Global technology stocks have performed well, with the Nasdaq index rising 8% in May, significantly outpacing the S&P 500's 5% and the Dow Jones's 3% gains. A similar trend is observed in Hong Kong stocks, where the Hang Seng Tech Index rose 0.3%, in contrast to the Hang Seng Index's cumulative decline of 2%.
Shiu Chi-ming, Head of Discretionary Portfolio Management Asia at Lombard Odier, remains optimistic about the long-term prospects of technology stocks but notes that after recent gains, a period of consolidation may be needed in the short term. He analyzes that the current outperformance of tech stocks is primarily supported by fundamentals, with upward revisions to corporate earnings growth serving as a cornerstone for the bull market. However, short-term overbought conditions have emerged; the Relative Strength Index (RSI) has surpassed 70 since the onset of the U.S.-Iran conflict. While the industry's outlook remains positive, elevated valuations now carry certain risks, making a technical consolidation in the near term unsurprising.
He emphasizes that the bank maintains an overweight position in equities, and any potential adjustments would merely reflect overbought conditions. Investors are advised not to hastily exit the market.
Shiu acknowledges that the AI supply chain has structural support, encompassing multiple high-growth sectors, and will continue to be a key investment theme. Technology companies with export-oriented businesses are expected to benefit. He also notes that while recent fund flows into emerging market equities have not been overwhelmingly positive, with slight net outflows observed, the overall capital pool remains relatively stable. The market's broader direction is likely to continue favoring AI-related concepts.
Interest rate futures suggest the possibility of a Federal Reserve rate hike within the year. He believes that the impact of potential rate hikes on technology sector earnings is relatively limited compared to their greater effect on defensive stocks.
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