Morning strategy for September 20, 2024: Expect divergence today!! Focus on cyclical sectors/Huawei.

The interest rate cut has finally been implemented. The index first fell and then rose, and individual stocks also saw a broad increase in volume. Yesterday was a day of universal joy.

Yesterday's market was entirely driven by emotional stimulus, but the trading volume was mainly concentrated in the morning. The afternoon saw reduced volume, indicating a more rational approach by investors.

If yesterday was a passive rebound, now that the rate cut has been implemented and the emotional excitement has been realized, whether a reversal can happen next depends on us.

The best scenario is to strike while the iron is hot, and our policy side must also keep pace.

The biggest challenge now is how to revitalize funds and stimulate consumption.

We still have a few tools left in our toolbox: reserve requirement ratio cuts, interest rate cuts, and reductions in existing loan interest rates—especially the last one, which currently has the loudest calls.

The biggest focus now is this weekend. I feel there’s a high likelihood of policy announcements. Let’s see if the authorities can take some concrete actions.

For now, the index appears stable, but the probability of a direct reversal is low. It’s more likely to slowly oscillate upward with volume support.

The worst-case scenario is no favorable policies, leading to a pre-holiday effect of reduced volume and a pullback, possibly retesting the previous low of 2635. This possibility is small but cannot be ruled out.

Yesterday saw high sentiment and broad stock gains, but today’s expectation is differentiation.

Now, let’s look at themes and individual stocks:

1. Pro-cyclical sectors
Yesterday, the pro-cyclical sector first saw a surge in consumer-related stocks, followed by industrial metals. In the afternoon, the index slightly retreated, but industrial metals continued to oscillate upward.

The most direct impact of the rate cut should be on commodities like copper, aluminum, and other industrial metals—especially copper, which is historically the most sensitive to rate cuts.

So, you could see that yesterday’s top gainers in the industrial metals sector were mostly copper- and aluminum-related stocks.

Additionally, from a supply perspective, global copper inventories have fallen by 11% since early September, while our copper inventories have dropped by 23%. Copper prices have also seen a small uptick recently.

Of course, this sector also has instability—it’s easily influenced by futures. So, those looking to participate should also consider overnight futures performance.

2. Huawei (HarmonyOS/IT innovation)
Recent new catalysts include the Lebanon pager incident, which has become a new trigger.

Meanwhile, the sector’s core leader, Changshan Beiming, continues to accelerate.

Later, Huawei will also release a heavyweight product—the Mate 70, which may feature the pure HarmonyOS. This is another expectation gap that could drive repeated performance in this sector.

Moreover, at the 2024 China International Fair for Trade in Services forum on September 24, Chen Xinxin, Huawei’s HarmonyOS industry solutions general manager, revealed that the fully self-developed, natively secure, and natively intelligent HarmonyOS NEXT will launch its official version by the end of September.