According to a report by HSBC, the performance of China's petrochemical giants continues to outperform, with a cumulative increase of 10-50% since the beginning of the year, compared to the Hang Seng Index's 7% increase over the same period, mainly due to the rise in oil prices and steady production growth. In the current context of state-owned enterprise reform, investors are seeking more resilient returns, and the bank maintains a positive view on oil stocks because the current yield is still attractive to domestic investors at around 6-7%, coupled with strong cash flow, which may provide potential for further dividend increases.

The bank expects that in the current operating environment where cash flow has become more reliable, oil stocks have the potential to be further revalued; therefore, the bank has raised its target price for oil stocks by 2%-37%. However, since achieving returns of 30%-120% since last year, marginal improvements may begin to weaken due to fundamental constraints. The bank remains bullish on PetroChina (00857.HK) because of its relatively stable cash flow compared to oil prices, followed by CNOOC (00883.HK), although the latter is more dependent on the price trend of crude oil. Sinopec (00386.HK) is maintained at a "hold" rating.

HSBC's investment ratings and target prices for oil stocks are listed as follows:

Stock | Investment Rating | Target Price (HKD)

PetroChina (00857.HK) | Buy | HKD 6.7 → HKD 9.2

CNOOC (00883.HK) | Buy | HKD 19.8 → HKD 23.5

Sinopec (00386.HK) | Hold | HKD 4.5 → HKD 4.6