As the pressure of US inflation decreases and employment data softens, the expectation of a Fed rate cut is becoming stronger.

With the warming of rate cut expectations, many investors expect funds to flow into emerging capital markets, and there is an increasing bullish sentiment towards Hong Kong stocks and Chinese concept stocks.

Analysts pointed out that the Hong Kong stock market is significantly affected by the US Federal Reserve's monetary policy, and there is a clear and rapid feedback. If the Fed gradually enters a rate-cutting cycle, based on the Hong Kong dollar pegging to the US dollar, and the similarity of Hong Kong interest rate levels to the trend of the US Federal Reserve, Hong Kong stock valuations are expected to increase significantly.

Since August, $Hang Seng Index (800000.HK)$ it has been trending upwards and has now crossed the 18,000-point threshold, $Hang Seng TECH Index (800700.HK)$ Surged over 3%.

In the Hong Kong stock market star ETF, $CSOP Hang Seng TECH Index ETF (03033.HK)$Up more than 3%, $TRACKER FUND OF HONG KONG (02800.HK)$N/A.$Hang Seng H-Share Index ETF (02828.HK)$ rising by more than 2%. The leveraged ETF has even more impressive gains, $CSOP Hang Seng TECH Index Daily (2X) Leveraged Product (07226.HK)$ Has soared more than 6%.$CSOP Hang Seng Index Daily (2x) Leveraged Product (07200.HK)$ Rises nearly 4%.

Multiple industries in the Hong Kong stock market are showing strong upward momentum!

Looking at today's market, multiple industries are showing strong upward momentum. The financial sectors, including insurance, real estate, and brokerage, are all performing well.

In the insurance sector, $NCI (01336.HK)$ increasing by nearly 10%, $CPIC (02601.HK)$ rising by over 7%,$CHINA LIFE (02628.HK)$ Up more than 6%, $CHINA TAIPING (00966.HK)$ Up more than 3%, Wheaton Precious Metals (WPM.US) fell more than 13%, with silver falling more than 4%, and others falling more than 2%. $CHINA RE (01508.HK)$ Rises more than 1%.

Among property stocks, $SUNAC (01918.HK)$Please use your Futubull account to access the feature.$GREENTOWN CHINA (03900.HK)$ Up more than 6%, $SEAZEN (01030.HK)$Please use your Futubull account to access the feature.$CHINA VANKE (02202.HK)$ Up more than 5%, $LONGFOR GROUP (00960.HK)$Please use your Futubull account to access the feature.$YUEXIU PROPERTY (00123.HK)$ Up more than 3%.

Among China-affiliated brokerage stocks, $CGS (06881.HK)$ rose more than 8%, $CICC (03908.HK)$ up nearly 6%, $CITIC SEC (06030.HK)$Please use your Futubull account to access the feature.$DFZQ (03958.HK)$ Up more than 3%, Wheaton Precious Metals (WPM.US) fell more than 13%, with silver falling more than 4%, and others falling more than 2%. $HAITONG SEC (06837.HK)$Please use your Futubull account to access the feature.$GF SEC (01776.HK)$ The TOPIX index rose more than 2%.

In addition, the new energy vehicle companies have recently seen a strong surge. $XPENG-W (09868.HK)$ Rise more than 9%, $LI AUTO-W (02015.HK)$ Rise nearly 9%, $GWMOTOR (02333.HK)$Please use your Futubull account to access the feature.$NIO-SW (09866.HK)$ Rise more than 7%, $LEAPMOTOR (09863.HK)$Please use your Futubull account to access the feature.$BYD COMPANY (01211.HK)$ Rise by more than 6%.

When will the Hong Kong stock market reverse? Which industries are worth paying attention to?

Stephen Jen, CEO of Eurizon SLJ Capital, a hedge fund in the United Kingdom, publicly stated that with the US interest rate cut, Chinese companies may sell $1 trillion worth of US dollar-denominated assets, which may lead to a 10% appreciation of the renminbi.

