Monthly Breakdown | April Stock Market: Middle Eastern Tensions Continue to Escalate, Hong Kong Stocks Hold the Fate of the Market

Last month’s most earth-shattering global event was the so-called “destructive strike” launched by the United States together with Israel against Iran. For now, the state of the conflict fits the popular financial-market catchphrase TACO (Trump Always Chicken Out), meaning that Trump backs down at the critical moment. In order to rescue his weakening election prospects, and amid political turmoil within Israel, the two countries teamed up to launch an unreasonable preemptive attack against Iran. At the time, Western media were shouting about “ending the battle within three days,” trying to replay the battle to kidnap Venezuela’s president. But they made a grave tactical blunder: those who underestimate the enemy will lose. Iran is neither Iraq nor Libya. Tehran deployed missile launch sites buried hundreds of meters underground, and the first wave of retaliation crippled multiple U.S. military bases in the Middle East.

In this asymmetric war, Iran uses tens of thousands of low-cost drones and hypersonic missiles, leaving the U.S. and Israel’s expensive defense systems stretched thin. Even more deadly, Iran has blockaded the Strait of Hormuz, causing global shipping insurance premiums to skyrocket by tenfold in an instant. What was supposed to be a so-called “surgical” precision strike by the U.S. and Israel against Iran has evolved into an unmanageable “long-term war of attrition.” Looking at it from the long sweep of history, this is not merely a military clash—it is the last thrashing of the dying old order and the painful growing pains before the birth of a new one.

By choosing to intervene in a regional dispute with military force, the foundation of the U.S. dollar—its credit currency—also begins to tremble. With tensions in the Middle East heating up, and with the Strait of Hormuz blockaded, the traditional “oil dollar Petrodollar” system is facing the most severe challenge in half a century. The latest alternative plan is not a single currency, but a multipolar network composed of digital-currency platforms, bilateral local-currency settlement, and the BRICS system. This includes the “mBridge” multilateral central bank digital-currency platform (of which the digital yuan e-CNY accounts for 95% of settlement volume), the “Petroyuan” oil-and-local-currency settlement (including Russia, Iran, and Saudi Arabia, etc.), the “BRICS” payment system linked to gold and other regional non-U.S.-dollar transactions, and so on. In fact, as the cost of green energy is lower than that of oil, global demand for oil (and the resulting demand for the dollar) is showing a structural decline, accelerating the natural erosion of the petrodollar system. “Oil dollars” have not collapsed immediately, but they have shifted from being the “only standard” to “one of the options.” The war between the U.S. and Israel and Iran is seen as a catalyst for accelerating this process, turning the originally slow “de-dollarization” process into a systemic migration toward hedging.

Threats are the method; retreat is the result—this is a common TACO phenomenon. Related interest groups and international big predators repeatedly harvest using this phenomenon. In this kind of “political boomerang,” chart-based technical analysis is completely ineffective; retail investors are stranded on both sides, with rivers of blood. Global capital is once again reevaluating “safe-haven space.” Once-chasing speculative hot money is withdrawing in large amounts from the turbulent regions, seeking havens with greater institutional safety; some “smart money” has already begun to reallocate into A-shares. Because here, policy has continuity—there is none of that show of “orders change with the day” by Western politicians. While the West is playing TACO in the Middle East quagmire, China is quietly walking its own path. Faced with high oil prices, China has built a natural refuge through land pipelines with Russia and Central Asia, as well as oil agreements with RMB settlement. The key to the “15th Five-Year Plan” (15th Five-Year Plan) lies in new quality productive forces that resist inflation—also the harvest period for technology. In quantum computing, biopharmaceuticals, and the application of low-altitude economy (eVTOL), China is already ahead of the world. This is a strong and powerful “moat.”

Hong Kong has long been the meeting point of Eastern and Western cultures, as well as a barometer of geopolitics. Hong Kong’s fate is closely tied to the nation’s pulse. When the U.S. and Israel’s unreasonable actions lead the Global South (Global South) to question Western institutions, Hong Kong’s strategic value as a “offshore RMB center” and “institutional bridgehead” becomes even more pronounced. More Middle Eastern capital and Southeast Asian sovereign wealth funds come to Hong Kong to seek asset allocation. What they want is no longer only the short-term P/E valuation, but that sense of security—far from the battlefields—backed by a vast mainland market.

Based on the above political and economic trends, it is believed that in April, Hong Kong stocks will still face many unclear factors and unforeseeable developments, influenced by great-power games, the Middle East war, politicians’ remarks, capital flows, financial data, and fiscal and economic policies, etc., leading to large fluctuations. Oil crises, and especially clean energy, are the top choice. Global-watched artificial intelligence requires a large amount of electricity; without enough electricity, no matter how much computing power there is, it’s futile. Therefore, the clean energy, artificial intelligence, and advanced technology sectors are poised to outperform the broader market. With both ships strong and guns ready, only then can one defend the country and deter the enemy; the defense industry and aerospace technology sectors are also must-haves for investment. The national policy of the “15th Five-Year Plan” will vigorously boost consumption, promoting the “dual circulation” of “internal circulation” in coordination with “external circulation,” and retail, electric vehicles, and related industries will certainly benefit.

With smoke and dust filling the sky, yet with a mind as calm as still water; move with the trend, choose the best, and settle. It is necessary to understand the profound changes that geopolitical conflicts bring to global supply chains, and from them identify companies with “resilience” and “strategic value.” Only investors who can see through the essence of politics, endure loneliness, and move in step with the nation’s fortunes will keep their composure amid turbulent waves and emerge with sure victory.

【About the Author】 Li Yongliang

Over 40 years of experience working in global financial markets, a banking professional fellow, a senior fellow of the Hong Kong Securities Investment Association and the Hong Kong Directors Association, one of the 18 outstanding alumni from the 80th anniversary class of the Faculty of Science of The University of Hong Kong, and one of the 80th anniversary alumni of Kowloon Wah Yan College. Skilled at analyzing the global stock market from practical experience in real trading has inspired the public retail investing community about trading strategies, investment strategies, confirming real orders, identifying fake orders/news, avoiding traps, predicting market crashes, and more. In May 2023, he was appointed as a member of the Chief Executive’s Policy Group expert team.