CITIC Securities: Three Key Themes for Hong Kong Stocks During the Earnings Vacuum Period
Alina Collins
CITIC Securities says earnings-estimate cuts have largely run their course after Q1 reports, with pessimism priced in; during the blackout window it recommends three high-conviction themes — supply-constrained cyclicals, AI hardware spillover, and broad-dividend plays.
How bad was the full-year 2025 scorecard?
The Hang Seng Composite and Hang Seng Index posted earnings growth of just 2.4% and 0.6% respectively. Ex-financials EBIT — operating profit stripping out banks and insurers — turned negative across the board, and ROE slipped to 10.1%.
Hang Seng Tech revenue still grew 10.8%, yet net profit shrank 9.5% year-on-year. This means → AI capex, price wars, and weak domestic demand are eating the profit that top-line growth should have delivered.
Aggregate earnings came in well below consensus: comparable net profit and ex-financials EBIT missed Bloomberg estimates by 2.77% and 3.85%.
Which sectors bucked the trend?
Materials nearly doubled their net margin from 4.0% to 7.8%, lifting ROE by 2.6 percentage points. Gold names, riding higher bullion prices, posted revenue growth of 21.6% and earnings growth of 87.1%.
Healthcare EBIT growth jumped 42.9 percentage points versus 2024 to reach 51.0%, tying materials as the sector with improving margins *and* rising ROE.
Industrials and engineering grew 28.9% against the tide. In plain terms = upstream resources and healthcare were the rare pockets where Hong Kong-listed companies earned more *and* earned it more efficiently.
Who dragged the market down?
Consumer discretionary saw its net margin fall 1.9 percentage points. Real estate revenue contracted 13.2% year-on-year, earnings growth sank to -34.0%, and more than 60% of developers missed expectations.
Among oil & gas and coal names, 71% and 86% respectively fell short of estimates. This means → traditional energy may have a supply narrative, but last year's delivery rate was dismal — stock-picking risk far outweighed the sector thesis.
What signal did Q1 reports send?
Revenue for reporting companies rebounded to 3.7% year-on-year growth; earnings and ex-financials EBIT declines narrowed sharply to -0.9% and -0.2%. This means → fundamentals are stabilizing at the trough, and the worst phase has most likely passed.
Standouts clustered in commodities and the export chain: metals and gold earnings surged 98.8% and 97.0%; battery-chain revenue jumped 52.5%, continuing to cash in on overseas pricing premiums; brokerages and asset managers rode a trading-volume recovery.
AI core supply chain and mature-node semiconductors — chips made at 28 nm and above, not cutting-edge processes — began delivering earnings, emerging as the growth-sector bright spot.
Traditional infrastructure and property chains remained under pressure. CXO — contract pharmaceutical R&D outsourcing — and pharma saw their high-growth trajectories flatten noticeably. Weak domestic demand has yet to turn around in substance, though the pace of decline is showing early signs of inflection.
What should investors focus on during the blackout?
CITIC Securities highlights three themes. First, supply-constrained strong-cycle sectors — energy, shipping, and industrial metals. The logic: supply contraction pushes prices higher, largely independent of domestic demand.
Second, AI hardware-spillover plays driven by computing-power demand. In plain terms = not just the large-model companies themselves, but the hardware and semiconductor links that benefit as computing demand "spills over."
Third, broad-dividend plays — names with stable-to-improving earnings and high payout certainty, offering compensation amid elevated risk premiums and external disruption. This reflects the market's core logic right now: when the broader index lacks upside momentum, capital gravitates further toward certainty.
What risks should be on the radar?
CITIC Securities flags four risk factors: a fresh escalation in global geopolitical conflict, a worse-than-expected deterioration in U.S.–China relations, another round of broad earnings-estimate cuts for Hong Kong stocks, and China's policy implementation or economic recovery falling short of expectations.
During the earnings blackout, whether the three themes above can keep delivering strong operating momentum will be the key test of their validity. In plain terms = picking the right direction is not enough — the next few months hinge on whether high-frequency data in these sectors can back up the thesis.
Content is for reference only, not financial advice.