Source: Haitong Strategy
According to a research report released by Haitong Securities, overseas stock markets generally picked up in November, and the performance of Hong Kong stocks was divided. Among them, the Hang Seng Index's performance was weak. The Federal Reserve is expected to end interest rate hikes next year. Hong Kong stocks are likely to rise even if interest rates have not been cut even after historical interest rate hikes have ended. Necessary consumption and health care generally perform better until the Fed ends interest rate hikes and cuts interest rates.
Haitong Securities's main views are as follows:
The Fed is expected to end interest rate hikes next year.
Looking at macro factors, the two major factors that prevented the Fed from starting to cut interest rates are being mitigated. In terms of inflation, the year-on-year growth rate of US CPI has fallen from 6.6% at the beginning of the year to 3.2% in October. The decline in used car prices and the easing of rental inflation are expected to drive short-term core inflation to continue to decline;
In terms of employment, the job gap corresponding to each unemployed person in the US fell from 2.0 on 22/12 to 1.5 on 23/09, maintaining a downward trend; in the long run, under trend changes such as easing supply and demand in the labor market leading to a decline in income and consumption, it is expected that the Fed's interest rate hike cycle will end next year, and interest rate cuts may even begin.
If the Fed ends interest rate hikes, Hong Kong stocks are expected to rise even if interest rate cuts are not initiated immediately.
It is possible to summarize the likely trend of Hong Kong stocks by reviewing market performance from the end of the Fed's interest rate hike cycle since 2000 to the period of the first interest rate cut. Specifically:
During the period from 2000/5-2001/1, Hong Kong stocks were affected by both the rebound in domestic economic growth and the bursting of the Internet bubble. The Hang Seng Index fluctuated and rose 6.7%. During the 2006/6-2007/9 period, China's economy grew rapidly, and equity distribution reforms were basically completed. Mainland companies went public in Hong Kong one after another, which attracted investor interest, and the Hang Seng Index surged 58.87%. In the 2018/12-2019/7 period, the Hang Seng Index rose 4.52% as the Fed stopped raising interest rates, expected to improve the liquidity of Hong Kong stocks, and China's downgrade boosted the market.
Essential consumption and health care generally performed better until the Federal Reserve ended its rate hike until it cut interest rates.
The following further examines the performance of various Hong Kong stock industries from the end of the Fed's interest rate hike cycle since 2000 to the first interest rate cut, and found that the investment win rate of the daily consumer/healthcare industry was high, and the odds were also high. The average gain/ranking was 39.2% /2nd, 30.2% /4, respectively; the investment win rate and odds in the energy, finance, and real estate industries were also prominent. In the 3 market segments, there were 2 increases, ranking in the top 50%. The average gains were 35.0%, 24.6%, and 24.3%, respectively, ranking in the top 50%. 5, sixth.
In contrast, during this period, some procyclical industries, such as information technology, telecommunication services, and optional consumption, often performed poorly. In particular, secondary industry media, fell all three times, and the decline reached 35.8%/2.0%/9.5%. This may be due to investors expecting interest rate cuts during this period, but it is still difficult to be sure that interest rate cuts will come soon, so they maintain a cautious attitude. Defensive industries such as essential consumption and high dividend industries related to economic weakness are favored.
Risk warning:
The Fed's interest rate hike exceeded expectations, geopolitical relations deteriorated, and domestic economic recovery fell short of expectations.
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