CITIC Securities: Liquidity drives a new round of increases in Hong Kong stocks, focusing on three offensives + two bottom positions

According to the Zhitong Finance APP, China Merchants Securities 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 welcome a new round of increases. In September, factors constraining 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 "shoe has dropped" for mid-term reports, alleviating profit concerns. 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 profitability of listed companies is also expected to reverse from the bottom. As a global valuation lowland, the Hong Kong stock market has significant room for valuation recovery.

The main viewpoints of China Merchants Securities are as follows:

Fundamentals and Policies: Weak recovery pattern continues, policy emphasizes implementation

The performance growth rate of Hong Kong stock companies is at a historically low level, with a clear differentiation between the old and new economic structures. China continues a more proactive fiscal policy and a 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 accelerated 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 certain, with a cumulative cut of 75bps within the year becoming the baseline scenario. Southbound funds continue to flow in, with net inflows exceeding HKD 1 trillion this year, accounting for about 30% of trading volume, 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, Non-bank) + Two bottom positions (Dilemma reversal, Dividends)

The "Three offensives" focus on elastic varieties. Technology stocks: The mid-term reports of internet giants have "dropped," 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 TECH Index is only half of that of the Nasdaq, indicating room for recovery. 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: Brokers have seen daily trading volumes and margin financing in the Shanghai, Shenzhen, and Beijing markets reach historical highs, with brokerage and proprietary businesses flourishing; insurance stocks benefit from improved equity investment returns and rising interest spreads, and there is a significant discount compared to A-shares.

The "Two bottom positions" are suitable for long-term layout. The "Dilemma reversal" 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 historical 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 growing demand for "fixed income +" products from southbound funds, residents' deposits are "passively relocating," and the demand for dividend stock allocation remains strong.

Risk Warning: Federal Reserve monetary policy exceeds expectations, overseas policy tightening exceeds expectations