‘A Definite Win or Loss’ – The Hong Kong stock market has not had a smooth ride entering the fourth quarter. The Hang Seng Index has lost ground below 24,000, hitting a recent low, while market turnover has further shrunk due to the mainland holiday season. In fact, this downward trend did not suddenly emerge in recent days. Observing the chart pattern, the market has been forming lower lows in successive waves, descending gradually since early August, with a cumulative decline of 2,000 points from its peak. Besides heavyweight tech stocks such as ATMXJ repeatedly searching for a bottom, international financial stocks are also hampered by multiple negative factors, jointly dragging down the overall market performance.
During this period, I have frequently received questions from seasoned investors asking: ‘Is it appropriate to bottom-fish at this stage?’ The answer is obvious. With high US bond yields, tense geopolitical situations, and lackluster earnings from certain companies, the Hong Kong market's appeal based on dividend income continues to weaken. Moreover, Hong Kong's major benchmark indices have traditionally low weightings in AI and new technology concepts that are currently popular in the market. Index constituents often fail to fully cover the top ten most actively traded stocks daily. Under such structural limitations, investors must establish reasonable expectations and avoid blindly anticipating a swift 'V-shaped' retaliatory rebound. At this stage, it is more advisable to remain patient and wait and see how the market trend evolves before making moves.
As for the US market, fund positioning appears highly divergent. The Dow Jones Index, led by traditional economy stocks, is clearly suppressed by rising long-term bond yields and has performed less than ideally. In contrast, the Nasdaq Index, led by large-cap tech stocks, has become a safe haven favored by capital flows, even breaking new highs. I dare not assert that such extreme divergence will persist throughout the fourth quarter, but in stock selection strategy, one must pay attention: with high risk-free interest rates, the opportunity cost of capital naturally increases. Institutional investors tend to prioritize allocating funds to industry leaders with the highest certainty and strongest earnings transparency. This also explains why capital has recently flowed back into the ‘Magnificent 7’ tech giants.
Regarding cash levels, given that interest rate trajectories and geopolitical situations remain unclear, it is definitely not advisable to go ‘All In’ too early with fourth-quarter investment strategies. In terms of sector selection, apart from the scarcity narrative of the AI hardware supply chain, investors should also pay closer attention to the practical applications of AI technology in biomedicine and drug development. Leading sectors in these areas are also attracting significant capital interest.
By Raymond Yuen, Co-Director of Investment Strategy, Wah Fu Kam Nga Securities
*Articles signed and/or unsigned published in ETNet are the authors’ personal opinions and do not represent ETNet's stance. ETNet’s role is to provide a free speech platform.
During this period, I have frequently received questions from seasoned investors asking: ‘Is it appropriate to bottom-fish at this stage?’ The answer is obvious. With high US bond yields, tense geopolitical situations, and lackluster earnings from certain companies, the Hong Kong market's appeal based on dividend income continues to weaken. Moreover, Hong Kong's major benchmark indices have traditionally low weightings in AI and new technology concepts that are currently popular in the market. Index constituents often fail to fully cover the top ten most actively traded stocks daily. Under such structural limitations, investors must establish reasonable expectations and avoid blindly anticipating a swift 'V-shaped' retaliatory rebound. At this stage, it is more advisable to remain patient and wait and see how the market trend evolves before making moves.
As for the US market, fund positioning appears highly divergent. The Dow Jones Index, led by traditional economy stocks, is clearly suppressed by rising long-term bond yields and has performed less than ideally. In contrast, the Nasdaq Index, led by large-cap tech stocks, has become a safe haven favored by capital flows, even breaking new highs. I dare not assert that such extreme divergence will persist throughout the fourth quarter, but in stock selection strategy, one must pay attention: with high risk-free interest rates, the opportunity cost of capital naturally increases. Institutional investors tend to prioritize allocating funds to industry leaders with the highest certainty and strongest earnings transparency. This also explains why capital has recently flowed back into the ‘Magnificent 7’ tech giants.
Regarding cash levels, given that interest rate trajectories and geopolitical situations remain unclear, it is definitely not advisable to go ‘All In’ too early with fourth-quarter investment strategies. In terms of sector selection, apart from the scarcity narrative of the AI hardware supply chain, investors should also pay closer attention to the practical applications of AI technology in biomedicine and drug development. Leading sectors in these areas are also attracting significant capital interest.
By Raymond Yuen, Co-Director of Investment Strategy, Wah Fu Kam Nga Securities
*Articles signed and/or unsigned published in ETNet are the authors’ personal opinions and do not represent ETNet's stance. ETNet’s role is to provide a free speech platform.
