Analysis of the Rebound in Hong Kong Stocks
According to a research report published by CICC, the Hong Kong stock market stabilized and rebounded after a significant pullback in mid-November, with the Hang Seng Index approaching the 20,000 point mark. This recovery is driven not only by the calendar effect before an important meeting, but mainly by market expectations of policy improvements. The importance of policy in the subsequent market direction is becoming increasingly prominent.
The central issue currently concerning the market is how to address credit contraction. Lowering financing costs and enhancing expected investment returns have become key targets. Investors generally expect that the People's Bank of China may further cut the reserve requirement ratio and interest rates. CICC estimates that a 40-60 basis point reduction in the 5-year LPR is needed to ease credit tension, but actual operations are still constrained by the interest rate differences and exchange rates.
Policy Strength and Fiscal Spending Outlook
The market is also focused on the tone that the Central Economic Work Conference will set for next year's fiscal policy. CICC believes the budget deficit rate might rise above 3%, possibly reaching 3.5%-4%. Furthermore, the Standing Committee of the National People's Congress has planned an expanded general fiscal expenditure scale of 3 trillion yuan, but CICC estimates suggest that to thoroughly solve the credit issue, at least 7-8 trillion yuan of fiscal expenditure would be needed in a one-time increase. However, practical constraints such as high leverage, interest rates, and exchange rates may limit policy strength unless external pressures significantly intensify.
Impact of External Factors
External uncertainties persist, particularly concerning the potential impact of Trump's policies on global markets. If the U.S. adjusts its tariff policies, different market performances may occur:
- If tariff policies are gradually implemented, the market impact may be limited, and Hong Kong stocks could maintain a volatile pattern.
- If a top 60% tariff imposition occurs, significant market disruptions might ensue, but it could also offer low entry positions.
Additionally, the growing anticipation of the Federal Reserve cutting interest rates may alleviate external pressures on Hong Kong stocks, providing certain market support.
Investment Strategy Recommendations
Assuming moderate domestic policy strength, Hong Kong stocks are currently in a baseline scenario of fluctuating structures. However, if significant volatility arises due to external risks, it may actually become a better buying opportunity. Conversely, if domestic policies exceed expectations, the market may rally in the short term, but CICC advises investors to gradually shift towards structural opportunities, especially given the backdrop of persistent long-term constraints.
Allocation Recommendations: Focus on Three Key Directions
CICC highlighted in the report that investment in the Hong Kong stock market should focus on the following three key directions:
- Industries with Supply and Policy Environment Clearance: Sectors such as internet, home appliances, consumer services, and electronics, where marginal demand improvement can further enhance performance.
- Policy-Supported Areas: Fields like home appliances and automobiles under the old-for-new policy and indigenous technology sectors like semiconductors and computers.
- Stable Return Sectors: Such as high-dividend state-owned enterprise stocks.
Conclusion: CICC believes that the future trend of the Hong Kong stock market is highly dependent on credit repair and policy direction. Although the risk of short-term volatility remains, changes in policy expectations may provide new opportunities for investors to rearrange their portfolios.
