Guotai Haitong: Emphasize the value of the Hong Kong stock dividend base, gradually increase the configuration of technology + overseas chains.

Guotai Haitong released a research report stating that the short-term risks, such as rising interest rates, have brought negative pricing disruptions, but the medium-term focus is still on the growth trend of the AI industry. The key to the next stage of the Hong Kong stock market lies in confirming the turning point of the fundamentals, and the Q1 financial reports of internet companies have solidified the narrative of fundamental reversal. Structurally, the focus is on the value of Hong Kong stock dividends, gradually increasing attention to Hong Kong stock technology companies, and resilient external demand/outbound chains. Guotai Haitong's main points are as follows: Short-term risks bring negative pricing disruptions, the medium-term focus is still on the growth trend of the AI industry. The rise in US bond yields above 4.5% this week has attracted attention. This is a concentrated pricing event that market has started to realize that an agreement between the US and Iran will take some time. If the Strait of Hormuz remains closed and oil prices continue to rise, inflationary pressures may exceed expectations. In addition, the formal approval by the US Senate of Powell to be the Federal Reserve chairman has caused concerns about his governance position. Historical experience shows that after the 10-year US bond yield breaks through the 4.5% mark, short-term risk assets may come under pressure, but looking at a 10-20 day timeframe, major markets are generally moving out of the downtrend. The current risk seems relatively controllable, with the key focus still on the growth trend of the AI industry. Q1 internet financial reports solidify the narrative of fundamental reversal. Hong Kong stocks have been weak since the fourth quarter of last year mainly due to continued downward revisions in profit expectations, in contrast to US stocks. Therefore, for Hong Kong stocks, the key to the next phase lies in confirming the turning point of the fundamentals. This week, JD.com, Alibaba, and Tencent successively disclosed their first-quarter reports, further solidifying the narrative of fundamental reversal, focusing on: 1) The clear trend of increased capital expenditure, 2) Strong growth expectations in cloud revenue, 3) Mass production of self-developed chips, 4) The appearance of a turning point in sales expenses ratio. Fundamentals have been positively priced in for the internet companies that have already released their first-quarter reports. The market is still in a period of intense disclosure of earnings for large tech companies, with upcoming focus on the first-quarter reports of Baidu on May 18 and NVIDIA on May 20. Industry comparison: Focus on the value of Hong Kong stock dividends, gradually increase allocation to Hong Kong stock technology companies and outbound chains. It is recommended to focus on the value of dividend allocation in Hong Kong stocks, with incremental funding support in the medium term, short-term resilience against downward risks from geopolitical disturbances leading to institutional portfolio adjustments. At the same time, the first-quarter reports have solidified expectations of the Hong Kong stock market's fundamentals recovery, with short-term overseas headwinds causing disturbances, but the main core pricing factor in the medium term is still the AI growth trend. Based on this, the recommendations are: 1) Gradually increase allocation to the technology sector in Hong Kong stocks which have a scarcity advantage, with a focus on semiconductors/hardware equipment, and the Hang Seng internet sector and large models. 2) Increase focus on resilient external demand/outbound chains, such as new energy vehicles benefiting from energy transition, and innovative drugs with low macroeconomic correlations and upward microeconomic trends. Monitoring indicators for Hong Kong stocks: Recent marginal changes worth noting in the past week are: 1) This week, due to the deadlock in the US-Iran negotiations, US-Japan inflation exceeding expectations, and Powell's formal approval, the market has significantly increased the expectation of a rate hike by the Federal Reserve this year from 0.06 times last week to 0.59 times this week, with an obvious tightening of overseas liquidity. 2) Foreign investment as a whole has turned into net inflows this week and for the second time since the end of February, there was a weekly net inflow of funds into the Hang Seng Technology Index. 3) This week, the southbound funds have significantly increased their positions in Hong Kong stock dividend companies for the fourth consecutive week, with buying intensity still exceeding historical average plus one standard deviation. Risk warning: Unexpected escalation of the Middle East conflict, Federal Reserve unexpectedly tightens policy.