Source: Guojun Overseas Macro Research Author: Zhou Hao, Sun Yingchao Recently, the conflict between employment data has not brought a clearer direction to the market. Looking ahead, the market's attention has now shifted to this week's inflation data and the Fed's interest rate meeting. Due to the recent sharp drop in oil prices, the May CPI data should cool down to some extent, which will alleviate the market's concern about inflation. In terms of product structure, the operating income of products valued between 10 and 30 billion yuan were respectively 401/1288/60 million yuan.
Authors: Zhou Hao, Huang Kaihong

Policy combination uplifts domestic confidence, with net inflows of funds towards pro-cyclical industries such as finance, consumer, industry, and raw materials.

This week, the Hong Kong stock market continued to rise strongly, with the consumer industry performing the best. After major overseas central banks started a rate-cutting cycle last week, this Tuesday, the Governor of the People's Bank of China announced a series of supportive policy measures at the State Council Information Office. On Thursday, the Politburo expressed positive messages to deploy the next economic steps. Taking advantage of the momentum, the Hang Seng Index broke through the 0.02 million points mark. In terms of industries, consumer, real estate, industrial, raw materials, and internet industries performed the best, with a cumulative increase of over 13 percentage points.

The daily trading volume of Hong Kong stocks on Friday broke historical records, with an average daily trading volume increasing by 154.2% compared to the previous week. Corresponding to the strong performance of the Hong Kong stock market this week is the heat of trading. As of Thursday, the average daily trading volume of Hong Kong stocks was 274.03 billion Hong Kong dollars, compared with an average daily trading volume of 107.81 billion Hong Kong dollars over the past 10 years, representing a 154.2% increase this week. The daily trading volume of Hong Kong stocks on Friday surpassed the 400 billion Hong Kong dollars mark for the first time in history.

During the rapid rise of the Hong Kong stock market, some investors hedged to lock in profits; some domestic funds took profits, but overall there was still a net inflow. Recently, as the Hong Kong stock market broke out of the previous low-level volatility, it continued to rise rapidly. As of September 27, the short selling ratio of the Hong Kong main board stocks rose to 17.5% this week, at a historically reasonable level, increasing by 1.9 percentage points from last week's 15.6% low. In terms of domestic funds, the southbound funds that have been consistently flowing into the Hong Kong stock market saw profit-taking behaviors on Tuesday and Wednesday this week, with net outflows of 4.308 billion Hong Kong dollars and 5.38 billion Hong Kong dollars respectively. However, looking at the overall performance for the week, southbound funds still maintain a net inflow trend.

In terms of structure, the policy measures this week have boosted domestic confidence, with southbound funds net inflows into pro-cyclical industries such as finance, consumption, industrial, and raw materials. As of September 26, southbound funds increased their allocation to pro-cyclical industries such as finance, consumption, industrial, and raw materials. Due to previous net inflows of domestic funds into Hong Kong stocks in the internet and high dividend industries like energy and communication operators, profits were taken during the continued rise of Hong Kong stocks this week. Specifically, there was a net outflow of 7.12 billion Hong Kong dollars from domestic funds in the information technology industry, with Meituan and Tencent Holdings net outflows of 4.62 billion Hong Kong dollars and 2.73 billion Hong Kong dollars respectively.

Investment Strategy: Domestic economic policy measures are being gradually introduced to bolster confidence in the Hong Kong stock market, with a bullish outlook for the future. Major overseas central banks have officially entered a rate-cutting cycle, and the easing of peripheral restrictive policies in the short term is helping improve liquidity on the sell side of the Hong Kong stock market, providing positive support for Hong Kong stocks. Interest-rate sensitive industries have greater price elasticity, including internet leaders, pharmaceuticals, and consumer industries. In the medium to long term, as peripheral restrictive monetary policies gradually loosen and the RMB exchange rate stabilizes and rises, the domestic policy space continues to open up. The policy measures announced by the Governor of the People's Bank of China at the State Council Information Office this Tuesday, and the positive statements by the Politburo on Thursday, significantly boosted confidence in the Hong Kong stock market. The expectation of further enhanced economic support policies being rolled out in the future has increased, and the outlook for the sell side of the Hong Kong stock market is expected to continue to improve. We believe that the current allocation value of Hong Kong stocks remains high.

Risk factors: 1) Slower-than-expected domestic economic recovery progress; 2) Escalation of international geopolitical events; 3) Repeated disturbances in overseas recession expectations.

Editor / jayden