Haitong International: The policy window is close and the market rebound momentum is expected to continue

The Zhitong Finance App learned that Haitong International released a research report saying that the market contracted and fluctuated this week, and it is expected that the rebound will continue next week, driven by rising policy expectations, but the intensity of the rebound still depends on the strength of policy implementation and whether the Federal Reserve cuts interest rates. At the same time, if the market fully competes ahead of schedule, it is also necessary to be wary of the risk that capital loans can be easily realized. Continuing to be optimistic about the chances of a rebound in the technology sector, it is still recommended to focus on opportunities for rotation in the science and technology innovation board driven by Hang Seng Technology, which has fully recovered, and Changxin's upcoming stock offering. In terms of policy direction, the brokerage sector already has the foundation for an overrun decline and is expected to make up for gains under policy impetus; while the real estate industry, which has recently accelerated its decline, and the domestic consumer sector, which continues to be sluggish, are also expected to usher in further strength on the policy side.

Haitong International's main views are as follows:

Haitong International believes that the market is expected to continue to rebound after the consolidation of the market last week, and there is still room for technological repair. The Hong Kong stock and A-share markets rose on Friday after the contraction and fluctuation this week, and the market began to pay attention to the Chinese policy window; non-ferrous metals performed the strongest, driven by the sharp rise in international metal prices, and related individual stocks represented by computing power in technology also showed relatively active performance.

Next week, the market will face three key events: the Politburo meeting, the Central Economic Work Conference, and the Federal Reserve's interest rate meeting. Market volatility is likely to increase

On Friday, the market began early trading expectations that the Politburo meeting would signal loose monetary policy and positive fiscal policy. At the same time, market expectations for policies to support long-term capital entry into the market have further heated up. Zhou Hardware Administration officially lowered insurance companies' business risk factors; Chairman Wu Qing of the Securities Regulatory Commission proposed at the 8th General Meeting of the China Securities Association that in the context of deepening market reform, the securities industry will shoulder four major tasks and proposed moderately broadening brokers' capital space and leverage limits; the public fund management consultation draft proposes institutional arrangements such as 30% executive remuneration to buy back funds, all of which help boost market confidence.

Earlier, Haitong International proposed that non-bank finance is expected to succeed banks as a new market stabilizer. The banking sector has continued to rebound since October, hedging the impact of falling technology, and is showing signs of stagnant growth. Driven by the policy, the insurance sector, which also has high dividend attributes, has recently performed better against the backdrop of both asset-side and debt-side improvements; the brokerage sector's YTD increase has turned negative. As a sector with high performance this year, it already has the potential to boost the market by overfalling and rebounding.

Peripheral markets mainly focus on the impact of US strategic adjustments and fluctuations in Japanese bond yields

The probability that the Federal Reserve will cut interest rates in December remained 86% this week, and the US dollar index continued to fall below 99. Since December, the central price of RMB has been running above 7.07, indicating that the regulatory authorities have controlled the pace of RMB appreciation to a certain extent, the onshore and offshore renminbi have not strengthened further this week, and both have remained around 7.07.

The United States released its latest national security strategy, which proposes a shift from a “return to Asia” strategy to the “Monroe Doctrine” centered on maintaining stability in the Western Hemisphere, and emphasizes an almost equal relationship with China, which will adjust economic relations with China and restore America's economic autonomy based on the principle of mutual benefit and equality. This statement is expected to give a certain boost to Chinese market sentiment. On the other hand, the Bank of Japan said that there is a possibility of interest rate hikes in December, driving Japanese bond yields to rise sharply. The 10-year Japanese bond yield has risen to 1.93%, a record high since 2006. Affected by this, the 10-year US bond yield rose simultaneously to 4.13%, and the global risk-free interest rate center rose, suppressing equity asset valuations.

In terms of market transactions and capital flows, the market shrank further this week. The average daily turnover of A-shares shrunk to less than 1.7 trillion yuan and Hong Kong stocks to 190 billion yuan, a new low of at least 4 months

In terms of A-share capital, equity ETFs (excluding large-scale ones) remained flat for the first four days of this week, with no further outflows. Since November, they have achieved a cumulative net inflow of 27.6 billion yuan. The net inflow of financing continued at 10 billion yuan this week, and the share of financing purchases has fallen back to 53% in a rolling year. On the bond market side, driven by strong fiscal expectations, long-term interest rates continued to rise. The 30-year treasury bond yield rose by nearly 7 bp to 2.25% in a single week. The 30-year treasury bond futures, which represents sentiment, hit a new low during the year. The 10-year treasury bond yield rose to 1.83%. Although it has not returned to the March high, it has accumulated a cumulative increase of 16 bps during the year, and the outflow of capital from the bond market continues.

In terms of southbound capital, net inflows continued to fall to HK$11.3 billion this week; in terms of industry trends, the trend of capital inflows to the Internet has slowed. Among them, Alibaba-W (09988) turned a slight outflow of 300 million dollars after two consecutive weeks of sharp inflows, Tencent Holdings (00700) switched to an outflow of 3.8 billion dollars, and SMIC (00981) continued to have a net outflow of 1.4 billion dollars, while the net inflow of Xiaomi Group-W (01810) rose to 4.6 billion yuan.

Risk Alerts

Implementation of the steady growth policy fell short of expectations, domestic economic recovery fell short of expectations, and overseas uncertainties were fermented.