JPMorgan's report suggests that investors may begin to acquire high-quality utility income stocks amid market volatility and the possibility of a Fed rate cut in the fourth quarter.

The bank upgraded China Power International's (00006.HK) rating from "neutral" to "shareholding" because its yield is about 7%, one standard deviation higher than the historical average, and its yield may decline if there are expectations of rate cuts. The bank expects greater clarity on the results of the two regulatory assets of China Power, SA Power Network and Northumbrian Water, in the second half of the year, with upward potential for returns and capital expenditures, and believes it can be a catalyst for the company's stock price. Additionally, the bank expects Cheung Kong to announce more merger and acquisition deals, as management has mentioned that it is seeking more opportunities, despite China Power and Cheung Kong announcing the acquisition of natural gas networks and solar projects in the first half of the year. The bank expects more trades and estimates that each trade will drive the stock price higher. The bank's top picks in order are China Power, Cheung Kong, China Gas (00003.HK) and CLP Holdings (00002.HK).

In addition, the bank expects Cheung Kong to disclose more merger and acquisition transactions, as management has mentioned that it is looking for more acquisition opportunities. Despite the fact that China Power and Cheung Kong have already announced the acquisition of natural gas network and solar energy projects in the first half of the year, the bank expects more transactions and estimates that each transaction will drive the stock price higher. The bank's top preferences are China Power, Cheung Kong, China Gas (00003.HK) and CLP Holdings (00002.HK).