Zhongtong Finance app learned that Huatai Securities released a research report stating that the current Hang Seng Index valuation level is about 5% away from the mid-April low, but the Hong Kong stock valuation level may be supported by the mid-April low this year: 1) From the understanding of the US Federal Reserve's monetary policy, there may have been signs of a monetary policy shift, which is a significant change since April; 2) The current market's expectations for real estate policies have also changed from the political game of policy expectations around April to recent levels. The Hang Seng AH premium index is also close to the mid-April water level, with implied macro expectations for parameters of (USD index 105, real estate sales area YoY -20%). Telecom with high and stable ROE, which is expected to continue to improve, utilities, software and services, and retailing as core stocks can be configured. On this basis, state-owned banks and large commercial banks with typical dividend characteristics can be added.

Active foreign capital outflows from Hong Kong stocks have marginally converged, and RMB exchange rate fluctuations have prompted a marginal decline in short selling positions.

Last week, the net purchase of southbound funds was about 5.6 billion yuan, a significant marginal decline from the previous week's roughly 12.5 billion yuan, and rising market uncertainties may affect the pace of southbound Hong Kong stock allocations. According to EPFR statistics on overseas mutual fund data, as of 7/24, the scale of overseas active funds outflows is marginally converged, and overseas "interest rate reduction trades" may reduce the pressure of active outflows from Hong Kong stocks. Last week, Hong Kong stock repurchases were about HKD 5.9 billion, still at a historically high level. The Hang Seng short selling ratio has marginally decreased, from 17.5% the previous week to about 15.8% last week, and from about 17% during the week to about 14%, Huatai Securities believes that the large fluctuations in the RMB exchange rate in the second half of the week may be the main factor affecting short selling behavior. It is still difficult to assert whether short positions have a trend change. Looking ahead, closely monitor changes in the proportion of short positions.

The current Hang Seng Index valuation level is about 5% away from the mid-April low.

Reviewing the market from late April to early May, capital was driven by foreign trade transactions and short covering, and the core game expectations were domestic real estate policy expectations and overseas interest rate reduction expectations. Huatai Securities believes that the Hong Kong stock valuation level may be supported by the mid-April low this year for two reasons: 1) In terms of overseas liquidity, pay attention to the recent slowdown in the Fed's balance sheet rate of reduction and the basic balance of US dollar net liquidity (Fed total liability-TGA-reverse repo), from the understanding of monetary policy, there may have been signs of a monetary policy shift, which may have a stronger impact on market expectations than the non-farm payrolls in April; 2) In terms of domestic policy expectations, the core game was the expected strong policy of subsequent real estate destocking at that time, but the current market is expected to fall back to a neutral level.

The current Hang Seng AH premium index (about 148) is close to the mid-April water level (150+)

Recently, the Hang Seng AH premium index (HSAHP) has approached the line of 148. Referring to "How to Understand the Rapid Convergence of AH Premium" (April 28, 24), without considering the expectation of dividend tax policy changes, the current HSAHP implies macro expectations of parameters of (USD index 105, real estate sales area YoY -20%). Recent macro expectations are basically reflected in the current pricing of HSAHP. Looking forward: 1) The current Hong Kong stock AH premium index is also approaching the mid-water level of April (150+); 2) Microscopically, the level of short-selling positions has been basically approaching the highest level (-18%+ weekly average) in the previous week; 3) Considering that policies will be introduced after recent meetings, it is not appropriate to be pessimistic about policies at the moment.

Configuration suggestion: You can continue to configure safety assets and wait for the bottom.

Combining the above analysis, you can continue to configure safety assets and wait for the bottom: you can configure telecommunications with high and stable ROE, which is expected to continue to improve dividends in the future, utilities, software and services, and retailing as core positions; on this basis, state-owned banks, large commercial banks with typical dividend characteristics and other "safety assets" can be added. Looking ahead: 1) If the subsequent July FOMC meeting/August Jackson Hole meeting/Fed balance sheet data once again stimulates overseas market interest rate reduction trading expectations, you can add stocks such as Henghe Technology as the core target of trading the bottom with greater market liquidity sensitivity; 2) If the short-selling trading ratio of the Hang Seng Index rises to the early April water level (weekly average 18%+), you can consider significantly increasing the overall position allocation of Hong Kong stocks to trade the opportunity of oversold rebound in the market.