On October 30, the H share large cap fell significantly on the futures settlement day, with the Hang Seng Index falling 320 points or 1.6% throughout the day to close at 20,380 points. The Hang Seng Tech Index fell by 2.4%, closing at 4,513 points. The market's turnover increased to 166.6 billion Hong Kong dollars.

Internal and external factors have increased investors' wait-and-see sentiment. The upcoming China-US economic data, the November FOMC meeting, the US presidential election, and the NPC Standing Committee are all key focuses of the market.

On the market, most sectors declined, with only seven constituent stocks of the Hang Seng Index rising, among which Sunac China Holdings (288 HK) rose 1.6%, marking the largest increase among blue chips. Hansoh Pharma (3692 HK) declined by 10.5%, showing the biggest decrease among blue chips, while semiconductor, pharmaceutical, consumer discretionary, and internet-related sector stocks also experienced significant declines.

Some energy, telecommunications, beer, banking, materials, and biomedical companies have released their third-quarter earnings. The profit growth rate has generally slowed down or even reversed since the second quarter, indicating significant micro growth pressure in the third quarter for enterprises. It is currently difficult to determine whether profit growth has bottomed out, and attention is still needed on whether fiscal policies will be implemented with targeted efforts.

CICC International indicated that after the overbought correction in October, the forecast PE ratio of the Hang Seng Index has fallen to 9.4 times, positioning at the 34.2nd percentile since 2018. A series of policy combinations since the end of September has shown a positive shift in the short-term growth stabilization strategy at the central decision-making level. With the support of the policy bottom, the probability of the forecast PE of the Hang Seng Index falling below 9 times is not high.

However, the short-term focus of the decision-making level on stabilizing growth does not mean the arrival of 'strong stimulus.' The medium and long-term policy direction of risk prevention and high-quality development will not change. Resolving multiple constraints on current developments such as declining commodity prices, real estate, and consumer confidence will not be achieved overnight. The sustained improvement in fundamentals is a gradual and relatively long process.

Since October, the yield on U.S. 10-year Treasury notes has been continuously rising. The sharp rise in bond yields is unlikely to be sustained in the short term. If the yield on 10-year Treasury notes returns to 3.8%, the risk premium of the Hang Seng Index returns to the rolling two-year average level, corresponding to a level of around 19,500 points for the Hang Seng Index, there will be a good value proposition at that time.

Macro dynamics:

The number of job vacancies in the USA in September dropped to 7.44 million, the lowest in more than three years, with each job seeker currently corresponding to 1.09 vacancies, returning to the pre-pandemic level of 2019. The resignation rate in September hit its lowest since May 2020. The US job market is gradually cooling, but the voluntary layoff rate by companies remains low, posing no major threat to the employment market.

In October, the two major consumer confidence indices in the USA saw significant increases. The final value of the University of Michigan Consumer Confidence Index in October reached 70.5, the highest in six months. The Conference Board Consumer Confidence Index in October surged to 108.7, hitting its highest point in nine months. It is expected that while consumption remains robust, inflation expectations remain relatively stable. Surveys show that residents' one-year inflation expectations are at a recent low of 2.7%, while the five-year inflation expectations remain stable at 3.0%.

Market expectations for a rate cut by the Federal Reserve are converging towards the September FOMC dot plot. Current interest rate futures indicate a nearly 100% probability of a 25 basis point rate cut in November, and a 78.6% probability of a total 50 basis point cut by December. The likelihood of a 100 basis point cut by mid-2023 has significantly increased over the past month, reflecting economic data exceeding expectations in the near term, as well as the substantial chance of Trump being elected as the new US President causing uncertainty in the inflation process.

Industry dynamics:

On Wednesday, the automotive sector in the Hong Kong stock market collectively declined under the shadow of tariff uncertainties. The European Union has decided to impose an additional 17%-35% tariff on electric vehicles imported from China for a period of five years. Individual stocks experienced declines ranging from 0.6% to 6% in a single day. Zhongtai International expects manufacturers to raise prices for products exported to the EU, and the quantity of new energy vehicles exported to Europe in the coming months is expected to slow down. However, as consumers gradually adapt to the new prices, exports to the EU can still rebound.

From January to September 2024, the countries with the highest total exports of new energy vehicles are Belgium, Brazil, and the United Kingdom; the countries with the highest year-on-year increase in new energy vehicle exports are Brazil, Mexico, and Belgium.

The Hang Seng Healthcare Index fell by 2.8% yesterday, with most major companies in the sector experiencing declines. The recent focus in the pharmaceutical industry has been on medical insurance negotiations. Media reports on October 29th focused on the EGFR-TKI inhibitors for cancer treatment, involving AstraZeneca (AZN US), Hansoh Pharma (3692 HK), and Betta Pharmaceuticals (300558 CH). There were market rumors that Hansoh's amelioration contract was not easily renewed, leading to a drop in the company's stock price yesterday. However, according to Zhongtai International's communication with management, the above rumors were false. Amelioration was not present at the negotiation site since it was easily renewable. Based on the current situation, the company expects double-digit growth in product sales in 2024, making it one of the better-performing companies in the pharmaceutical sector this year.

Remegen (9995 HK) announced yesterday that its revenue for the first three quarters increased by 57.1% year-on-year to 1.209 billion yuan, in line with expectations. The shareholders' net loss widened by 3.96% to 1.071 billion yuan, but due to the company's reduction in sales and administrative expenses, the net loss to shareholders was lower than the market's recent expectations. Zhongtai International is bullish on the market demand for the company's products and also expects that due to the net debt ratio reaching as high as 71.9% by the end of September, the company is expected to continue controlling costs in the future.