To The Moon

The Hang Seng Index of Hong Kong stocks extended its gains to 1%, while the Hang Seng Tech Index was down 0.06%.

Huatai Securities believes that on the fundamentals front, structural data such as services consumption during the long holiday period deserves close attention, though overall it may be difficult to change the relatively lackluster trend in earnings data.

Although historical experience shows that Hong Kong stocks tend to see short-term rebounds during long holidays, the current market has not accumulated sufficient short positioning to create high payoff ratios, making the risk-reward of betting on ultra-short-term opportunities unfavorable.

In terms of sector allocation, dividend plays remain the base position. Investors should control exposure to banks and coal, where the dividend yield advantage relative to A-shares is converging and where raising payout ratios is relatively difficult. Attention should be directed toward higher cost-performance areas such as oil and gas.

Leading innovative drug and CXO companies have already recovered during the trading around the U.S. rate hike landing, and can continue to be held, though beta upside is limited. Investors need to carefully select individual stocks and set profit-taking levels. Essential consumer sectors such as beverages and dairy products are already on the right side of the fundamental bottom but lack catalysts, so patience is warranted.