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<Research>CICC Analyzes HK Stock Valuations; Div. Sector Expected to Have 5% More Room Compared to A-Shrs; Tech Sector Largely in Line w/ ROE
According to a CICC report on the Hong Kong stock strategy, the AI boom has significantly shifted investor sentiment and macro narratives since the Spring Festival holiday, driving...
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<Research>CICC Analyzes HK Stock Valuations; Div. Sector Expected to Have 5% More Room Compared to A-Shrs; Tech Sector Largely in Line w/ ROE
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According to a CICC report on the Hong Kong stock strategy, the AI boom has significantly shifted investor sentiment and macro narratives since the Spring Festival holiday, driving the Hong Kong stock market into a continuous uptrend.

Regarding the position of Hong Kong stock valuations, CICC noted that, statically, they remained at the lower end of the historical range. In a longitudinal comparison, the dynamic P/E of the HSI has recovered from 9.1x before the Spring Festival holiday to around the historical average of 10.8x, corresponding to the 61.2% percentile since 2013, while the dynamic P/E of HSTECH has recovered from 15.6x to 19.3x, though still below the historical average, corresponding to the 33.2% percentile since July 2020.

Related NewsG Sachs Keeps XIAOMI-W (01810.HK) at Buy; TP $58
In a horizontal comparison, the dynamic P/E of the Hong Kong stock market remained low compared to major global markets. The dividend yield (about 3.2%) of the HSI was still much higher than the 10-year mid-term bond yield (about 1.8%). The recent market rebound has reduced the ratio but it stayed above the historical average by more than 1x standard deviation.

In terms of sectors, with a divergence between new and old economies, the dynamic P/E of the new economy rose to 16.7x and the old economy to 6.1x, both below the average since 2015. Within sub-sectors, valuations in finance, raw materials, and other sectors have returned to historical averages, while retail, media entertainment, and consumer services still hovered at historical lows.

At the individual stock level, Hong Kong stock valuations, under comparable company criteria, were lower than major markets like US stocks. The average dynamic P/E of China's top 10 tech giants (BABA-W (09988.HK)  -5.500 (-3.929%)    Short selling $4.15B; Ratio 16.972%   , TENCENT (00700.HK)  -17.000 (-3.187%)    Short selling $2.41B; Ratio 13.412%   , MEITUAN-W (03690.HK)  -8.600 (-4.687%)    Short selling $1.54B; Ratio 17.347%   , XIAOMI-W (01810.HK)  -1.500 (-2.760%)    Short selling $1.21B; Ratio 10.174%   , BYD COMPANY (01211.HK)  -9.600 (-2.703%)    Short selling $1.10B; Ratio 29.237%   , JD-SW (09618.HK)  -7.800 (-4.586%)    Short selling $915.86M; Ratio 26.089%   , NTES-S (09999.HK)  +0.200 (+0.124%)    Short selling $463.59M; Ratio 26.488%   , BIDU-SW (09888.HK)  +1.200 (+1.322%)    Short selling $443.16M; Ratio 20.615%   , GEELY AUTO (00175.HK)  -0.700 (-3.919%)    Short selling $135.59M; Ratio 8.891%   , SMIC (00981.HK)  -2.550 (-4.670%)    Short selling $569.12M; Ratio 7.395%   ) reached 21.9x, lower than the US "Magnificent Seven" (Apple (AAPL.US)      , Microsoft (MSFT.US)      , Alphabet (GOOG.US)      , Tesla (TSLA.US)      , Meta (META.US)      , Nvidia (NVDA.US)      , and Amazon (AMZN.US)      ) at 28.4x.

Related NewsCMS: DeepSeek Triggers Re-rating of CN Internet Tech Firms; Potential Price War Under Radar
Statically, whether comparing horizontally with other assets and markets or longitudinally with historical trends, even within sectors and individual stocks in the Hong Kong stock market, Hong Kong stocks' current valuations remain at relatively low levels in the historical range. As for how much room there is for further expansion of their valuations, CICC believed the dividend sector has 5% more room compared to A-shares, and the tech sector is already largely aligned with ROE.

The report also pointed out that the higher discount in Hong Kong stocks suggested the dividend yield was significantly higher than that of A-shares, which will still be considered attractive even after factoring into dividend tax. This has partly explained why China's southbound funds continued to favor high-dividend Hong Kong stocks, with southbound fund holdings in CHINA TELECOM (00728.HK)  -0.220 (-3.543%)    Short selling $10.89M; Ratio 2.159%   and CHINA SHENHUA (01088.HK)  +0.200 (+0.651%)    Short selling $87.51M; Ratio 22.095%   exceeding 50%.

As for the tech sector, current valuations and ROE are largely aligned, with further room dependent on profit improvement. The report said that DeepSeek has sparked market enthusiasm for re-rating tech stocks, but after a month of continuous gains, whether they are still undervalued is questionable.

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In the broker's opinion, it seems so on an absolute level, but further expansion will require more realization given current profitability; otherwise, there will also be a lack of room.
(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2025-03-10 16:25.) (Real-time Streaming US Stocks Quote; Except All OTC quotes are at least 15 minutes delayed.)

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