China Merchants International published a research report, outlining the outlook for the US and Hong Kong stock markets, with a preference for Amazon (AMZN.US), DoorDash (DASH.US), Netflix (NFLX.US), Meituan (03690.HK), Tencent (00700.HK), Tencent Music (TME.US), Hansoh Pharmaceutical (03692.HK), 3SBio (01530.HK), REMEGEN (09995.HK), Alnylam (ALNY.US), Thermo Fisher (TMO.US), GeneFab Biotechnology (02367.HK), Anta (02020.HK), Xtep (01368.HK), YUM CHINA (YUMC.US), Geely (00175.HK), BYD (01211.HK), Xiaopeng (09868.HK), TAL Education (TAL.US), and Duolingo (DUOL.US).

Regarding the US stock market, China Merchants expects that Trump will implement a combination of domestic tax cuts, deregulation, and external tariff increases next year, which could boost US corporate profits and household income in the short term, but will also exacerbate local fiscal deficits and debt pressures, as well as increase inflation expectations. The firm also noted that the trade protectionism of increasing tariffs supports local manufacturing in the USA, but in the long run, it will affect domestic consumption, impact global trade, and other regional economic growth, thereby influencing the overseas income of American leading companies that are already globalized.

China Merchants mentioned that although US technology stocks have experienced significant increases, their earnings growth has also been rapid, and valuations have not reached bubble levels. Due to the concentration of AI-related technology stocks globally in the US market, which presents scarcity, a 'cautious recommendation' rating was given to US stocks.

Regarding the Hong Kong stock market, China Merchants pointed out that since the end of September this year, China has clarified its policy shift and acceleration. It is anticipated that next year, more proactive fiscal policies and moderately relaxed monetary policies will be implemented, focusing on stabilizing the housing market and stock market, significantly boosting consumer spending, and promoting technological innovation and new productivity development. The firm indicated that economic data for the first eleven months of this year show that China’s economic growth and export growth are strong, consumption is weak, and private investment is declining. As for next year, the factors driving exports will weaken, and growth must be compensated by consumption and investment.

China Merchants predicts that the market's reaction to 'Trump 2.0' will be more rational than during the 1.0 era because discussions and preparations regarding Sino-US conflicts are more comprehensive than before, and the Chinese government has also clarified its supportive stance toward the real economy and the market. Although the effectiveness of policy stimulus is yet to be verified, H-stock valuations are lower than A-stock, and the new low in mainland government bond yields also adds motivation for funds to southward seeking higher-yielding symbols, thus providing a 'cautious recommendation' rating for H-stocks.

In terms of industry, China Merchants is bullish on US tech stocks with strong earnings growth; US innovative pharmaceutical companies; leading platform internet companies that demonstrate business resilience, cost reduction and efficiency improvement, healthy profit growth, and robust shareholder returns; automobile companies that deepen technological and cost competition in electrification and evolve into high-level intelligent driving; and the education industry's leading firms providing a second growth curve with AI + Education.

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