Daily Investment Strategy

Daily focus：HKEX（388）

China's fiscal policy continues the more proactive and persistent tone since the fourth quarter of 2024. This year, the fiscal budget deficit is targeted to be around 4%, with a deficit scale of RMB5.66 trillion, up by RMB1.6 trillion from the previous year. The scale of special LGBs is planned to increase by RMB500billion from last year to RMB4.4 trillion. Special CGBs are planned to be issued at RMB1.3 trillion, an increase of RMB300billion from last year. The broad fiscal expenditure is significantly more proactive than last year, with these three items combined increasing by RMB240 billion more than last year, which can effectively offset the potential drag due to the U.S. tariffs. The market reacts positively to the two sessions, driving up trading volume of the Hong Kong stock market. Meanwhile, HKEX is reviewing with the SFC the trading unit system, or the so-called "board lot" system, and will put forward proposed enhancements this year, so that trading arrangements can better meet liquidity characteristics of shares of different sizes and investment needs, as well as facilitate trading and improve efficiency. The Hong Kong Exchange can benefit from the potential increase in trading activity. Also, as the pace of IPO issuances in China's A-share market slows and geopolitical factors diminish the appeal of U.S. listings, Hong Kong is becoming the preferred destination for Chinese companies to go public. Earlier reports indicated that regulatory bodies in both mainland China and Hong Kong have requested some of the world's largest investment banks to help expedite listings for Chinese enterprises in Hong Kong. Since last October, qualified companies are expected to undergo regulatory assessments within 40 business days, while those with a projected market value of HK$10 billion will benefit from a "fast-track approval timeline" of no more than 30 business days. In summary, fully compliant applications could complete their processes within six months. In fact, the market showed significant recovery in 2H24, raising HK$69.5 billion in capital, accounting for over 80% of the annual fundraising. Throughout 2024, Hong Kong recorded 63 IPOs, raising a total of HK$82.9 billion, a 78% increase compared to 2023. The IPO fundraising amount has returned to the top five in the global IPO market, reflecting a resurgence in market sentiment that is expected to continue into 2025, with Bloomberg estimating that fundraising could reach HK$170 billion—doubling compared to 2024—benefiting the HKEX through increased listing fees. Overall, we remain positive towards HKEX. Target price is HK$380.

S&P 500 ends lower as tariff concerns fuel sell-off

Stocks resumed a sharp correction on Thursday as the White House's latest concessions on controversial tariffs failed to calm panicked investors. The Dow Jones Industrial Average fell 427.51 points, or 0.99%, to 42,579.08 points, falling more than 600 points from its intraday low. The S&P 500 fell 1.78% to 5,738 points. The Nasdaq fell 2.61% to 18,069.26 points, officially closing in correction territory, which means the index is down 10% from its recent high. On Thursday afternoon, U.S. Treasury Secretary Scott Bessent expressed support for the tariffs, prompting investors to question the extent to which the White House was willing to compromise on policy. “To the extent that another country’s practices harm our own economy and people, the United States will respond,” Bessent said at an event in New York. " This is the America-first trade policy.” On the other side, investors are currently awaiting Friday's jobs report to gauge the health of the U.S. economy and the Federal Reserve's future interest rate trajectory, as they worry about new tariffs and rising costs of raw materials for factories indicating that inflation may increase in the coming months.

Hong Kong Stock Connect had a net inflow of HK$6.53bn Thursday of which Kuaishou (1024) had the largest net inflow, reaching HK$1.53bn; followed by Alibaba (9988). Tracker Fund (2800) recorded the largest net outflow at $1.41bn, followed by Tencent (700).