Looking back at the first half of 2024, the Hong Kong stock market was ups and downs, and turbulent. At the beginning of the year, the Hang Seng Index fell to a new low of 14,794.16 points in nearly a year and a half. However, in late April, the Hong Kong stock market started a strong rebound, powerfully entering a technical bull market and becoming the focus of global markets. Although the Hong Kong market has recently retreated, it has not affected the keen anticipation of institutions and investors for the second half's rising trend as it oscillates and consolidates in the support range.

In terms of the market, many institutions are optimistic that the Hang Seng Index will break through the 20,000-point mark, and Guosen Securities has given a super-strong expectation with an upper limit of 21,500 points. In terms of sectors, high-dividend assets and Internet-related sectors have become the focus of major institutions' attention, and some institutions are also bullish on mainland real estate shares.

Market analysis

1. CICC: The first target of the Hang Seng Index is 19,000-20,000 points

CICC pointed out that for the trend and allocation direction of the Hong Kong stock market, it is recommended to follow the direction of leverage. On the whole, adding leverage can anticipate an index trend with strong beta in the cyclical and core assets, while part of adding leverage corresponds to a dumbbell allocation of market fluctuations and dividends and growth. Going deleveraging may face pressure again.

Under the benchmark scenario, CICC predicts that the Hong Kong stock market will maintain volatility. The first target of the Hang Seng Index driven by risk premium is 19,000-20,000 points. The interest rate decline may push it up to 21,000 points, while above 22,000 points requires stronger profit growth.

2. Guosen Securities: The Hang Seng Index will return to the range of 20,500-21,500 points

Guosen believes that Hong Kong stocks have a significant comparative advantage in global valuation. The reason for the rebound since the beginning of this year is diverse:

First, the index valuation is low enough and has a significant advantage in global comparison;

Second, the median valuation of the Hong Kong stock connect is low, which indicates that the decline of small and medium-sized market cap targets is also limited;

Third, the forward-looking performance of the Hang Seng Technology has reached a new high, forming support for the performance of Hong Kong stocks;

Fourth, more industries have achieved upward revisions in their performance in the first half of the year.

Considering that it will take time for PPI to turn positive, it is estimated that Hong Kong stocks are most likely to gradually lift along the bottom to repair. And it is estimated that when this round of expansion ends, the Hang Seng Index will return to the range of 20,500-21,500 points. Gradually adding Hong Kong stocks below 18,000 points rather than focusing on breakthroughs may be a more secure investment approach.

3. Shenwan Hongyuan: The Hang Seng Index still has 11% upward space under the neutral hypothesis this year.

Shenwan Hongyuan stated that, in terms of time, the end of July may usher in a window of expectation for policies and semi-annual performance.

a) The impact of the risk-free rate on the market is gradually increasing at a time when the Fed is about to enter the interest rate cut cycle, especially when the improvement of EPS expectations and the interest rate environment is equally important for reopening the space for risk preference repairs under the background of historical range constraints;

b) Potential market mechanism reforms such as Hong Kong stock dividend tax arrangements and further optimization of the interconnection mechanism will also bring incremental funds to Hong Kong stocks;

c) The disturbance of political and currency cycles from overseas in the second half of 2024 is worth noting, but the combination of "corporate profit expectations bottoming out + risk preference returning to neutral + overseas funds still significantly underweight + continuous inflow of funds through the Hong Kong stock connect + net repurchase support overall liquidity" in current market provides significant downside protection. If the above three catalysts appear in the second half of the year, it is still worth looking forward to the market's upward trend.

If the catalysts mentioned above appear in the second half of the year, the market's upward trend is still expected.

4. JPMorgan: The range of the Hang Seng Index fluctuates between 17,500-22,500 points.

CICC International suggested that the rebound momentum in the Hong Kong stock market has exceeded the bear market oversold rebound and should be highly valued. Stabilizing at 18,000 points is an important sign of Hong Kong stock market's true bear-bull conversion.

Historically, bull markets occur after technical bear market cycles and short-term corrections. The possibility of continued mid-term growth increases with the index's current increase mainly due to the risk premium adjustment of undervalued stocks. In the future, continued policy benefits, decrease in risk-free interest rates, and improvement of fundamentals are needed to support the further growth of Hong Kong stocks.

CICC International predicts that Hong Kong stocks will continue to rise in the third quarter, and will have a range-bound increased volatility in the fourth quarter. The range of HSI fluctuation is between 17,500-22,500 points, and the range of HSCEI fluctuation is between 6,000-7,500 points, while the ChiNext board fluctuates between 3,500-5,000 points. It is recommended to maintain a range-bound and dumbbell allocation strategy in the second half of the year.

