Analysts at China International Capital Corp. are suggesting investors load up on Hong Kong stocks, wagering that the equity market will soon bottom out.

CICC expects the Hang Seng Index and MSCI China Index, which includes both onshore and offshore shares, to rise 10%-15% in the second half of this year, strategists including Kevin Liu wrote in a research note on Tuesday. About half of the rally will be driven by an earnings recovery, while the rest will depend on an improvement in valuations, Liu wrote.

“From every aspect, Hong Kong stocks are sitting at the bottom area,” Liu wrote in the note released before the People’s Bank of China unexpectedly cut its short-term policy interest rate. “We think the Hong Kong stock market will see some ‘mean reversion” to some extent.”

CICC’s upbeat prognosis jives with the views of Nomura Holdings Inc. and Haitong Securities which expect Chinese equities to bounce back due to policy stimulus and a recovery in earnings. Morgan Stanley and Goldman Sachs Group Inc. are less upbeat, saying currency concerns and geopolitical risks may be a dampener.

Foreign positioning in Chinese stocks is extremely low, with an estimated $7.7 billion worth of inflows expected if macro economic data improves and Sino-US tensions ease, CICC added. Additionally, onshore investors may keep buying local stocks, driven by demand for dollar-based assets given the prospect of a weaker yuan.

In December 2022, CICC predicted the Hong Kong benchmark would rally 20%-25% this year, amid hopes of a reduction in US interest rates in the first quarter and a recovery in Chinese earnings. Year-to-date, the Hang Seng Index has fallen 1.5% as China’s macro data disappointed.

Government intervention “may not be able to lift the whole market, but it is enough to secure a support level at the bottom,” wrote Liu. “The worst phase of foreign outflow may be over,” the note added, recommending investors buy state-owned telecom names that pay high dividends and shares in the information technology sector.