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During the May Day period, Hong Kong stocks led the world up. How will A shares perform in May?

In the two trading days during the May Day period, Hong Kong's Hang Seng Index rose more than 4 per cent, ranking first among the world's major stock indexes, with a cumulative gain of nearly 5 per cent in a week. Looking ahead, the Hang Seng index has closed higher for nine consecutive days, the longest straight gain since 2018.

From the perspective of international markets, European and American markets vary, and British stocks continue to hit new highs. The US stock index first fell and then rose, returning to its 60-day moving average, of which the Nasdaq rose more than 3%, while the Dow and the S & P 500 both rose about 2%.

Analysts believe that the European and American markets out of the rebound, the main reason is to bet on the Fed to cut interest rates. The April jobs report was much lower than expected, and expectations that the Fed could start cutting interest rates soon strengthened further. The Hong Kong stock market, which has low valuations in the world, is more sensitive to interest rates and has entered a technical bull market, and Chinese assets represented by science and technology stocks are even more powerful. With the general improvement in the external markets, especially the sharp rise in Hong Kong stocks, A-share "Red May" is worth looking forward to.

Hong Kong stocks lead global gains

During the May Day period, Hong Kong stocks continued their previous upward momentum. On May 3, the Hang Seng Index opened higher and closed at 18475.Revolvegamescrypto.92 points, an eight-month high. Technology stocks performed more brightly, with the Hang Seng Technology Index up 2. 5%.Revolvegamescrypto.74%, standing above the 4000-point mark during the day. Throughout the holiday, the Hang Seng Index surged more than 4 per cent, leading the world; the Hang Seng Technology Index surged more than 7 per cent.

In terms of heavyweights with a market capitalization of more than 100 billion yuan, Kuaishou-W, JD.com Group-SW, Ping an of China, etc., rose more than 10%; Meituan-W, Standard Chartered Group, Shell-W and more than 30 stocks rose more than 3%.

From the outside point of view, the three major indexes of US stocks rose for at least two days in a row to recover.RevolvegamescryptoLost ground that had fallen continuously before. From May 1 to May 3, the Dow rose 2.27%, the Nasdaq rose 3.18%, and the S & P 500 rose 1.83%.

Chinese assets listed on US stocks soared, with the Nasdaq China Golden Dragon Index soaring 8.47 per cent in three days, while companies with a market capitalization of hundreds of billions of dollars, such as Shell, JD.com, Ctrip Group, NetEase and pinduoduo, all rose more than 10 per cent. European stocks led by U. S. stocks rebounded next Friday, with the FTSE 100 index hitting a record high.

On the news side, a blockbuster data set off stock markets in Europe and the United States. Before Friday's trading, the u.s. labor market report showed that u.s. non-farm payrolls were 175000 in April, down more than 40% from 315000 last month and well below expectations. The market had widely expected U. S. employers to add 240000 jobs in April. After the disclosure of the data, traders advanced their expectations of the Fed's first rate cut to September from November this year; US interest rate futures expect the Fed to cut interest rates twice by 25 basis points in 2024, compared with one before the release of non-farm data.

Davis of Hong Kong stocks double-click

As we all know, Hong Kong listed companies are mainly domestic companies, and their profitability is driven by the domestic economic cycle and profit cycle. At the same time, the risk-free interest rate of Hong Kong stocks is determined by the US dollar interest rate, which is driven by the Fed's monetary policy cycle.

In this context, when the domestic economic development is relatively general and the US dollar interest rate continues to rise, the performance of the Hong Kong stock market is often restrained; at the same time, when the domestic economic expectation is good and the US dollar interest rate is expected to fall, the Hong Kong stock market, which is at the low level of the global stock index, has ushered in a big explosion.

Hong Kong stock market ushered in Davis double-click. On the one hand, US dollar interest rates are expected to fall; on the other hand, the domestic economic cycle begins to stabilize upward. According to data released by the National Bureau of Statistics in April, GDP grew 5.3% in the first quarter from a year earlier, much higher than market expectations. On April 30th the Bureau of Statistics announced that the manufacturing PMI index for April was 50.4%, which was in the expansion range for two consecutive months, indicating that the economy is in a stage of moderate recovery.

In addition, the property market, which is of considerable concern to the market, also seems to have ushered in a major turnaround. The political Bureau of the CPC Central Committee held a meeting on April 30, which specifically mentioned the adjustment policy on the real estate market, "digesting the stock of real estate and optimizing incremental housing." Institutions generally believe that the new formulation marks an important change in the thinking of regulation and control of the real estate market, and is expected to boost the depressed real estate market.

In terms of valuation, as of May 3, the Hang Seng Index's rolling price-to-earnings ratio was 9.41 times, in the last decade's 31.86 percentile; the price-to-book ratio was less than 1 times, only 0.92 times, in the last decade's 13.29% quantile. Compared with the global stock market, the absolute valuation and quantile of Hong Kong stocks are significantly lower.

In addition, the dividend yield return of the Hang Seng Index is also considerable, with the latest dividend yield reaching 3.91%, which is only lower than the Brazilian and Australian stock markets with a concentration of resource stocks and ranks third in the world.

Institutions are optimistic about A-share "Red May"

In the short term, driven by the sharp rise in the external market, especially the Hong Kong stock market, A-share "Red May" is worth looking forward to.

Everbright Securities (activist) said that after the full disclosure of the results, the recovery of fundamentals is expected to be further verified at the data level, and market expectations may return to stability. In addition, the gradual introduction of capital market policies in the future will also play a stable role in market expectations and confidence. Driven by both fundamentals and policy, the market is expected to remain stable after April and the stock market is expected to continue to rise.

Recent research by UBS (UBS) shows a more substantial long-term return on Chinese assets. MSCI China has narrowed its ROE gap with other emerging market countries in the past 18 months, but valuations have changed from a premium to a discount during that period, the report said. Under China's current ROE, it is supposed to be a 13 per cent premium to emerging markets, but it is actually a 40 per cent discount. Even if only half of the valuation gap is restored, there will be plenty of room to rise. This is especially true for Hong Kong stocks.

UBS also points out that the Chinese pool is still too small for large global funds to withdraw significantly from developed markets (Microsoft's weighting in the MSCI global index alone is about 1.5 times that of China). The global active fund currently has a low allocation of 80 basis points in China, and the weight of the entire china in MSCI is only 2.6%, that is, a low allocation of 1/3.

　　摩根士丹利、高盛等外资机构也纷纷看好中国资产。高盛表示，如果A股能够在股东回报等方面缩小与全球平均水平的差距，那么 A 股可能会上涨约 20%，若能达到全球领先者的水平——最乐观的假设，涨幅可能高达40%。