Industrial Securities released a research report stating that the AI wave in 2026 will benefit from the Federal Reserve's interest rate cuts, while bubble concerns may drive AI toward differentiation and value transformation. The Hong Kong stock market's bull run is expected to persist, with earnings and liquidity likely to jointly drive the market. Potential remains strong for both earnings and valuation improvements, particularly in large-cap growth and dividend assets.
In terms of investment strategy, the firm believes excess returns will come from "growth momentum + value reconstruction dividends," favoring new AI investment logic, military technology, AI-driven demand, new consumption, and healthcare sectors. Additionally, in a low-interest-rate environment, dividend assets—as scarce stable high-yield instruments—are poised to attract sustained inflows from absolute-return-seeking institutional investors, such as mainland insurance funds. Opportunities in insurance, banking, energy, property management, and utilities are recommended. Traditional industries should focus on supply chain restructuring, overseas expansion, and anti-involution measures.
Key highlights from Industrial Securities' report include:
1. **AI Wave: Fueled by Fed Rate Cuts in 2026** - U.S. liquidity easing and a weaker dollar will improve global liquidity. - AI may become a "rigid bubble" in the era of great-power competition, with skepticism driving differentiation and value realization.
2. **China's 15th Five-Year Plan: Policy-Driven Opportunities in 2026** - Structural economic improvements will drive stock market opportunities, focusing on tech self-reliance, service consumption, and traditional industry upgrades. - Mild inflation recovery is expected amid a weak macroeconomic rebound.
3. **Hong Kong Market Liquidity Outlook: Dual Support from Domestic and Foreign Capital** - RMB appreciation expectations and improved asset returns may attract foreign capital back to Chinese equities. - Wealth allocation shifts toward stocks, supported by low interest rates and policy incentives.
4. **Market Trends: "New Consensus" Driving Rotation** - Hong Kong's status as an international financial hub will underpin the bull market. - Earnings and valuation upside remain, particularly in large-cap growth and dividend plays.
5. **Investment Strategy: Patience and Selectivity** - Growth sectors: AI, military tech, energy tech, new consumption, and healthcare innovation. - Dividend assets: Insurance, banking, and utilities in a low-rate environment. - Traditional industries: Supply chain restructuring, global expansion, and anti-involution beneficiaries.
**Risks**: Geopolitical tensions, unexpected Fed policy shifts, and global economic slowdowns.
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