Standard Chartered: HK Stock Rally May Be Sustainable; Balanced Allocation Recommended for Tech Stocks
Claire Weston
Standard Chartered's North Asia CIO Zheng Zifeng says Hong Kong stocks rebounded 3.5% last week as global funds rotate out of expensive chip names back into cheap large-caps; the bank targets 25,500–26,500 on the Hang Seng Index over 12 months, suggesting the bounce may outlast a single week.
Where is the rally money coming from?
Zheng observed in conversations with global investors that large flows are shifting into Hong Kong stocks, with undervalued large-caps the first port of call.
Over recent months, money left Hong Kong for sectors directly tied to AI capex — especially memory chips — flowing into US and Korean equities.
This means → the rally is not driven by a Hong Kong-specific catalyst; it is a rebalancing trade after overseas chip stocks got too expensive.
In plain terms = money made elsewhere, valuations stretched, so capital migrates to wherever looks cheap — and Hong Kong fits that bill.
Why is money leaving chip stocks now?
After a sharp rally, memory and other chip names have seen P/E ratios climb to historically elevated levels; earnings upside is already priced in.
At the same time, mainland China's participation in the memory sector keeps rising — the risk of a significant supply increase ahead cannot be ignored.
This means → chip stocks face a double headwind: peak valuations + new supply entering the market. Fundamentals-focused investors are starting to pull back.
Does the macro backdrop help or hurt Hong Kong?
Standard Chartered expects the Fed to hold rates steady for the rest of the year; the dollar is starting to top out.
Even if Middle East tensions flare again, that call still favours Hong Kong — a weaker dollar typically pushes capital into emerging markets.
Hang Seng Index 12-month target range: 25,500–26,500.
This reflects the bank's core thesis: macro headwinds for Hong Kong are fading, leaving room for a valuation re-rate.
Fundamentals are weak — so what supports the rally?
Zheng concedes that Hong Kong valuations are cheap but the market's fundamental expectations are already low.
The key: if company guidance shows earnings have troughed, the market may look past soft near-term numbers.
In plain terms = expectations are rock-bottom; as long as results aren't worse than feared, share prices have room to move up.
He flagged electric vehicles as a potential surprise: mainland subsidies are fading, but overseas sales are far exceeding forecasts and gross margins may deliver a positive beat.
How should investors position in tech?
Zheng recommends a balanced allocation rather than chasing whichever company just launched a new AI model.
Focus on companies with strong pricing power — their fundamentals can support the share price even through lock-up expiries or secondary placements.
He also highlights leading platform stocks: many have invested directly in AI chip businesses, and improving sentiment raises the odds of spin-offs that unlock hidden value.
In addition, he suggests holding high-dividend names yielding above 7% to anchor returns in an uncertain environment.
What signal tells us the rally can last?
Whether the rebound continues ultimately depends on heavyweight earnings guidance confirming a fundamental trough.
This means → the next reporting season is the verification window: upbeat guidance extends the rally; disappointing guidance could trigger another outflow.
In plain terms = the current bounce runs on "everywhere else is too expensive"; for it to become a real trend, Hong Kong's own earnings need to deliver.
Content is for reference only, not financial advice.