Guosen Securities released a research report stating that the rise in US stocks in January was significantly smaller than in emerging markets, viewing the US dollar index rebound as temporary and maintaining that emerging markets offer greater opportunities in the first half of 2026. However, two risks require monitoring: first, a sharp rise in crude oil prices due to geopolitical conflicts; second, a continued significant upward climb in long-term bond yields. The rebound in the dollar index and the rise in US Treasury yields have, to some extent, negatively impacted the capital flows into Hong Kong stocks. Nevertheless, with the Renminbi continuing to appreciate, Hong Kong stock earnings being steadily revised upwards, and the view that the dollar index rebound is unlikely to persist, the firm remains optimistic about the subsequent performance of the Hong Kong market. Regarding sectors, it is recommended to focus on AI and PPI-related areas such as raw materials and industrials. The main views of Guosen Securities are as follows:
In the US, the nomination of Waller triggered a reversal in market trades. When market expectations for a full year of interest rate cuts became overly unanimous, the anticipation of quantitative tightening (QT) sparked by Waller's nomination led to a rebound in the dollar index. It is still too early to be concerned about this; given the significant pressure on hourly wages, consumption, and employment in the US during the first half of the year, coupled with manageable inflation pressures, the necessity for rate cuts remains high. Furthermore, more details regarding QT are not expected to become clear until after the Federal Reserve chair transition in May. In January this year, the gains in US stocks were notably less than those in emerging markets, reinforcing the view of the dollar index rebound as a temporary phase and the belief that emerging markets present better opportunities in the first half of the year. However, two risks need tracking: first, a substantial increase in crude oil prices driven by geopolitical conflicts; second, a continued sharp rise in long-term bond yields.
Domestically, the two main themes of 'AI' and 'PPI' are relatively clear. The most significant difference between the A-share market and the Hong Kong market in January was that A-share trading volume hit a record high. The AI theme significantly outperformed the broader market; sectors within the PPI theme, such as non-ferrous metals, chemicals, and new energy, also performed quite well. It is worth noting that Hong Kong stock trading volume did not reach new highs; therefore, the enthusiasm for AI applications seen in A-shares did not simultaneously transfer to Hong Kong stocks, resulting in divergent market performances. Hong Kong investors continue to base their direction on earnings expectations.
For Hong Kong stocks, the firm remains optimistic about the spring rally and advises positioning around earnings. The rebound in the dollar index and the rise in US Treasury yields have somewhat negatively affected the capital environment for Hong Kong stocks. However, with the Renminbi's ongoing appreciation, steady upward revisions to Hong Kong stock earnings, and the expectation that the dollar index rebound will not last, the outlook for the Hong Kong market's subsequent performance remains positive. Regarding specific sectors: 1. AI Theme: Differentiation is occurring within the AI theme. The high-growth segments include semiconductors, cloud computing, and the computing power chain, while the application side has underperformed in the short term due to factors like competition in food delivery services and crowded positioning from the previous year. As competition in food delivery eases and prices adjust, alongside the continuous enrichment of large model application scenarios, AI applications remain one of the strategic directions for 2026. 2. PPI-related Raw Materials and Industrials: The long-term logic for precious metals, driven by asset reallocation among global central banks and institutions, remains solid, supporting a continued positive view on the full-year allocation value of gold. Furthermore, many companies within the industrials sector that represent Chinese characteristics have stable market structures and possess global competitiveness, with favorable profit expectations, making them worthy of attention. 3. Consumer Sector: Valuations in the consumer sector are at the 1st percentile compared to the past decade, indicating excessively low market expectations and room for sustained improvement. This sector's strength lies in its stability and relatively independent performance, being less affected by international turbulence. 4. Energy: The rise in commodity prices is expected to gradually spread from precious metals and base metals to energy and shipping sectors, which also merit attention, especially given that energy asset prices remain low and can hedge against geopolitical uncertainties. 5. Innovative Drugs: The performance of innovative drug companies is stable, warranting continued holding. Should new Business Development (BD) projects emerge, there is potential for further valuation repair in this sector.
Risk warnings include uncertainty regarding geopolitics, uncertainty in US tariff policies, uncertainty regarding the extent of overseas interest rate cuts, and uncertainty in the competitive landscape of certain industries.
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