Rejecting "Black Friday"! Hong Kong stock market bulls counterattack, short-term stimulus is coming?

In the backdrop of the sharp decline in the US stock market, the Hong Kong stock market saw a long-awaited surge today. At the close, the Hang Seng Index rose by 2.28%, and the Hang Seng Tech Index rose by 3.69%.

Tech and internet stocks surge

Tech and internet stocks surged across the board, with NetEase rising over 6%, Alibaba and Meituan both rising nearly 4%, Tencent rising over 3%, and XPeng, Kuaishou, and Bilibili rising by about 5%.

Automobile stocks rose across the board, with Great Wall rising over 4% and BYD rising over 3%. Gold stocks weakened, while real estate stocks turned from decline to rise, with Sunac China rising over 4%.

Rongchuang Services surged over 50% at one point and closed with a 37.04% gain. Prior to this, Rongchuang China announced that the convertible bonds and Rongchuang Services shares chosen by creditors exceeded the prescribed limit.

Offshore renminbi against the US dollar continued to rise in the afternoon, briefly recovering the 7.30 level and rising about 140 points intraday.

Multiple foreign institutions actively speak out: Chinese stock market may have bottomed out

Since last week, multiple foreign institutions have actively spoken out, stating that the combination of capital market and real estate policies introduced at the end of August has exceeded expectations, and the direction and determination of stabilizing growth are very clear. The Chinese stock market may have bottomed out.

"There are reasons to be more optimistic about the current Chinese stock market. From some indicators, it appears that the market may have bottomed out." "Whether it's stocks or the macroeconomic trend, the development process of any entity involves many complex factors. We need to be more patient with the market." This is what several foreign institution professionals said.

Regarding asset allocation, foreign institutions generally believe that the Chinese stock market has entered a valuation range with relatively high cost-effectiveness after the adjustment.

Wang Zonghao, Head of UBS China Equity Strategy Research, said that there are reasons to be more optimistic about the current Chinese stock market. The divergence between market fundamentals and stock price performance may be due to depressed sentiment, which will take time to reverse. However, from some indicators, it appears that the market may have bottomed out.

Short-term stimulus measures may be implemented in Hong Kong

Hong Kong Chief Executive Carrie Lam said yesterday (21st) that the "Task Force on Enhancing Stock Market Liquidity" has been holding continuous meetings recently to study methods to enhance the liquidity of the Hong Kong stock market, and will submit a proposal report to her as soon as possible. It is believed that Hong Kong has many "good bridges," and the financial services sector is no exception. It is hoped that professionals in the financial services sector will provide feedback on "good bridges" and good suggestions to the task force, so that the task force can pool wisdom and contribute to the future development of the Hong Kong securities market.

Li Wai-hung, a member of the Financial Services Sector of the Hong Kong Legislative Council, said that members of the task force are objectively examining the challenges faced by the Hong Kong stock market, and have put forward various proposals to enhance the liquidity of the stock market, including listing reforms, transaction costs, and trading mechanisms. It is expected that short-term stimulus measures will be launched soon.

Short-term rebound in Hong Kong stocks remains possible

Although the potential space for interest rate cuts in 2024 is narrowing and the neutral interest rate level may be higher, which may mean that the central level of US bond yields will rise and provide some support for the US dollar, it may still take time for the US dollar liquidity environment to shift to loose. But at the same time, if the economic situation is consistent with the economic forecasts of the Federal Reserve, the potential growth in corporate profits may partially offset the unfavorable factors on the valuation side. Moreover, with the reduced risk of recession, there is a possibility of an upward shift in risk sentiment.

Reviewing the performance of US stocks and Hong Kong stocks during the pause in interest rate hikes in each cycle since 1971, and whether a recession occurred or not within one year.

From the review, it can be seen that in the situation where there was no recession within one year after the pause in interest rate hikes by the Federal Reserve, the performance of US stocks and Hong Kong stocks tended to be positive.

The latest guidance from the Federal Reserve indicates that interest rates are about to peak, and a short-term rebound in Hong Kong stocks can still be expected after the Federal Reserve completes its final rate hike.