Hong Kong stocks, which are currently bottoming out, are in a critical window period!
CICC believes that Hong Kong stocks are gradually bottoming out, with a potential upside of 10-15% in the benchmark scenario. In the short term, investors should focus on potential recovery rebounds and consider oversold rebound or high beta sectors, especially interest rate-sensitive industries such as biotechnology, technology hardware, internet, and new energy.
This article is sourced from Zhongjin.
The Chinese market faced some bottlenecks last week and remained volatile. As the positive effects of previous factors such as the decline in US bond yields, improvement in Sino-US relations, and domestic policy efforts gradually take effect, investors are also waiting for more catalysts. However, even so, Hong Kong stocks continue to outperform A-shares, mainly due to the higher sensitivity of Hong Kong stocks to US bond yields, higher attractiveness of high dividends, and also benefiting from the strengthening of the renminbi exchange rate.
In the short term, there is still some support for a corrective rebound, mainly considering: 1) Continued domestic policy support; 2) Cooling expectations of US Federal Reserve rate hikes and weak US bond yields; 3) Unexpected surge in the renminbi exchange rate. Therefore, as long as these positive factors are not falsified, the corrective rebound is unlikely to reverse.
We suggest that investors pay attention to the December FOMC meeting of the US Federal Reserve, the end-of-year Central Economic Work Conference and the Political Bureau meeting for signals on growth and policies. At the same time, the monthly fiscal expenditure situation and whether the LPR interest rate will be adjusted on December 20 can serve as important validation windows for observing policy signals and become key factors in the market trend.
However, we also reiterate our previous view, that the necessary conditions for the market to continue and rebound significantly or even reverse lie in a substantial and rapid fiscal expansion, which may be the targeted direction and main lever to initiate credit expansion and address growth expectations.
Based on the assumption of gradual policy progress and the gradual decline in US bond yields, we believe that Hong Kong stocks are in the process of gradually bottoming out, with an upward space of 10-15% in the benchmark scenario. In the short term, investors are advised to seize potential corrective rebounds and focus on oversold rebounds or high-beta sectors, especially interest rate-sensitive industries such as biotechnology, technology hardware, the internet, and new energy.
However, in order to achieve a trend reversal and more sustained upward breakthrough after the initial rebound, more policy support is still essential. Before that, the dumbbell allocation strategy remains effective.