Summary 摘要

Since the start of the Russia-Ukraine conflict, several rounds of negotiations have been conducted, but no substantive progress has been made yet. Due to the Russia-Ukraine conflict and the subsequent sanctions from the US and other European countries, global financial markets have been significantly impacted. Commodity prices have soared, with crude oil WTI once reaching US$130 per barrel. Yet Russia and Ukraine have conveyed positive signals in their latest round of negotiations; the two sides have prepared a ceasefire withdrawal plan under the condition that Ukraine remains neutral and refrain from joining military alliances or hosting foreign military bases. Investor panic eased, and global stock markets rebounded significantly. Looking ahead, Russia"s economic outlook is relatively pessimistic under the pressure of sanctions. The EU is facing greater energy pressure, while the direct impact on China and the US is relatively limited. China opposes unilateral sanctions; follow-up actions from the US remain uncertain. The full scale of sanctions against Russia could change existing global trade and economic and financial order. Although the Russia-Ukraine conflict may prevent the eastward expansion of NATO, the probability of subsequent strategic conflicts in other regions increases. Supply shortages of energy, agricultural commodities and other related commodities are likely to persist, potentially disrupting global economic recovery. In addition, the Russia-Ukraine conflict may interfere with the US Federal Reserve"s (the "Fed") monetary policy, and volatility of the global financial market may continue. In general, we believe that crude oil, natural gas and other commodity prices may remain high in the short run. Global inflation and recession risks are likely to keep major financial markets volatile. As for our covered sectors, Automobiles & Components, Clean energy -- Natural Gas, Consumer (Apparel, Food & Beverage/ Household Products, Hotels), Electricity, Gaming, Health Care, and Telecommunication Equipment may experience negative impacts; impacts on Cement and Construction Materials, Conglomerate, Electric Equipment, Environmental Protection, Infrastructure, Ports, Property, Shipping and Logistics, Telecommunication Services are mostly neutral, while sectors such as Clean energy (Solar, Wind & Others), Consumer - Retailing, Machinery, Nonferrous metals, Petrochemicals, Precious Metals, may benefit. That said, historically, the effects of rising geopolitical tension tend to be short-lived and are mainly reflected in market sentiment disruptions. If the situation between Russia and Ukraine does not deteriorate further, its direct impact on the fundamentals of the Hong Kong stock market should be limited. Risk factors such as overseas monetary tightening expectations, the delisting risk of China Concept Stocks, the spread of the domestic epidemic, etc. have led to a sharp correction in Hong Kong stock indices. The current valuation level of the Hong Kong stock market is appealing, and the market is expected to see an improvement in market investment sentiment driven by policy catalysts from the State Council meeting of the Financial Stability Commission, positive effects from domestic steady growth policies, and a clearer outlook for Fed rate hikes. We expect the Hang Seng Index to fluctuate between the range of 20,000-25,000 points in the short run, equivalent to 9.4x-11.8x 2022F PER of the index. At present, we are bullish on the Automobiles & Components, Banking, Clean Energy (wind power), Electric Equipment, Infrastructure, Health Care and Petrochemical sectors.