CITIC Strategy: Liquidity Drives a New Round of Rise in Hong Kong Stocks, Focusing on Three Offensives + Two Bottom Positions

According to the Zhitong Finance APP, China Merchants Securities has released a research report stating that in the short term, the Hong Kong stock market is still mainly driven by liquidity. With ample internal and external liquidity, the Hong Kong stock market is expected to usher in a new round of increases. From the mid-year report data of Hong Kong stocks, the performance growth rate of Hong Kong companies is at a historically low level, and the differentiation between the old and new economic structures is evident, with a technology-led structural market having solid profit support. The allocation direction focuses on three offensives (technology, non-ferrous metals, non-bank) + two bottom warehouses (turnaround and dividends).

The main viewpoints of China Merchants Securities are as follows:

Core viewpoints for Hong Kong stocks in September. In the short term, the Hong Kong stock market is still mainly driven by liquidity, and with ample internal and external liquidity, the Hong Kong stock market is expected to welcome a new round of increases. In September, factors restricting liquidity have eased: 1) The Federal Reserve is advancing interest rate cuts; 2) The tight funding situation in the Hong Kong market has improved; 3) Southbound funds continue to flow into the Hong Kong stock market; 4) The mid-year report "shoe has dropped," and profit concerns have been fully priced in. In the medium to long term, as the supply-demand pattern improves and the economy stabilizes and rebounds, a turning point in demand prosperity may be welcomed, and the profits of listed companies are also expected to reverse from the bottom. As a global valuation lowland, the Hong Kong stock market has significant room for valuation repair.

Fundamentals and policies: Weak recovery pattern continues, with policies emphasizing implementation. The performance growth rate of Hong Kong companies is at a historically low level, and the differentiation between the old and new economic structures is evident. China continues a more proactive fiscal policy and moderately loose monetary policy tone, emphasizing the implementation and effectiveness of policies. Industrial policies focus on "artificial intelligence +," with the State Council issuing relevant action opinions, and the cultivation of new productive forces entering an acceleration phase.

Liquidity and valuation: Support from both domestic and foreign capital, highlighting the advantages of valuation lowland. The U.S. non-farm payroll data for August was dismal, significantly below expectations, with the unemployment rate rising to a nearly four-year high. The interest rate cut in September has become almost a certainty, with a cumulative cut of 75bps this year becoming the baseline scenario. Southbound funds continue to flow in, with net inflows exceeding HKD 1 trillion this year, and the trading volume proportion rising to about 30%, becoming an important support for the market. Local liquidity in Hong Kong briefly tightened in August, with HIBOR rising rapidly. However, as the Hong Kong dollar exchange rate stabilizes and the Monetary Authority suspends net absorption, liquidity is marginally improving.

Allocation strategy: Three offensives (technology, non-ferrous metals, non-bank) + two bottom warehouses (turnaround, dividends)

"Three offensives" focus on resilient varieties. Technology stocks: The mid-year reports of internet giants have "dropped the shoe," and the impact of the food delivery war on AI investment is limited, expanding growth capital expenditure, with high growth expected in the future. The growth potential of the high-end manufacturing sector is sustainable. The valuation of the Hang Seng Technology Index is only half of that of the Nasdaq, indicating room for repair. Non-ferrous metals: Driven by the depreciation of the U.S. dollar, low interest rates, and liquidity, there is still upward elasticity. Gold also benefits from its safe-haven properties and central bank gold purchasing demand. Non-bank financial β enhancement: Under the background of brokerage firms achieving historical highs in daily trading volume and margin financing in the Shanghai, Shenzhen, and Beijing markets, brokerage and proprietary businesses are flourishing; insurance stocks benefit from improved equity investment returns and rising interest spreads, and there is a significant discount compared to A-shares.

"Two bottom warehouses" are suitable for long-term layout. "Turnaround" strategy: Represented by essential consumption, the industry has shown initial signs of a supply-demand turning point after four years of difficulties. However, valuations are still at the historically lowest 20% percentile. Leading companies with long-term competitive advantages can still increase market share and profit margins to achieve α-style growth High Dividend Strategy: The dividend yield of the Hang Seng High Dividend Yield Index is 6.12%, with stable dividend-paying ability. Driven by the increasing demand for "fixed income +" products from southbound funds, there is a continuous strong demand for dividend stock allocation as residents' deposits are "passively relocating."

Risk Warning: Federal Reserve monetary policy exceeds expectations, overseas policies tighten beyond expectations.