20131220-招商证券-Hong_Kong_Stock_Market_Strategy_2014Outlook__Big_Reforms_Start_From_Small_Steps_51页_3mb

Hong Kong Stock Market Strategy Summary

Core Content

This document outlines the outlook and investment strategy for the Hong Kong stock market in 2014, emphasizing the impact of global liquidity conditions, economic reforms, and sectoral performance. It highlights the volatility and differentiation expected in the market due to structural changes and policy shifts.

Main Views

• Market Performance Frontloading: The Hong Kong stock market is expected to perform strongly in the first half of 2014, with certain sectors outperforming even in a weak market.
• Reform Pain Over Benefits: While reforms will eventually benefit the economy, the short and medium-term effects are likely to be negative, leading to market instability and increased sectoral divergence.
• Economic Slowdown and Inflation: China's economy is expected to grow at 7.5% in 2014, with inflation peaking in Q2, which will limit monetary easing and increase financing costs.
• Capital Flow Dynamics: The market is influenced by both US and Chinese factors, with H shares showing stronger correlation with A shares and RMB appreciation.

Key Issues

1. Three Great Rotations:

   • From bonds to equities
   • From emerging markets to developed markets
   • From old industries to new industries

2. Hong Kong Stock Market Performance:

   • Influenced by global liquidity conditions
   • Sectors will differentiate significantly
   • Reform implications will affect both the Chinese economy and Hong Kong market

3. Risk Exposure:

   • Rising interest rates and tight monetary policy will increase financial risks
   • Deleveraging and capacity reduction may lead to sporadic bankruptcies and unemployment

4. Industry Selection:

   • Focus on sectors with good growth visibility, reform beneficiaries, and consolidation opportunities
   • Highlighted sectors include environmental protection, new energy, railway, high-end equipment manufacturing, non-bank financials, mass consumption, healthcare, internet and technology, media, and service

5. Investment Timing:

   • Q1 and Q4 are expected to be peak periods
   • Q2 will likely face a downturn, especially with the Fed's QE tapering and rising inflation

Key Insights

• The Hong Kong stock market (HSI and HSCEI) has shown significant divergence from US stocks and the dollar index since July 2013.
• HSI top performers include companies like Galaxy Entertainment, Tencent, and Sands China, while laggards are concentrated in real estate and cyclicals.
• HSCEI top performers include Great Wall Motor, Longyuan Power, and China Pacific Insurance, with laggards including Air China and China Coal Energy.
• The correlation between HSCEI and SHCOMP has increased, indicating a stronger link between Hong Kong and mainland Chinese markets.
• The market is expected to be more volatile and differentiated in 2014 due to economic reforms and global monetary policy changes.

Sectoral Analysis

Top Performing Sectors in 2014

• Environmental Protection
• New Energy
• Railway
• High-End Equipment Manufacturing
• Non-Bank Financials
• Mass Consumption
• Healthcare
• Internet and Technology
• Media
• Service

Investment Ideas by Sector

Conclusion

The Hong Kong stock market is expected to face a complex and volatile environment in 2014, driven by economic reforms, global liquidity conditions, and shifting capital flows. While the market may frontload its performance in the first half, the second half is likely to experience challenges. Investment should focus on sectors with strong growth potential and reform benefits, while being cautious of those exposed to high leverage and economic uncertainties.