Shenwan Hongyuan 2026 Spring Hong Kong Stock Industry Comparative Strategy | More Than Dividends: Re-pricing of High-Dividend Assets

(Source: Shenwan Hongyuan Rongcheng)

Securities Analysts: Liu Yajing / Wang Xuerong / Mu Jinjing / Wang Sheng

Main Conclusions

1. From a capital attribute perspective, foreign investment emphasizes “unique ecological niches,” while southbound funds focus more on “high dividends.” In recent years, the proportion of Hong Kong Stock Connect assets held by foreign investors across industries (classified by Shenwan industry categories) has been systematically higher than that of southbound funds in sectors such as media, non-bank financials, household appliances, real estate, social services, and food & beverages. These sectors are related to capturing specific stages of China’s economic development and competitive barriers (e.g., Tencent, Meituan). Since 2025, the increasing proportion of foreign holdings in power equipment (represented by CATL) and trade retail (represented by Alibaba) further confirms this trend. Conversely, sectors where southbound funds have higher systematic holdings than foreign investors include banks, coal, petrochemicals, telecommunications, machinery, and pharmaceuticals, most of which are high-dividend industries aiming to leverage dividend rate advantages in A-H share comparisons.

2. High-dividend assets still hold investment value in 2026, but the driving factors for growth may be inflation expectations, with traditional high-dividend bond-like sectors potentially weaker. (1) Reviewing the performance of high-dividend Hong Kong stocks during RMB appreciation phases, historically, most sectors (sampled as stocks with dividend yields over 3%) have yielded absolute gains. (2) RMB appreciation effectively enhances China’s purchasing power for dollar-priced resources, which drives the global resource price center upward, supported by historical evidence. (3) The rise in global resource prices transmits to domestic resource prices, reflected in systematic expansion of gross profit margins and improved earnings in energy and materials sectors, many of which are sensitive to PPI increases. (4) Considering performance growth and dividend returns, Hong Kong high-dividend sectors still have an advantage over A-shares.

3. During inflation transmission, Hong Kong’s consumer discretionary stocks are also worth attention. Historical experience shows that the rebound of PPI at cycle bottoms often leads CPI improvement, and the performance of Hong Kong consumer discretionary sectors tends to lead CPI recovery, aligning more closely with PPI cycle turning points and outperforming the Hang Seng Index during PPI uptrends. Meanwhile, essential consumer sectors follow inflation transmission patterns, historically outperforming the Hang Seng Index during CPI increases. Coupled with policy emphasis on service consumption industries, we highlight investment opportunities in leading Hong Kong consumer discretionary and service consumption assets, as well as the potential for more high-quality assets from subsequent IPO expansions.

4. Historically, during RMB appreciation phases, internet stocks have a higher probability of outperforming, and we believe this logic remains valid in 2026. We see Hong Kong tech stocks > Halo, awaiting Fed rate cuts and ecological validation. Since Q1 2026, RMB appreciation has shown a significant divergence from Hong Kong tech stocks: the Hang Seng Tech Index, tech sector, and consumer discretionary sectors have weakened, mainly because the market has misjudged Hong Kong tech stocks as Halo assets under the Halo strategy, leading to undervaluation. In contrast, the Hang Seng Index and cyclicals continue to follow the historical pattern of RMB appreciation benefiting Hong Kong stocks. We believe that Hong Kong internet companies are not primarily Halo-damaged assets; their physical assets like IDC data centers, automated logistics centers, and offline fulfillment networks are core assets, and despite algorithm iterations, demand for physical goods and services persists. Furthermore, the integrated soft-hard ecosystem and unique ecological positioning of internet companies justify higher valuations than Halo, providing a future industry map that offers infrastructure capabilities for global tech while maintaining a distinct ecological niche premium (see “Dare to Ask How Much Is the Value of Dreams? — Building Shenwan Hongyuan’s ‘Future Industry Pricing System’”). Lastly, financial and real estate stocks, as “bullish options” benefiting from inflation and RMB appreciation, are recommended for tactical allocation.

Risk Warning: 1) US Federal Reserve rate cuts below expectations, weakening dollar liquidity easing expectations and impacting the valuation center of Hong Kong stocks from an foreign investor perspective; 2) Escalating geopolitical uncertainties may lead foreign investors to reduce exposure, lowering their willingness to allocate to Hong Kong stocks; 3) Uncertainty in AI technological pathways may affect tech sector earnings forecasts.

Additionally, we have constructed the Hong Kong Dividend 20 Portfolio. Investors are welcome to contact Shenwan Hongyuan Strategy Theme Group for details.