Xiong Liping: How to Choose Between Alibaba, Tencent, and Dividend Stocks?

This two-part episode features guest Conita Hung (Conita), discussing whether Hong Kong stocks are currently in a "super bull market" or nearing the end of an upward trend. According to Conita, rather than defining it as a "bull market," it is more appropriate to view it as an "upward wave" or "upward cycle"—a term she prefers to describe the current market state, emphasizing that this cycle did not just begin recently.

Looking back to September last year, when the central government introduced a series of policies, it marked the beginning of the upward cycle. However, in April this year, tariff issues caused Hong Kong stocks to decline, making it difficult for many investors to clearly recognize this upward trend (due to special external factors). Since then, the broader market has continued to rise, with the Hang Seng Index climbing to around 26,000 points. Despite some questioning whether the market is now extremely bullish, Conita rarely uses the term "bull market." She believes the market remains in an upward cycle, and this phase may not yet be over.

From a valuation perspective, although Hong Kong stocks have risen to 26,000 points, there is still room for further growth compared to global markets. In August, most major markets (such as the U.S. stock market) hit new historical highs, while Hong Kong stocks merely rebounded to their 2021 peak (and mainland China's A-share market only returned to 2015 levels). If valuations in overseas markets continue to rise, Hong Kong stocks’ relatively lower valuation offers potential for catch-up gains. Additionally, the current upward trend is primarily driven by three factors: cyclical dynamics, policy support, and global AI development—with advancements in the AI industry being one of the key drivers of market growth.

Promising Hong Kong Stock Picks: Alibaba and Capital Flow Logic

The Logic Behind Holding Alibaba Long-Term

Conita shared her long-term Hong Kong stock pick—$BABA-W(09988.HK)$ . She purchased it several years ago at around HKD 110 per share and has held it for over a year, enduring significant price fluctuations ("weathering drops of dozens of dollars") until the stock price recently rebounded. Her primary reason for favoring Alibaba lies in its active push into artificial intelligence and cloud services beyond its e-commerce business.

Although performance in the e-commerce segment was unsatisfactory previously (e.g., continuous organizational restructuring from the "1+6+N" model to the current four business segments), the market has gradually accepted these changes. More importantly, growth in the cloud business has started to show: advancements in large models and cloud services have provided fundamental support for the stock price. Furthermore, despite fierce competition in areas like food delivery platforms (e.g., "talent grabs"), Alibaba maintains a competitive edge. Previously, the market focused more on Meituan and Tencent, paying less attention to Alibaba’s cloud business; however, as data and earnings have been released, the stock price has finally emerged from a challenging period.

Management stated during the earnings call that they will adopt a "two-pronged approach"—strengthening the e-commerce business (through integration via AutoNavi for e-commerce and food delivery) while advancing cloud service development. If the e-commerce business continues to enhance synergies and the cloud business maintains growth, Alibaba’s fundamentals will become even stronger. Conita believes that in the past, Alibaba suffered from unclear business focus and insufficient inflows of capital due to a lack of clear positive catalysts. Now, with the market gaining strength, investor interest in entering the market has increased—some who previously closed positions are unwilling to short under the current market conditions and instead chase after Alibaba and similar picks. Moreover, the original "ATMXJ" grouping among $MEITUAN-W(03690.HK)$ Underperformance,  $JD.com(JD.US)$ mediocre performance naturally leads capital to flow to Alibaba, which has greater potential. Personally, she hopes that Alibaba’s stock price will rise above 200 yuan (although this may be difficult to achieve this year, a range of 180-200 yuan is more likely).

The Stock Price Outlook and Capital Factors of Alibaba

Notably, after Alibaba’s dual listing, mainland capital (referred to as 'Northbound funds') was permitted to buy its shares. Initially, Northbound funds were relatively active, but later they experienced net selling. However, their current shareholding remains at double-digit percentages, with recent net buying showing a significant increase. Therefore, apart from external funds (such as index funds), the movement of Northbound funds is also worth monitoring—continued net inflows would provide further support for the stock price.

Suggestions for Hong Kong Stock Allocation under Aggressive and Conservative Strategies

In response to an audience question regarding “which stocks to target if one missed out on the earlier rally in Hong Kong stocks,” Conita recommended adopting a portfolio strategy combining both aggressive and conservative approaches (to balance risk and return). The core allocation should focus on two categories: technology internet stocks and high-dividend stocks.

Aggressive Strategy: Technology Internet Stocks (Key Focus on Tencent and Alibaba)

Technology internet stocks are a must-have sector in today’s market—the trend of artificial intelligence development and capital concentration make them a focal point. Investors who previously did not hold such stocks can consider purchasing Tencent and Alibaba:

$BABA-W(09988.HK)$: Currently trading at around 150 yuan, if it retraces to 140 yuan (Conita’s previously estimated support level), the reward-to-risk ratio will be higher; if not already held, the current price of 150 yuan is not far from historical highs (only a gap of three to four yuan, with the trend still upward), making it suitable for entering with the momentum. However, risk control measures must be in place, avoiding heavy positions, and some funds should be reserved for adding positions during market pullbacks.

​​ $TENCENT(00700.HK)$The current price is approximately 700 yuan, only a few dozen yuan away from its historical high. At this level, the risk-reward ratio for entering the market is not favorable (if betting on a breakout, the risk is relatively high, and the current price is somewhat awkward).

Conservative Strategy: High-dividend stocks (primarily telecommunications and mainland bank stocks)

The core value of high-dividend stocks lies in providing stable cash flow – even if the market declines, their impact is relatively mild, and at the very least, they can continue to generate dividends.

Telecom stocks: Top recommendation$CHINA MOBILE(00941.HK)$ , due to their stable business operations (e.g., mobile communication as a core business) and dividend yield exceeding 5%. In contrast,$CHINA TELECOM(00728.HK)$ and$CHINA UNICOM(00762.HK)$ are more significantly influenced by news flow, resulting in more pronounced stock price volatility.

Mainland bank stocks: Although historically, when mainland bank stocks were at their peak, their dividend yields were often below 5%, if the current stock prices decline and the dividend yield rises above 5% (e.g.,$ICBC(01398.HK)$ with an expected dividend yield exceeding 5%), they would have allocation value. Conita believes that although the likelihood of mainland banks increasing dividends is low (current payout ratios are around 30%, with prices generally offering over 5% dividend yield), they can still maintain stable dividends under conditions of zero profit growth or minor fluctuations, helping to balance an investment portfolio.

Investment allocation and market focus recommendations

Regarding how investors should allocate their funds to Hong Kong stocks (assuming a 100% allocation), Conita's personal recommendation is as follows:

If also participating in the US stock market, 20-30% of funds can be allocated to US stocks, with the remaining 70-80% focused on Hong Kong stocks.

For those who have never participated in the US stock market, there is no need to divert attention. The current US stock market is at a high level, and entering now may lead to psychological pressure – others who have already profited can hold their positions confidently, while investors who enter at a high point may panic due to short-term declines. By comparison, after being under long-term pressure, Hong Kong stocks are now experiencing an upward trend, presenting clearer opportunities.

She emphasized that Hong Kong stocks are currently in a clear upward cycle, and selecting familiar stocks and sectors (such as technology and high-dividend stocks) will enable investors to better seize these opportunities.