Sectors for investment:

1. High Dividend Yield: Driven by policies, free cash flow, interest rate cuts, and other factors.

As the absolute main theme of Hong Kong stocks in the first half of the year, high-dividend assets have shown a dominant upward trend. In the second half of the year, major institutions still maintain their bullish outlook, with the China Mainland banking, petroleum, and telecommunication sectors receiving the most attention.

Goldman Sachs believes that the high-dividend sector can maintain its strong momentum in the future for five main reasons:

a) In line with the 'Nine Articles' and the goal of the new round of state-owned enterprise reform, the policy promotion and implementation of improving shareholder return are strong;

b) 47% of the market capitalization of listed SOEs is held by government-related entities. For every 1% increase in the dividend payout ratio, there will be an increase in fiscal revenue of 23 billion yuan;

c) The prospect of listed companies returning cash to shareholders is good - the dividend payout ratio is low (more than 30%), but both cash balance (180 billion yuan) and free cash flow (fiscal year 23: 26 billion yuan) are at a historical high;

d) Domestic interest rates in China are falling, which has increased the attractiveness of immediate cash returns;

e) Domestic institutional investors with low stock weightings in their portfolios may have structural demand for stable income.

According to Futubull data, among petroleum stocks,$CNOOC (00883.HK)$its increase this year is nearly 90%, $PETROCHINA (00857.HK)$the increase is over 70% this year, and the dividend yields of the two exceed 5%.

Among China Mainland banking stocks,$BCQ (01963.HK)$, $CQRC BANK (03618.HK)$have increased by nearly 50% this year,$BQD (03866.HK)$, $CM BANK (03968.HK)$increase is over 30%. Meanwhile, the dividend yields of the four companies exceed 6%, with Bank of Chongqing's dividend yield reaching as high as 8.65%.

Among telecommunication stocks,$CHINA UNICOM (00762.HK)$its increase this year is nearly 60%, $CHINA TELECOM (00728.HK)$, $CHINA MOBILE (00941.HK)$and the increase is over 25%, with the dividend yields of the three major operators being 4.89%, 5.44%, and 6.16%, respectively.

How to accurately allocate high-dividend stocks in a complex market? Futubull offers the solution.High Dividend Yield Ranking, Dividend Payment Calendar, Dividend Payment RecordThree treasure trove functions for mooers to deploy all in one stop.

2. Internet sector: the valuation clearance is relatively sufficient.

As a core asset of Hong Kong stocks, network technology stocks have always been the focus of investors. CICC stated that the valuation of Hong Kong stocks is still lower than the ten-year average of 1.7 times the standard deviation. After three years of adjustments, network technology stocks are also relatively sufficient and have comparative advantages.

The dynamic price-to-earnings ratio of the information technology sector of the Hang Seng Index has dropped from a high of 61.9x in early 2021 to the current 22.1x, a drop of nearly 70%. Some key stocks, such as [names of stocks omitted], have also fallen by more than 55% from their dynamic price-to-earnings ratios at the end of 2020 and the high points of 2021. Chart: The valuations of Hong Kong's Internet sector and some key stocks have clearly fallen over the past three years; Source: CICC. $TENCENT (00700.HK)$with$BABA-SW (09988.HK)$And the dynamic PE ratio has also fallen by more than 55% from the high points at the end of 2020 and the beginning of 2021.

According to data from Futubull, there are a total of 7 CSI constituents that have risen more than 10% this year, including [names of stocks omitted], all of which have bounced back more than 30%. $MEITUAN-W (03690.HK)$more than 40%,$SENSETIME-W (00020.HK)$, $TRIP.COM-S (09961.HK)$, $BILIBILI-W (09626.HK)$, $TENCENT (00700.HK)$All rebounded by over 30%.

3. Mainland real estate: intensive policy stimulus helps.

The performance of the Hong Kong stock real estate sector in the first half of the year was relatively mixed, and the development in the second half of the year is also uncertain. Some institutions are cautiously bullish on mainland real estate stocks. For example, Galaxy Securities and Jianguo International both believe that the intensive policy stimulus will bring trading opportunities for mainland real estate stocks. Guotai Junan is relatively optimistic. He believes that the market has stronger confidence in the intensity and sustainability of the real estate destocking policy and believes that investors' positive sentiment towards the industry will continue for a long period of time.

According to data from Futubull, there are [number] mainland real estate stocks that have risen more than 30% this year. $MIDEA REAL EST (03990.HK)$, $CIFI HOLD GP (00884.HK)$, $LOGAN GROUP (03380.HK)$There are [number] mainland real estate stocks that have risen more than 10%. $SHIMAO GROUP (00813.HK)$, $SEAZEN (01030.HK)$.

Although most institutions are relatively optimistic about the performance of Hong Kong stocks in the second half of the year, risks may still arise from the divergence between the pace of Fed rate cuts and market expectations, geopolitical uncertainties brought about by the US election, and the deepening of trade protectionism in Europe and the United States. Investors should also pay attention to market risks while trading.

Editor/Lambor