceeded expectations and triggered fluctuations in overseas liquidity expectations. Coupled with geopolitical turbulence and a correction in the Hong Kong stock market, the Hang Seng Index fell 1.78% cumulatively, and the Hang Seng Technology Index fell 4.66%. The high dividend strategy outperformed the market. Among them, the China Securities Hong Kong Stock Connect dividend index rose 0.28%, the Hang Seng Hong Kong Stock Connect High Dividend Index fell 0.46%; Guojun Hong Kong Stock Connect's high dividend portfolio rose 0.23%, outperforming the Hang Seng Index by 2.01 percentage points.

Among them, industries such as energy, capital goods, and banking led to a rise in indices related to high dividend strategies.The energy industry performed best last week. The main thing is that China's economic recovery exceeded expectations. Coupled with no increase in overseas crude oil production, the market expects future support from the oil price center, corresponding to a rise in oil companies' performance centers. As a result, higher corporate valuations were given. The energy industry's stock price rose last week, driving a high dividend index.

Meanwhile, the decline in real estate chain stock prices dragged down the high dividend index.Data from the National Bureau of Statistics showed that some real estate data were weak, and the year-on-year decline in real estate investment and new construction area increased in March. Affected by this, the real estate industry index performance was sluggish; in the materials industry, steel and cement companies lowered prices due to weak demand, and material stock prices fell.

In this context, constituent stocks outside the real estate chain contributed most of the portfolio's earnings to Guojun Hong Kong Stock Connect's dividend portfolio.In the portfolio, the best-performing constituent stocks mainly came from industries related to the recovery of the domestic economy, such as finance, energy, and transportation. When the Hong Kong stock broad-based index fell 1.78%, the cumulative increase of most constituent stocks was more than 2%. The underperforming individual stocks mainly came from the real estate chain, including real estate stocks and materials stocks, such as CNOOC Development, Vanke, China Resources Cement, and Conch Cement. The cumulative decline was in the 3.6%-6.5% range throughout the week, dragging down the performance of high dividend portfolios.

Looking back, the high dividend strategy, which can embrace a certain logic of China's recovery in an uncertain overseas environment, is worth paying attention to.The domestic economy is still recovering, domestic policies may continue to be strengthened, and the profit stability of high-dividend industries is guaranteed. On the overseas side, it is not ruled out that trailing risks will cause risk premiums to rise. The high dividend strategy, which can embrace a certain logic of China's recovery in an uncertain overseas environment, is worth paying attention to. In terms of industry configuration:

1) Based on the judgment of “rising and falling from east to west”, it is recommended that high-allocation Chinese banks, the capital goods industry, and the middle allocation real estate, transportation and materials industries; judging from historical experience, in the “rise and fall” stage in the past, these parts of the industry all performed well;

2) Seize the trend of reform and innovation of central state-owned enterprises, and recommend industries such as high-capital goods, utilities and telecommunication services by allocating central state-owned enterprise targets with Chinese letters;

3) Corporate capital expenditure has declined, the supply side has been limited for a long time, and the profit ROE of the industry is expected to increase steadily. For industries such as upstream resource products and downstream operators, industries such as high-distribution energy and telecommunication services are recommended.

Risk warning:1) Sino-US relations have repeatedly exceeded expectations; 2) The progress of China's economic recovery has fallen short of expectations.

Editor/Somer