Macquarie Group and ANZ Bank have a similar view, but they are more conservative, believing that this number may be around $500 billion and $430 billion, respectively.

If trillions or hundreds of billions of dollars flow into the Hong Kong and A-share markets, it will have an effective boost on these two markets, especially considering that the current trading volume of A-shares is around 500 billion yuan.

Previously, Hang Seng's leading companies have continued to increase dividends and buybacks, which will help enhance attractiveness for allocation. The necessary conditions for the second phase of the Hong Kong stock market in 2024 have matured. "There is hope to launch the second phase of the market in August." The recent trend in the Hong Kong stock market seems to be confirming Zhang Yidong's judgment, as the Hang Seng Index has risen by more than 5% within the month.

Guotai Junan believes that after the dovish statement by the Federal Reserve, the market reaction has been positive, with U.S. stocks collectively rising, and the weakening trend of the US dollar and US bond yields forming a positive factor in terms of liquidity for Hong Kong stocks. The current valuation of Hong Kong stocks has fully priced in the previous pessimistic factors, with a higher implied investment return due to risk premium. In addition, foreign investment in Hong Kong stocks is at a low level, with significant room for further inflows. Considering the rate cut by the US Federal Reserve and the opening of domestic policy space, we are more optimistic about the subsequent performance of the Hong Kong stock market at this moment.

At the index level, the decline in US bond rates may temporarily boost the strength of the broad-based indices of Hong Kong stocks. For Hong Kong stocks, foreign investment remains an important influencing factor, determining the direction of the stock index and the weight of heavyweights. If US bond rates and the US dollar index decline, emerging markets represented by Hong Kong stocks will greatly benefit. Currently, foreign investment in Hong Kong stocks is at a low level, with significant room for further inflows.

Additionally, Guotai Junan also stated that since the first half of the year, southbound funds have gradually begun to increase their allocations to high-quality internet assets in Hong Kong stocks. As of August 21, 2024, a total net inflow of 25.13 billion Hong Kong dollars into the media sector of Hong Kong stocks since the beginning of the year, with a net inflow of 12.33 billion Hong Kong dollars since August, ranked first in the whole industry. With the industry consolidation or approaching its end, improvement in corporate profitability, there is optimism for the subsequent valuation recovery and elasticity space of Hong Kong's internet sector.

In terms of industry sectors, benefiting from the decline in US bond rates, the Hong Kong sectors with higher elasticity mainly include information technology, medical, essential consumer, and industrial sectors, showing a higher negative correlation between their stock prices and US bond yields.

Tianfeng Securities stated in a research report that they continue to be optimistic about Hong Kong-listed Chinese concept stocks, focusing on the "low-lying" opportunities in Hong Kong stocks under future liquidity improvements.

Minsheng Securities also indicated recently that by the end of 2020, Chinese concept stocks had significantly corrected, and their valuations are still at historical lows. In the current market environment, companies with sufficient cash on their balance sheets and relatively stable operating cash flows are beginning to increase shareholder returns, especially in leading internet companies. Since 2024, this trend has become more pronounced. It is recommended to actively pay attention to high-return investment opportunities in Chinese concept stocks; in addition, assets with special dividend potential are worth close tracking.

Everbright Securities also stated that the rate cut by the Federal Reserve is expected to create a favorable financing and valuation environment for the development of the innovation industry chain. Meanwhile, recent favorable policies for innovative drugs domestically have shown strong support and encouragement for the development of the innovative drug industry. The continuing marginal improvement in both the financial and policy environment also indicates a long-term industrial trend formation for the innovative drug industry chain.

Therefore, Everbright Securities suggests focusing on leading innovative pharmaceutical companies. "Under the background of innovation-driven and domestic upgrading, brand leaders are the future investment mainstay in the pharmaceutical industry."

Editor/Somer