Core Viewpoint - Current valuations of state-owned enterprises (SOEs) in Hong Kong are extremely low, with significant A/H price differentials and attractive dividend yields, making them appealing for long-term institutional investors such as insurance companies [1][2] Valuation and Investment Appeal - As of June 13, 2024, the H-share PE (TTM) for China Railway, China Railway Construction, and China Communications Construction is all below 4 times [2] - The PB (MRQ) for these companies is also below 0.4 times, indicating extremely low valuations for construction SOEs [2] - The average A/H price differential for the five listed companies is 86%, significantly higher than the average of 73% for all dual-listed companies, with some exceeding 100% [2] - The average dividend yield (TTM) for seven construction SOEs is 5.16%, with several companies offering yields above 5%, highlighting their attractiveness [2] Economic and Policy Context - Economic pressures are expected to increase in the second half of the year, necessitating continued policy support, with anticipated fiscal expansion [5] - Recent data shows a decline in exports, industrial production, and investment, indicating insufficient demand as a core issue [5] - The government is expected to accelerate the implementation of existing fiscal policies, with significant issuance of special bonds and other financing tools [5][10] Infrastructure and Revenue Outlook - The implementation of fiscal policies is expected to enhance the funding for infrastructure projects, leading to improved revenue performance for construction SOEs [5] - The anticipated marginal improvement in revenue and performance is supported by a low base effect, with expected year-on-year growth in the second half of the year [5][11] Market Management and Quality Focus - SOEs are enhancing their market value management and focusing on operational quality, which is expected to drive further valuation recovery [13] - The shift from a focus on scale to improving operational efficiency and profitability is evident, with a reduction in long-term investment projects [13] Investment Recommendations - The report recommends key construction SOEs in Hong Kong, highlighting their low valuations, attractive A/H price differentials, and high dividend yields [14] - Specific companies recommended include China Communications Construction, Sinopec Engineering, China Railway Construction, and others, with projected dividend yields ranging from 4.3% to 7.1% [14][15]