To The Moon

I. Performance and Valuation of Global Equity Indices

Data Source: Bloomberg, Complied by Tiger Brokers

II. Key Market Themes

i. Greater China Market Volatility Intensifies as Trump Announces China Restrictions—How to Position for the Future?

• Recently, Greater China tech stocks have continued to lead the global market. Alibaba’s latest earnings report revealed a quarterly capital expenditure of $31.7 billion, further igniting investment enthusiasm in China’s AI sector. However, over the weekend, the White House released a presidential memorandum on the “America First” investment policy, restricting both Chinese capital from investing in core U.S. assets and U.S. capital from flowing into related Chinese enterprises. This has caused significant market fluctuations in Greater China.

• In the short term, this memorandum will inevitably trigger emotional market reactions, but there’s no need for excessive concern at this stage. First, this policy can be seen as a continuation of Trump’s previous stance and does not exceed market expectations regarding U.S.-China competition. Additionally, according to international investment banks’ estimates, European and American institutions currently allocate only about 2% of their portfolios to Greater China, with little participation in the recent rally. Therefore, the overall impact on Chinese assets remains limited.

• At present, the valuation of the Greater China tech sector remains highly attractive. As of February 19, the forward P/E ratio of the Hang Seng Tech Index $恒生科技指数(HSTECH)$ is only 18.4, leaving approximately 30% room for recovery to its five-year average. Moreover, earnings for the index are keeping pace, with forward ROE maintaining steady growth for two consecutive years. Therefore, despite significant volatility and the time required for a full macroeconomic recovery, we believe the Greater China tech sector remains an excellent long-term investment opportunity.

Data Source: Bloomberg, Complied by Tiger Brokers

ii. Economic Instability, Persistent Inflation—The Fed Is Stuck, and the Stock-Bond See-Saw Is Worth Watching!

• The recent performance of U.S. stocks has been anything but stable, with the tech-heavy Nasdaq facing consecutive declines, sparking concerns among global investors. As we previously analyzed, the U.S. market faces three major uncertainties: rate cuts, tariffs, and political risks—any one of which could trigger a market shock, and together, they compound investor anxiety.

• This time, the catalyst was the University of Michigan’s consumer sentiment survey. The consumer confidence index was already showing weakness at an initial reading of 67.8, but it was further revised down to 64.7, marking its lowest level since late 2023. Even more concerning, consumer inflation expectations for both the next year and the next five years surged to 4.3% and 3.5%, respectively—the highest levels since 2023. These factors, combined with ongoing concerns about tariffs, have heightened fears of stagflation in the market.

Data Source: tradingeconomics, Complied by Tiger Brokers

• Interestingly, according to a Bank of America fund manager survey, while cash holdings are at just 3.5%—the lowest level since 2010—89% of respondents believe U.S. stocks are overvalued. Although the “Mega 7” stocks remain the most crowded trade, the notion of U.S. market exceptionalism is being challenged. This suggests that while global investor sentiment remains relatively optimistic, skepticism about U.S. equities persists.

• For now, the Federal Reserve finds itself in a difficult position. While meeting minutes indicate that Fed officials remain relatively confident about controlling inflation, tariffs introduce a persistent layer of uncertainty. Some Fed members have even mentioned stagflation as a potential risk. We believe that while the Fed is in no rush to cut rates, it will adopt a more accommodative tone in its statements to reassure markets. As a result, the market may revise its rate cut expectations, and long-term bonds may present a more compelling opportunity than U.S. equities at this stage.

Data Source: Bloomberg, Complied by Tiger Brokers

Disclaimer

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