23/7/2018-2

Increase cash holdings, don’t rush to enter the market

US stocks are improving, but China and Hong Kong stock markets are sluggish. The market estimates that the trade war will be the winner of the United States. Chinese companies must give up some of their profits to avoid full impact on tariffs. Before the two countries reached an agreement, the stock market still did not run, and more and more unfavorable news came out during the period.

As US stocks are dominated by institutional investors, the increase is mainly due to the rise of heavyweights, while the more heavily weighted stocks are mainly high valuation stocks; but the main investors of A shares are retail investors, and large market capitalization companies are not equal to high valuations. As a result, the Chinese and US stock markets have different trends.

Reduce the ratio of stocks and funds

In addition, most investors in China, Hong Kong and Macao have a wealth of real estate. Cash, stocks and funds are relatively low, which is significantly different from other countries. In the three major categories of assets, only about 10% of Chinese investors invest in stocks and funds. In contrast, Western countries are much higher, and at least 20% of national wealth.

The current market conditions are affected by uncertain news. The relevant factors are not for ordinary investors. The allocation proposal for the second half of this year is to increase cash holdings, reduce the proportion of stocks and funds, and wait for market opportunities.

Hong Kong stocks will enter the performance period. According to statistics, most companies in the first half of the year reported good news. Except for ZTE (00763) issued a profit warning, most companies are expected to perform well. Although the Chinese and Hong Kong stock markets have support in the short term, the strategy is still conservative.