The Zhitong Finance App learned that Cathay Pacific Haitong released a research report saying that there are no expectations that are too high or too low. The market fluctuates sideways; the stock market will rebound after a sharp fall, with little to no high or weak fluctuations; a stronger market will take time. Investments balance “microstructural health” and “expected to improve”. They are more balanced, more scattered, small but beautiful, and optimistic about high dividends from domestic technology/strategic resources/big finance.
Cathay Pacific Haitong's main views are as follows:
Trend analysis: There are no expectations that are too high, and there are no expectations that are too low. The market fluctuates sideways; large-scale markets will still take time and wait. Currently, we are in a “transformation bull” recuperation period. At this stage, the general market index is neither expected to rise to a new high, nor is it expected to plummet to a new low. First, after the full A-share pricing industry narrative in the first half of the year, there are currently no new large-scale growth narratives and investment stories to drive the improvement of overall expectations, and a “waiting period” has entered a “waiting period” on a logical level. Second, since August, the entry of incremental capital into the market has clearly slowed down, and the market state has also gradually changed from an incremental state to a stock game, so the impact of the microstructure on the market will increase. The “gray rhino” will also limit risk appetite in the short term, such as the Federal Reserve's interest rate hike, the inflation situation and tense international relations, and increased technological sanctions and trade conflicts. The market is not ignorant of the above factors. At a stage where expectations are not high but risk assessments have not declined, the short-term stock market will rebound after a sharp decline, but currently it is generally a weak shock with a low level of intensity; a stronger/higher level of market will still require time, conditions, and waiting.
The Chinese stock market has local microstructural problems, and further self-digestion is needed; however, the impact of local problems and local pressure on the overall market/broad base is manageable, and there is no need to worry too much. After the microstructural problem occurs, stocks will gradually not express logic and are more affected by trading factors. At the same time, there will also be a phased situation where they are less sensitive to benefits and more intense reactions to shortfalls. The market response in the three quarterly reports is still a window for us to observe whether this problem improves. The current round of the stock market is different from 2015/2022. There are no overall microstructural problems. It mainly focuses on a small number of local technology sectors focusing on individual stocks, and the overall market and the vast majority of stock trading structures are healthy. Furthermore, it is not that industrial innovation/logical changes are no longer expressed; rather, under the current pattern, they will be expressed more in the “microstructural health” + “expected to improve” technology sector and individual stocks. Second, microstructural problems will not persist. After a period of full change of hands or strong new narratives and new expectations, the affected individual stocks can strengthen again. Currently, the market still needs to self-digest related issues, and it is expected that the end of the year and the beginning of the year will be a favorable point.
Industry comparison: The current investment focus is on “microstructural health” + “expected to improve” sectors and individual stocks. They are more balanced and scattered, and have obvious “small but beautiful” and rotational characteristics. 1) Domestic chain technology: Overseas sanctions and trade disputes are increasing, and the need for autonomy and control is increasing; in 2027, China's AI will have an independent development narrative. Recommended: Domestic chips/semiconductor upstream components and materials/high-end equipment/pharmaceuticals, etc. 2) Strategic resources: US debt is no longer necessarily a risk-free asset. Demand for resource security increases in complex international situations, and geographical conflicts and AI construction demand will also strain supply and demand for commodities. Recommendation: Precious metals/industrial metals/rare metals/oil chemicals/agricultural products, etc.; 3) Finance and high dividends: stable demand for combinations increases, and new insurance regulations promote willingness to allocate dividends. Recommended: Banks/Brokers/Electricity & Utilities/Operators/Real Estate Leaders, etc.
Risk warning: Overseas economic and geopolitical risks, risk of individual stock performance falling short of expectations.