Zhito Finance APP learned that Haitong sec released a research report stating that Trump's victory in November suppressed liquidity and risk appetite for Hong Kong stocks, leading to a decline, while improvements in domestic fundamentals still require time. In this round of market movement, Hong Kong stocks have shown a clear leading performance compared to A-shares, as the Hong Kong stocks rebounded first on August 5, with a correction starting on October 8. The firm believes that Hong Kong stocks are currently at a high cost-performance range, and future domestic policy efforts may drive improvements in the fundamentals, presenting substantial upside potential for Hong Kong stocks.

The main points of Haitong Securities are as follows:

Market review: In November, the major global stock indices displayed mixed performances, and Hong Kong stocks continued to adjust. For A-shares: the csi 300 index had a cumulative increase of 0.7% and a maximum increase of 3.9% in November, while the chinext price index saw a cumulative increase of 2.8% and a maximum increase of 6.8%; for Hong Kong stocks, the hang seng index experienced a cumulative decline of -4.4% and a maximum decline of -10.8%, and the hang seng tech index recorded a cumulative decline of -3.2% and a maximum decline of -13.4%; for US stocks, the s&p 500 index had a cumulative increase of 5.7% and a maximum increase of 6.1%, while the nasdaq index recorded increases of 6.2% and 6.9%; in other markets, Germany's DAX index had a cumulative increase of 2.9% and a maximum increase of 4.4%, the united kingdom's FTSE 100 had a cumulative increase of 2.2% and a maximum increase of 3.9%, and the nikkei 225 index recorded a cumulative decline of -2.2% and a maximum decline of -5.2%. Analyzing the performance by industry, the top three performing sectors in Hong Kong stocks in November were medical care (1.0%), finance (0.8%), and telecommunication services (0.5%), while the three sectors with the largest declines were consumer staples (-5.1%), real estate (-4.5%), and public utilities (-3.5%).

In this round of market movement, Hong Kong stocks showed leading performance, rebounding from their low on August 5. Looking back at the market rhythm of Hong Kong stocks versus A-shares in the second half of this year, Hong Kong stocks demonstrated clear leading performance. First, starting from August 5, Hong Kong stocks rebounded first from the low, and since the market started, Hong Kong stocks have had a larger increase. From August onward, multiple domestic and international factors have improved, driving the rebound in Hong Kong stocks from August 5. In contrast, A-shares' rebound came relatively late, as the market only confirmed the rebound around the press conference by the State Council Information Office on September 24 and the Political Bureau meeting on September 26. Second, after the National Day holiday, the speed of adjustment in Hong Kong stocks was faster than that in A-shares, and the degree of adjustment in Hong Kong stocks was deeper. Due to the rapid increase in the previous period, Hong Kong stocks started to adjust from October 8, while A-shares saw a rise on the first trading day after the National Day holiday, followed by an adjustment on the next day, October 9. It is worth noting that after the announcement of the US election results on November 6, the performance of Hong Kong stocks and A-shares diverged, with Hong Kong stocks accelerating their decline, while A-shares maintained high-level fluctuations.

Trump's victory has suppressed the liquidity and risk appetite of Hong Kong stocks, and there is a lag in the restoration of domestic fundamentals. Since October 8, Hong Kong stocks have started to adjust and accelerated their decline after the global macro super week from November 4 to November 8, with two main reasons: first, Trump's victory led to a strengthening of the US dollar and US treasury yields, which suppressed liquidity for Hong Kong stocks. From the perspective of macro liquidity, Trump's policies have inflationary properties that strengthen the US dollar and US treasury yields, exacerbating liquidity tightness; from the perspective of micro liquidity, the outflow of foreign capital has noticeably accelerated in November, creating pressure on the Hong Kong stock market. Second, Trump's policies restrict risk appetite, and there is a lag between policy efforts and improvements in fundamentals. From the perspective of risk appetite, Trump's hard-line stance towards China has suppressed risk appetite for Hong Kong stocks. From the perspective of fundamentals, the market is concerned that a rekindling of trade frictions between China and the USA could impact the fundamentals of Hong Kong stocks, and the lag between domestic policy efforts and improvements in fundamentals may also be a reason for the recent adjustment of Hong Kong stocks.

Currently, Hong Kong stocks are undervalued, with reduced trading volume and a high short sell ratio, highlighting their cost-performance under the backdrop of policy efforts. The recent adjustment in Hong Kong stocks began on October 8, and current various indicators show that Hong Kong stocks are already in a high cost-performance range: in terms of valuation, the valuation of Hong Kong stocks has fallen to a historically low position; from an international comparison perspective, the valuation of Hong Kong stocks is also at a low level. In terms of transaction volume, after the National Day holiday, the trading volume of Hong Kong stocks has significantly shrunk, and the reduction in trading volume of Hong Kong stocks compared to A-shares is distinct. Regarding the short sell ratio, the current short sell volume of Hong Kong stocks exceeds the average level since 2014. Since September 24, the bottom of domestic policies may have emerged, and the effects of these policies have already begun to show in recent economic data. Looking ahead, with the increase in policy efforts supporting the repair of domestic fundamentals, there is significant upside potential for Hong Kong stocks.

Risk warning: The unpredictability of USA policies, the Federal Reserve's interest rate cuts are less than expected, and domestic economic recovery is not as expected.