Donald Trump’s victory has led to expectations of heavy spending on infrastructure and other fiscal stimulus measures, sending the dollar higher and prompting funds to leave US bonds and emerging market equities and flow into US stock markets.
In the first quarter of next year, US equities will probably continue to benefit hugely from such asset reallocation trends.
Trump will be officially sworn into office on January 20 next year, and he will enjoy a honeymoon period of around 100 days. We could therefore look forward to a six-month up cycle.
Investors should do well by increasing their exposure to US stocks. Consumption plays and infrastructure stocks are likely to do well.
Meanwhile, the outlook for Hong Kong stocks is less certain.
Fund outflows from the region will weigh on Hong Kong equities, particularly the leading performers over the past few months, such as Tencent (00700.HK). High-yield plays will suffer as well amid fears of higher US interest rates.
Nevertheless, the upcoming Shenzhen-Hong Kong stock trading link could provide a lift to the market.
Among dual-listed stocks of state-owned enterprises, H shares that offer deep discounts to their A-share counterparts, such as ZTE Corp. (00763.HK), Zoomlion Heavy Industry Science and Technology Co. (01157.HK), Xinjiang Goldwind Science & Technology Co. (02208.HK) and China Vanke Co. (02202.HK), are worth following.
Several big investment banks have encouraged investors to switch to mainland infrastructure stocks under the Belt and Road theme.
Also, mainland insurance stocks are likely to benefit from rising bond yields and new insurance policy premium growth.
This article appeared in the Hong Kong Economic Journal on Nov. 22.
Translation by Julie Zhu
[Chinese version 中文版]
– Contact us at [email protected]