BOCOM International: Recommends Overweighting HK Stocks in H2, Hang Seng Index and Hang Seng Tech Index Have Upside Potential
Claire Weston
BOCOM International recommends overweighting Hong Kong equities in H2, seeing upside for both the Hang Seng Index and HSTECH on PPI reflation driving earnings upgrades plus AI catalysts, with a barbell structure balancing tech growth and inflation beneficiaries.
How does BOCOM International frame the second half?
The house labels H2 as "AI-driven under reflation" — prices are rising and AI spending is surging at the same time.
Three forces feed the reflation leg: Middle East geopolitical events reactivating the energy chain, China's PPI turning positive and spilling over, and U.S. services inflation staying stickier than expected.
AI plays a floor-setting role: the global AI capex wave supports asset prices and economic resilience.
In plain terms = prices trending up, AI charging ahead — that twin dynamic is the macro backdrop for H2.
Why overweight Hong Kong stocks?
BOCOM International argues the core driver has shifted: from "cheap valuations + improving liquidity" to "earnings upgrades + AI narrative + domestic substitution" — three catalysts resonating together.
This means → Hong Kong is no longer just a value-repair story; fundamental earnings improvement is now behind it.
The recommended structure is a barbell: one end in AI and tech growth, the other in energy, materials, and financials that benefit from rising prices.
In plain terms = bet on both ends — tech for growth, cyclicals for pricing power — and skip the middle.
What about U.S. equities?
BOCOM International stays neutral on U.S. stocks. AI remains the main thread, but the house advises against piling further into mega-cap tech.
It suggests diversifying into small caps, financials, energy, and utilities — less crowded corners of the market.
This means → the core concern is concentration risk — too much capital in the same handful of names amplifies any pullback.
How does the rate environment affect this thesis?
BOCOM International expects the Fed to most likely hold rates steady in H2. The 10-year Treasury yield is projected to oscillate in a 4.0%–4.6% range, with the centre of gravity biased upward.
A steepening yield curve — short end flat, long end drifting higher — is the structural trend to watch.
This means → with rates staying high, the playbook of "liquidity lifts all boats" does not apply; earnings improvement is the only hard catalyst.
Where is the biggest risk to this call?
BOCOM International itself flags the key checkpoint: whether PPI reflation can sustainably translate into corporate earnings upgrades.
In plain terms = if factory-gate prices rise but profits do not follow, the overweight-Hong-Kong thesis falls apart.
This reflects a bottom-line assumption behind the entire allocation: "rising prices can become rising profits" — and that still needs data to confirm.
Content is for reference only, not financial advice.