Current market dynamics are characterized by significant volatility and heightened sensitivity to external influences. During periods of substantial market fluctuations, technology stocks, particularly those of small and mid-cap companies, typically experience more pronounced adjustments, which is a normal market phenomenon. Following substantial gains last year, many investors have accumulated considerable profits, leading to increased pressure for profit-taking. Several technology sectors have already undergone notable corrections recently. Investors who have secured significant returns and wish to avoid market volatility risks may consider reducing their positions appropriately. However, those with a medium to long-term investment horizon, who are less concerned with short-term market swings, might opt to hold steady and await market stabilization and the initiation of the next upward trend.
Overall, technology stocks are expected to remain a leading sector this year, though not the exclusive one; they represent one of the key investment themes. That said, investing in technology stocks this year presents greater challenges compared to last year. While last year's gains were largely driven by broad sector momentum, this year may see only leading companies with core technologies and breakthrough capabilities rising, whereas non-leading firms, especially those reliant on speculative themes, could face declines, potentially significant ones. Therefore, the decision to reduce positions should depend on the specific holdings. Investors may continue holding fundamentally sound leading stocks, but should exercise caution with concept stocks that have seen substantial gains without solid fundamentals, considering appropriate position reductions to manage risk.
Regarding Hong Kong stocks, the market has generally performed weakly over the past six months. The Hang Seng Index, particularly the Hang Seng Tech Index, has experienced considerable adjustments, shaking investor confidence and leading some to question whether the bull market has ended. However, excessive pessimism may be unwarranted. The recent downturn in Hong Kong stocks is partly attributable to capital flow dynamics, including delayed expectations for Federal Reserve rate cuts, which have dampened investor sentiment. Interestingly, during the decline of the Hang Seng Tech Index, the Hang Seng Tech ETF saw net subscriptions, and southbound capital continued to increase positions amid the downturn. This indicates that many institutional investors remain broadly optimistic about the future trajectory of Hong Kong stocks. Approximately 60% of the Hang Seng Tech Index consists of technology and internet companies, which enhance consumption convenience through internet technologies; their profits essentially stem from consumption and are thus significantly influenced by changes in consumption growth rates. The noticeable slowdown in China's total retail sales of consumer goods has somewhat impacted the performance of these index constituents. A rebound in consumption growth could potentially lead to a revaluation of these technology and internet companies.
Furthermore, in the AI era, these tech and internet firms are gradually increasing their investments in AI technologies. For instance, several internet giants have launched large model products, with "Doubao" featuring prominently in this year's Spring Festival Gala, where many users engaged with it for inquiries. Other developments include large models like Qianwen and Yuanbao. These advancements may enhance market valuations for tech and internet companies. Additionally, some internet giants are boosting R&D investments in AI, chips, and GPUs. If these companies sustain their investments in AI technology and begin to deliver on performance, market valuations could shift from traditional consumer stock metrics toward tech stock metrics, thereby elevating overall valuation levels. A stabilization and rebound in the Hang Seng Tech Index would be crucial for the broader Hang Seng Index's recovery, given its significant influence on investor sentiment.
There exists a relatively stable premium between A-shares and Hong Kong stocks. The A-H share premium index stands at around 120%, meaning A-shares of the same company are typically priced about 20% higher than their H-share counterparts. Consequently, Hong Kong stocks remain attractive from a valuation perspective, and investors need not be overly pessimistic. Significant market adjustments often attract external capital seeking opportunities. Among global major capital markets, Hong Kong stocks continue to trade at relatively low valuations, representing a value洼地.
Wall Street investor Jim Rogers holds a relatively negative view on US stocks, believing that after years of gains, the technology sector exhibits substantial泡沫. In a discussion, he mentioned having exited US stock positions in favor of allocating to A-shares and Hong Kong stocks, anticipating a potential significant decline in US markets. This represents a relatively pessimistic outlook. Conversely, more optimistic views exist. For example, during a CCTV财经 New Year program early this year, renowned investor Dan Bin expressed strong optimism about AI technology's development, considering it a generational opportunity still in its early stages with immense future potential. Thus, he maintains a positive stance on US stocks overall. A balanced perspective suggests a middle ground is likely. A crash in US stocks this year appears improbable, given continuous global capital inflows and the strong competitiveness of the "Tech Seven Sisters." However, further substantial gains may be constrained by high valuations, the pace of AI application commercialization, and tech companies' ability to deliver on earnings.
In the "Ten Predictions for 2026" released late last year, it was noted that US stocks might peak and decline this year. Recently, Berkshire Hathaway's annual report revealed that Warren Buffett formally stepped down as CEO at the end of last year, making a final significant decision to continue reducing US stock holdings. Berkshire Hathaway's cash holdings have now reached $3700 billion, exceeding the market value of its stock portfolio, indicating Buffett's equity allocation has fallen below 50%. Known for his caution, Buffett's past five significant reductions in US stock exposure were followed by substantial market declines, a point worthy of investor consideration. Having attended the Berkshire Hathaway annual meeting in Omaha现场 seven times over the past decade, I will again lead a group of investors there this May Day to interpret Buffett's latest insights. The main Q&A session at this year's meeting will be handled by successor Greg Abel. I will also share updates and perspectives via live stream.
Recently, international gold prices have not surged significantly due to Middle East conflicts but have rebounded after adjustments, following a pattern of sharp rises, declines, and recoveries. Over the past two years, I have maintained a firm bullish stance on gold and other precious metals, primarily driven by global "de-dollarization" trends. The US government's debt has soared to $38 trillion, with annual interest payments exceeding $1 trillion, leading to rising Treasury bond issuance rates. Textbook definitions often treat the US 10-year Treasury yield as the risk-free rate, assuming no default risk, thus classifying it as a safe-haven asset. However, given the high debt levels, the current 10-year yield of approximately 4.5% incorporates a significant risk premium.
Historically, each time intervention is needed to support markets or the economy, the Federal Reserve has resorted to quantitative easing, even implementing unlimited QE in recent years. This translates to substantial money printing and liquidity injection, increasing the supply of US dollars. Consequently, the long-term trend for the US dollar is depreciation, and its purchasing power is expected to decline over time. As gold is priced in dollars, its price is poised to rise correspondingly. After significant gains over the past two years, which accumulated substantial profitable positions, a correction following the rally is understandable. Investors might consider allocating around 20% of their portfolio to gold-related assets, tailored to individual circumstances, to hedge against currency depreciation risks. This strategy has proven effective in recent years and remains viable. Therefore, avoid overemphasizing short-term fluctuations in gold prices; instead, adopt a medium to long-term perspective, treating gold as an asset allocation. Consider buying on dips during significant declines, accumulating gold assets akin to collecting, and aiming for sound returns through sustained holding.
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