The Bank of China International ’s 2020 investment outlook released yesterday pointed out that despite the limited market opportunities, the “leading effect” will continue
In the past 10 years, the concentration of Chinese and American industries has become higher and higher, and leading companies have become more and more important in their respective industries, and have generated higher returns on equity, especially in mainland China. Hongye, Managing Director and Head of Research Department of Bank of Communications International, said that the prospect of Hong Kong stocks underperforming A shares next year is still not only due to the challenge of Hong Kong’s economic fundamentals, but also due to the accelerated internationalization of the Mainland market, which continues to attract foreign investment. Hong Kong Commercial Daily reporter Zhong Yinglin
Hong Yan said that contrary to the general pessimistic situation at the end of 2018, 2019 is a year of peak turnover. At present, the leading indicators of the Mainland economic cycle are picking up, and the trend of slowing down the real economy this year may improve.
More market uncertainties next year
Relative to growth, greater uncertainty comes from inflation in food and other raw materials, and the outlook for inflation directly constrains central bank monetary policy choices. Hong Yan believes that 2020 will face more uncertainty. If it is to surpass 2019, fundamentals, monetary policy and trade negotiations need to exceed expectations.
Although overall market opportunities are limited, industry leaders still have a leading edge. The long-term underperforming trend in emerging markets, small-cap stocks, and cyclical sectors has not ended. In the short term, the cyclical sector may have room to repair at the beginning of the three months.
In terms of stock selection, Bank of Communications International will be the first to buy Hong Kong stocks in different sectors next year, including Ping An of China (2318), Longguang Real Estate (3380), Meituan Reviews (3690), Shenzhou International (2313), CSPC (1093) And Follett glass (6865).
Hong Kong stocks continue to lose A shares
Talking about the trend of Hong Kong stocks, Hong Ye said that due to the challenges of Hong Kong’s economic fundamentals, investor confidence is lacking, and the Mainland market is accelerating internationalization, and the strength of attracting foreign investment is increasing. Looking forward to next year, the probability that Hong Kong stocks will continue to underperform A shares is very high. He pointed again. With the increase of MSCI’s shareholding, the interconnection mechanism, and the removal of restrictions on qualified foreign investors (QFII / RQFII) investment quotas by the State Administration of Foreign Exchange, the substitution of Hong Kong is increasing.
Hong Min reminded that from the historical data, the valuation of Hong Kong stocks has been at a very low level. Low valuations may attract investors to enter the market. However, to reverse the current situation, a “catalyst” is needed, but it is currently unpredictable what this “catalyst” is.
More Chinese-funded secondary listings in Hong Kong
Alibaba (9988) came to Hong Kong for a second listing, and the market expects more Chinese stocks to return. Hong Ying pointed out that Ali generates huge cash flow every quarter, and the finances are very healthy. It is not a financing need to return to Hong Kong for listing. Instead, as a responsible Chinese-funded company, China and the United States have made preparations for coming to Hong Kong under the competition of the United States and China. He believes that there is a great opportunity for other mainland companies to return to Hong Kong for listing, which is also conducive to trading in Asian time zone investors.
In terms of economic growth in the Mainland, Hong Yan believes that next year’s GDP growth rate will be below 6%, but the goal of doubling GDP in 2020 compared to 2010 will still be achieved. He explained that the current growth prospects are relatively certain, and the greater uncertainty comes from inflation, mainly the number of inland pigs destroyed by African swine fever, which is almost equivalent to the entire EU’s swine herd, and the changes in the virus are difficult to predict. Sows will need 12 Monthly cycle, and it is difficult to predict whether piglets will carry the plague virus.
2700 points at the bottom of the Shanghai Index in the next 12 months
In addition, Bank of Communications International believes that in the next 12 months, the bottom of the trading range of the Shanghai Composite Index is likely to be about 2700 points. The actual forecast distribution of the trading range of the bank’s bond yield model is 2500 points to 3500 points. Unless external factors are introduced, such as a large inflow of foreign liquidity, the mainland stock market will still be a zero-sum game.