Hong Kong stocks: Is the "policy bottom" stable? What is the market still waiting for?
The market is still waiting for more "targeted" policies! The future performance of the market depends on the improvement of investment sentiment and the implementation of more practical and effective policy measures, such as the down payment ratio for second homes in first-tier cities, even the relaxation of purchase restrictions, further reduction of LPR, and expansion of fiscal expenditure.
After experiencing a "roller coaster" market for more than a month since the end of July, the overseas Chinese-funded stock market has basically returned to the "starting point" before the meeting of the Central Political Bureau.
Looking back, the market performance has indeed been poor, but the policies during this period have been continuous and implemented at a faster pace than expected by the market. The market's tepid response and the continuous escalation of policies have formed a contrast, which has become a common concern in the market. How can we explain this phenomenon?
CICC believes that there are three main reasons: 1) The market is waiting for more "targeted" policies. Further optimization of real estate policies and the central government's leverage are still the main means to break the current weak growth and weak expectations. Last week, the real estate policies, such as reducing the down payment ratio, lowering the interest rates for new housing loans, and lowering the interest rates for existing mortgage loans, were all positive signs;
2) Policies are being implemented in a "gradual and progressive" manner, which is different from the comprehensive and explicit package that investors expect, and there is a certain degree of reservation;
3) The market bottoming out usually has a natural process, which generally goes through policy bottom, sentiment bottom, market bottom, fund flow bottom, and profit bottom. Based on the speed and intensity of the positive policies introduced last week, it can be clearly judged that the current situation is at the "policy bottom", and the future trend of the market needs to wait for the policies to take effect and for sentiment to recover.
Therefore, although the policies are being implemented in a "gradual and progressive" manner and there is still some room for maneuver, the continuous support of positive policies, combined with low valuations, positions, and market sentiment, provides downside protection for the market, but the upside potential still needs to be unlocked.
Therefore, we reiterate our previous view that the market has a "bottom" and a "top", and the future performance of the market depends on how investment sentiment improves and more practical and effective policy measures are implemented, such as the relaxation of down payment ratios for second homes in first-tier cities, even the relaxation of purchase restrictions, further reduction of the loan prime rate (LPR), and expansion of fiscal expenditure.
The recovery of fund flows and profits often occurs after the market has recovered. In terms of allocation, the dumbbell structure allocation strategy is still effective in the current environment. At the same time, we recommend that investors pay attention to the consumption sectors related to the decline in the real estate market and mortgage loan expenditures, such as home appliances, home furnishings, and offline consumer services.