There was a pullback and sideways for half a month. The big financial sector showed agitation, especially the bullish rider brokerage sector. The Hong Kong stock Chinese brokerage sector rose sharply by 5.25% on November 5. Among them, Shen Wan Hongyuan (06806) rose 11.38%, while A-shares showed a rise in technology+big financial stocks, and Hong Kong stock ETFs surged 4.22%.

The market seems to be about to change, but there are traces of all of this agitation.

The Zhitong Finance App learned that since September 24, there has been a comprehensive shift in macroeconomic policy, and loose monetary policy+fiscal policies have been frequent, bringing good expectations to the macroeconomy, while overseas geographical turmoil, safe-haven funds, and overseas escaped capital have chosen Chinese assets as safe havens to invest in high-quality Chinese assets. According to Goldman Sachs's report, in the four weeks ending October 30, net global capital inflows to mainland China's stock market reached 24.385 billion US dollars.

In order to allow foreign investors to invest more smoothly in Chinese assets, six departments including the Ministry of Commerce and the China Securities Regulatory Commission revised and issued the “Administrative Measures on Strategic Investment by Foreign Investors in Listed Companies” on November 1, allowing foreign natural persons to implement strategic investments and relax natural asset requirements, which will take effect from December 2, 2024.

Broad-based ETFs will become the first choice for foreign investors. Wind data shows that by the end of the third quarter of 2024, the market value of A-shares held by passive index funds had surpassed that of active equity funds. According to Everbright Securities Research Report, passive capital inflows were actively flowing into large-market themed ETFs last week, totaling 20.19 billion yuan. As of November 1, 2024, the size of large-cap ETF funds was approximately 1.33 trillion yuan.

The upward trend in the market is highly certain. There are three main dimensions: first, the restoration of technical indicators continued for half a month, and the main capital and short-term market capital were rising; second, loose money+fiscal recovery economic expectations, stock savings continued to flow in. In addition, special policy funds would also flow in through holdings growth; third, foreign capital will pour into the domestic capital market in early December.

However, we are still concerned about some variables, such as the US presidential election, because after the election, often accompanied by “wits” after taking office, a series of economic policies will be enacted, while Nard Tran is the most concerned candidate in the capital market. He advocates continuing tax cuts to stimulate economic growth, and will be more aggressive in terms of inflation policies. Furthermore, expectations for the Federal Reserve to cut interest rates have strengthened. According to an American Broadcasting Corporation report, the US Federal Reserve monetary policy meeting from November 6 to 7 may decide to cut interest rates again. It is expected that the target range of the federal funds rate will be lowered by another 25 basis points to around 4.6%.

Under the market's definitive investment opportunities, which sectors of Hong Kong stocks attract more investors' attention?

First, there are undervalued sectors with high dividends, such as the bull market rider brokerage sector. According to relevant trading software, the Chinese brokerage sector is only 0.7 times, and the dividend rate generally exceeds 3%. Among them, Ping An (02318), the leading financial sector, has a dividend rate of over 5%. In addition, other industry sectors, such as the infrastructure real estate sector, are also generally valued at less than 1 times. Under the opportunity of a reversal of the difficult situation, high-performing stocks such as China Resources Land (01109), which pay dividends all year round, are still worth fighting for.

Second, high-tech and highly recognizable sectors, such as the robotics and low-altitude flight sector, have recently introduced plans related to robotics and the low-altitude economy across the country, and applications have continued to be implemented. In particular, Shenzhen is a fertile land, leading the development of “bold capital” and forming a trillion-level government investment fund group, bringing huge amounts of capital to highly recognizable technology. Preferred Choice (09880) is the first stock of humanoid robots in the Hong Kong stock market. Xiaopeng Motor (09868) is relatively pure in terms of the low-altitude economy concept. Other investment targets are mainly A-shares, but with market linkage, Hong Kong stock related industry chains will also benefit.

Finally, pay attention to the reversal of industry fundamentals caused by the incident, such as the Myanmar rare earth customs closure incident. Myanmar is dominated by medium to heavy rare earth ion ore, accounting for 11% of global raw ore production in 2023, which is one of the important sources of rare earth raw materials in China, accounting for more than 40% of imports. The turmoil in Myanmar has raised concerns about the supply crisis, which has caused industry prices to rise dramatically. Rare earth prices have basically bottomed out after a long period of pullback. The incident drove the price return and driven the industry to reverse. As far as targets are concerned, the Hong Kong stock Jinli Permanent Magnet (06680) surged 44% on November 1, while A-shares of China Rare Earths and Northern Rare Earths also surged.

Of course, as small white investors and prudent risk-averse investors, broad-based ETFs and sector ETFs, or first of all, these funds mainly invest in sector constituent stocks, which differentiate the risk of single shareholding, and enjoy the average yield brought about by the rise in the market and sector with lower risk. According to Wind data, as of November 1, there were 937 stock ETFs in the entire market, with a total size of 3.14 trillion yuan, with plenty of options to choose from.

Generally speaking, expectations for A-Hong Kong stocks have not changed. Relaxed monetary and fiscal policies are gradually being implemented in the real economy. Amid frequent international conflicts and the relaxation of investment policies, safe-haven capital will continue to flow into the country, boosting the long-term rise in the domestic capital market. However, after half a month of sideways trading, there are signs that the market is starting to change. Hong Kong stock securities have surged, and related ETFs have changed, lurking, and an undercurrent of OTC capital surges.

Hong Kong stocks are a depression of investment value. High-performing stocks with a PB of less than 1 times can be found everywhere. This is mainly affected by insufficient liquidity and weak markets in the past few years, but now, under the bullish trend, these high-performing stocks with high dividend rates will also be exploited by capital to obtain excess returns in value.