Daily Investment Strategy

Daily focus：HKEX（388）

The HKEX can benefit from robust trading activity. The emergence of DeepSeek shakes up AI landscape, leading investors to reassess Hong Kong stock market that were previously viewed as lacking an AI concept. Large names like Tencent and Alibaba, along with various software-related companies, performed really well in recent weeks. With trading volume rising, the Hong Kong Exchange stands to gain directly.

 The IPO market is also showing signs of improvement. 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. The U.S. "Higher for longer" policy is advantageous for investment returns. In 2023, the HKEX's investment income doubled due to high interest rates environments. Recently, Federal Reserve Chairman Powell stated during a testimony to Congress that if the economy remains strong, but inflation remain above 2%, restrictive policy rates could be sustained longer; thus, the "Higher for longer" monetary policy in the U.S. is likely to persist. Additionally, most of the Exchange's investment income comes from cash and bank deposits, and increased trading volume also includes futures and options; higher margin fund can allow greater investment income generation. Target price is HK$380.

Weaker services, consumer sentiment data adds to economic worries

Stocks sold off on Friday as new U.S. data stoked concerns about an economic slowdown and continued inflation, with investors seeking safer assets. The S&P Global U.S. preliminary composite Purchasing Managers' Index (PMI) was 50.4 in February, down from 52.7 in January, while the services PMI fell to 49.7 from 52.9. In addition, the University of Michigan's consumer confidence index showed that U.S. consumer confidence further deteriorated in February, falling from 71.1 to 64.7 and lower than expected. Dow Jones Industrial Average fell 748 points or 1.7%, the benchmark S&P 500 was down 1.7%, and the Nasdaq Composite fell 2.2%. Among individual stocks, UnitedHealth Group shares fell more than 7% as the Wall Street Journal reported that the Justice Department had launched an investigation into UnitedHealth Group in recent months over its expense calculation practices.

Hong Kong Stock Connect had a net inflow of HK$14.0bn Friday of which Alibaba (9988) had the largest net inflow, reaching HK$6.25bn; followed by SMIC (981). Xiaomi (1810) recorded the largest net outflow at $0.49bn, followed by ZTE (763).