HSBC Research released a research report stating that the USA has entered an interest rate reduction cycle, and it is expected to bring positive impact to the fundamentals of public utility stocks. Considering that xinyi energy (03868.HK), CLP (00002.HK), Towngas (00003.HK), CNOOC (00857.HK), and Swire Pacific (00019.HK) have relatively high offshore debts, their sensitivity to US interest rates is also high.

The bank currently predicts that the Fed will cut interest rates by 25 basis points at each of the next six meetings, anticipating that the reduction in debt costs will benefit public utility stocks, and will promote related companies to increase dividends over the next two years and drive valuation reassessment. HSBC Research stated that based on past records, Hong Kong defensive income stocks have often underperformed the broader market three to twelve months after the first rate cut in the USA, but it believes that the enthusiasm of southbound funds entering the market will provide some support.

For the latest target prices and investment ratings for a group of Chinese and Hong Kong public utility stocks, please refer to the table in the research report by HSBC.