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financial news agency, october 2 (editor tong gu)hong kong stocks surged in volume today when a-shares and southbound trading were closed. yan zhaojun, a strategic analyst at zhongtai international, told the associated press that this perfectly reflects the characteristics of foreign capital and local hong kong capital entering the market one after another due to the phobia of missing out. he also analyzed the future upside potential of the hang seng index from four different angles for hong kong stocks. finally, i would like to remind you that the current violent rise with extremely high slope is unsustainable and short-term volatility will increase.

yan zhaojun, a strategic analyst at zhongtai international, told the financial associated press that today the hong kong stock connect and a-share markets are closed, but hong kong stocks have surged across the board, and transactions have continued to rise, which perfectly reflects the characteristics of foreign capital and local hong kong capital entering the market one after another due to the fear of missing out. no one wants to miss this feast. on the market, sectors or stocks that have been most severely pressured in their early valuations, such as the hang seng technology index, consumer discretionary, and real estate, have rebounded astonishingly, while index heavyweights have also surged across the board.

foreign capital that had previously been significantly underweighted in hong kong stocks returned to hong kong stocks.

this is the return of foreign capital that had previously been significantly underweight hong kong stocks, as well as the seven sisters (mag 7) who were long japanese stocks, indian stocks and us stocks in the past, and the short-selling china trade has reversed. the situation is just like the reversal of the japanese yen carry trade in early august, which caused the japanese yen the same as the sharp rise, but this time it happened in the chinese stock market.

yan zhaojun said that the hang seng index's forecast pe and risk premium have recovered to the 37.5% and 15.1% quantiles in seven years, and the risk premium is currently one standard deviation lower than the rolling two-year average. the hang seng index's forecast dividend yield is 3.7%, falling to its lowest level in more than a year. the rapid rise in hong kong stocks that began in late september was driven by capital and sentiment. expectations of more fiscal stimulus such as potential additional issuance of special government bonds are expected to continue to support positive sentiment. the increase in incremental liquidity brought about by the fear of missing out will continue for some time. , and the short-term rising height is also difficult to predict.

because it takes a long time to go from policy framework to policy implementation and then to policy effectiveness, the final scale of fiscal policy implementation is also uncertain. taking into account the current market sentiment and capital above all else, we need to measure the reasonable rise of hong kong stocks from different perspectives.

potential future gains in hong kong stocks

first, from the perspective of risk premium, if the short-term profit growth forecast remains unchanged, the yield on 10-year u.s. treasury bonds is at 3.8%, and the risk premium has returned to the low in may this year. points) the short-term reasonable level is 21,300 points.

secondly, if proactive fiscal measures are introduced continuously, with reference to the post-epidemic opening-up market, or the risk premium is lower than the extreme level of two standard deviations from the rolling two-year average, the hang seng index is expected to reach as high as 22,500 points (forecast pe 10.2 times).

third, refer to the risk premium of the hang seng index under the 2015 a-share leveraged bull market, which can be as high as 23,500 points (forecast pe 10.7 times).

fourth, from the perspective of dividend yield, if the dividend yield of the hang seng index returns to the level of january 2023 (3.3%), it can reach as high as 23,700 points.

in terms of short-term strategy, yan zhaojun recommends paying attention to

1) consumption sectors that are expected to benefit from improved policies, such as catering, gaming, beer, beverages and other low-valued sectors are forced to cover short positions and rebound after revised pessimistic expectations;

2) the technology (platform economy giants), biomedicine and real estate sectors benefited from the return of foreign capital and improved liquidity and risk appetite;

3) non-bank finance companies such as domestic insurance companies and securities companies benefited from the rising popularity of the stock market and the support of capital market liquidity policies.

violent promotion is unsustainable

finally, yan zhaojun reminded that we should pay attention to the fact that the current violent rise with extremely high slope is unsustainable. the hang seng index volatility index also surged by 27.2%, hitting a high of more than a year. as the hang seng index rises to a high close to early january 2023, the short-term valuation repair has been very sufficient. it is expected that the volatility of hong kong stocks will increase significantly, and high profit-taking pressure cannot be ruled out.

if the subsequent market enters a volatile and digesting market, it is expected that the leaders of second- and third-tier industries with a basis for profitability will run out. in addition, high-dividend stocks such as domestic banks, energy, and telecommunications that have performed poorly recently may also become the targets of capital inflows.