Hong Kong stocks fell more than 8% in August! Will they continue to decline in September? There is hope for a temporary rebound!
Three major factors may benefit Hong Kong stocks, with opportunities for the automotive and AI sectors! However, if the Chinese economy fails to enter a "passive destocking" phase, Hong Kong stocks will continue to experience "wide fluctuations" and struggle to break through significant resistance levels for a major rally.
In the upcoming month of August, the Hong Kong stock market has dropped more than 8%. Will it continue to decline in September?
The Zhangchi team from Guojin Securities believes that three major factors may benefit the Hong Kong stock market and maintain a temporary rebound.
A series of policy measures recently introduced are expected to boost market sentiment and potentially release incremental funds, thereby improving market liquidity.
The domestic economy is likely to stabilize, coupled with the expected improvement in interim performance, which will provide support to the fundamentals.
Signs of a US economic recession are emerging, which may further alleviate the pressure of RMB depreciation and Hong Kong dollar devaluation, benefiting the inflow of foreign capital and improving local liquidity in the Hong Kong stock market.
However, the bank also stated that if the domestic economy fails to enter a phase of destocking, both A-shares and Hong Kong stocks will continue to experience wide fluctuations and struggle to break through the upper resistance level to achieve significant gains.
In terms of market style, growth-oriented stocks remain the mainstream during the rebound, mainly benefiting from improved market sentiment, marginal improvement in liquidity, and relatively strong fundamental support.
Considering that the domestic economy has bottomed out, especially with the emergence of a turning point in consumption, it is expected to lead the direction of the cyclical sector in the future. In fact, based on the disclosed interim reports, industries that have exceeded profit expectations in the first half of 2023 are mainly concentrated in the consumer sector.
Guojin Securities' September Allocation Recommendations
(1) Maintain a focus on growth + seize the rebound in brokerage firms. Growth opportunities include:
(1) Automobiles, especially the certain opportunities in the "smart cars/autonomous driving" sector.
(2) AI still has opportunities, but differentiation is likely to occur. Media companies are expected to benefit from the implementation of AI, with high-profit elasticity, improving liquidity trends, and increased institutional holdings.
(3) Pharmaceuticals and biotechnology, especially CXO and innovative drugs, will benefit from the downward trend in US interest rates, which is conducive to the recovery of overseas pharmaceutical investments and the expectation of domestic consumption recovery.
(4) Mechanical automation (including robots, industrial machinery, etc.) will benefit from the bottoming out and recovery of the industry's business cycle.
(5) Power equipment is expected to rebound, including energy storage, charging piles, power grids, photovoltaics, and other sub-sectors that are still in the upturn of the business cycle and currently have reasonable valuations.
Brokerage firms will benefit from the implementation of the stamp duty reduction policy. Brokerage firms with a higher proportion of brokerage business and lower management expense ratios are expected to benefit more.
(2) Build positions in the consumer sector, including:
Pharmaceuticals (including medical aesthetics), automobiles, and liquor. These sectors will not only benefit from the inflow of foreign capital but also act as leaders in the cyclical sector. Once destocking begins, they will drive the consumption market.