Damo: Capital reallocation for Chinese stocks is expected to see Hong Kong stocks absorb liquidity improvement proposals in August at dips

The Zhitong Finance App learned that Morgan Stanley released a report saying that shortfall financing and southbound capital inflows helped Hong Kong stocks regain momentum; it is expected that the market environment will improve further in August, leading to a better recovery. The current extremely low allocation positions mean that now is the time to gradually increase positions.

Damo pointed out that global investors' interest in Chinese stocks is rising, so it is expected that within the next few months, capital will gradually be reallocated to Chinese stocks. Considering that the position is extremely low, it is recommended that it can now be gradually absorbed.

Damo said that the Hong Kong stock market has paved the way for a significant recovery in August. The main reasons include e-commerce performance in the second quarter confirming that the damage to profits of the price war has peaked; further progress has been made in the prospects for commercialization of artificial intelligence (AI); and the pressure to lift the ban on IPOs in July may be mostly digested. However, if the market is to see a further significant rebound, the domestic market must see the revised profit expectations bottoming out and the prospects for AI commercialization improve. Peripheral factors need to be contained through a more clear Federal Reserve policy path, further stabilization of interest rates and bond yields, confirmation of planned capital expenditure expansion by major US technology companies, and deleveraging pressure in highly leveraged market sectors during the summer.