The Zhitong Finance App learned that Cathay Pacific Haitong released a research report saying that in the current environment of high expectations and high positions but increased uncertainty, a strong/sustainable rebound in the market still depends on subsequent substantial improvements. The bank still maintains that the time is approaching, and that there will be better conditions at the end of the year and the beginning of the year. There were no low expectations for the general market during the year, and a strong rebound in an uncertain pricing environment requires timing and conditions. I am optimistic about domestic technology/pharmaceutical/resources and dividends at the end of the year and the beginning of the year.
Cathay Pacific Haitong's main views are as follows:
General analysis: The general market adjustments have been sufficient during the year, and there are no expectations that are too low; however, strong rebound conditions will have to wait for timing and better opportunities. Cathay Pacific Haitong's strategy has indicated that market expectations are not too high since mid-September, and focused on the investment risks implied by the deterioration in the microstructure of Chinese technology stocks. At the end of October, expectations were not too low when the bank began to focus on major markets, but local microstructural pressure still exists. Recently, the stock index fluctuated above 3,500 and stabilized, and the overall trend is in line with the bank's judgment. At present, there is plenty of room for general market adjustments during the year, and the valuation levels of various indices are also in a historically low position. Furthermore, the central bank and the Securities Regulatory Commission are stepping up their efforts to stabilize the market. Repurchases and reloans after exchanging convenience will also drive the formation of stable market growth. Currently, the market is at the bottom. However, considering that the current market lacks a large level of growth narratives and investment stories, there is relatively limited room for liquidity growth at the end of the year, and there is still uncertainty about international relations and the Trump administration's political initiatives. Therefore, in the current environment of high expectations/high positions but increased uncertainty, the market still depends on subsequent substantial improvements. The bank still maintains that the time is approaching, and there will be better conditions at the end of the year and beginning of the year.
Market style: Expectations need to be re-calibrated. Future opportunities are blue chips and domestic technology. Unlike 2015/2022, there is no overall speculation or microstructural risk in the current round of the stock market, and it is mainly concentrated in local sectors. Therefore, along with the adjustment of technology stocks and market capitalization contraction, the drag on the market index has decreased. However, the complexity of the global geopolitical situation, the intensification of the US divided government game, and the loosening of the US AI narrative will still be the core variables that will dominate the market for some time to come. The stock market's requirements for profit certainty and margin of valuation/risk compensation will continue to be low. Currently, the dynamic price-earnings ratio of the Shanghai and Shenzhen 300 (excluding electronic communications) continues to be low, and the popularity of transactions is also at a historically low level. The steady cash flow generation ability of large-cap blue chip stocks, leading barrier values, and stable dividend return attributes are worth paying attention to. Furthermore, the AI industry cycle is not over. China's major power strategies have caught up with narratives, centralized governance structures, lower interest rates, and more relaxed financial conditions, and China's AI growth and investment are expected to move beyond independent narratives.
Industry comparison: balanced allocation, focusing on the “microstructural health” + “expected improvement” sector. 1) Emerging technology: Global AI capital expenditure expectations have increased uncertainty, and midstream and upstream growth expectations have declined, but the penetration rate of downstream applications continues to increase. The technological conflict between China and the US may intensify in the next stage, and expectations of autonomy and control will heat up. The development of AI and technology in China has an independent development narrative, and the micro-trading structure for individual stocks in the domestic chain is relatively better. Recommendation: Hong Kong Stock Internet/Media/Computer/Semiconductor Equipment Materials/Military; 2) Overseas Market Leaders: Increased global competitive advantage of Chinese companies, reduced pressure on foreign exchange profit and loss, reduced pressure on profit and loss, recommended: pharmaceutical/agricultural machinery/feed, etc.; 3) Stable dividends: declining risk-free returns, improving the price/performance ratio of dividend assets, but it is necessary to balance undervaluation with improved and stable cash flow. Recommended: Electricity/banks/operators/highways, etc.; 4) Strategic resources: Demand for resource security increases in complex international situations, and geographical conflicts and AI construction demand will also strain supply and demand for commodities. Recommended: non-ferrous metals/agriculture/power grid equipment, etc.
Theme recommendation: 1. Domestic aviation development: The Zhuhai Air Show will showcase a variety of autonomous aircraft for the first time. Future mass production and delivery of the CJ-1000A will drive the supporting industry chain to accelerate localization, and I am optimistic about aviation development assembly/components/key materials. 2. Embodied intelligence: The humanoid robot technology ecosystem is perfect and mass production of the whole machine is accelerated, and the main body/core components/full-sized models are optimistic. 3. Food security: Super El Niño increases supply disturbances, strengthens policies to stabilize production and supply, and is optimistic about the seed industry/intelligent agricultural machinery. 4. Stable dividends: Bank dividend ratio increased, optimistic about flexible city commercial bank/nuclear power operations.
Risk warning: Overseas economic recessions have exceeded expectations, and global geopolitical uncertainty.