Guotai Junan: Global Policy Resonance Benefits HK Stocks
Guotai Junan released a research report stating that the Hong Kong stock market has factored in too many pessimistic elements, with clear bottom characteristics and high cost-effectiveness for allocation.
Major overseas central banks have successively started a rate-cutting cycle, and the easing of restrictive policies in the short term helps to improve the liquidity on the denominator side of the Hong Kong stock market, forming a positive support.
Industries sensitive to interest rates have greater stock price elasticity, including internet leaders, pharmaceuticals, and consumer industries.
In the medium to long term, as restrictive monetary policies abroad gradually loosen and the RMB exchange rate stabilizes and rises, domestic policy space is further opened up.
With the expectation of increased economic support policies, the overly pessimistic pricing of the Hong Kong stock market's numerator is expected to improve marginally.
The Hong Kong stock market, which has fully adjusted in the past three years, is expected to see an increase in return, highlighting its allocation value.
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The main views of Guotai Junan are as follows: Chinese officials have introduced a series of "stabilize economy" measures.
Today, the Governor of the People's Bank of China announced at a press conference that the existing housing loan interest rates will be reduced and the minimum down payment ratio for housing loans will be unified, guiding commercial banks to reduce the existing housing loan interest rates close to the newly issued housing loan interest rates, with an estimated average reduction of about 0.5 percentage points.
Positive events at home and abroad have been implemented, and the upward signal of the Hong Kong stock market is obvious.
The Hong Kong stock market has risen significantly, reflecting a positive response.
According to previous calculations by Guotai Junan, the current average interest rate of existing housing loans is around 4.10%.
The latest first-time home loan interest rates in 30 cities are at 3.21%, and the second-time home loan interest rates are at 3.53%.
If the average reduction of existing housing loans is 0.5 percentage points, it can roughly be the same as the current new interest rate for the second house.
The convergence of housing loan interest rates and rental yields is a necessary condition for the current stabilization of housing prices, and the reduction of existing housing loan interest rates helps to further stabilize the current housing prices.
On the other hand, as the recognition of the first house has been somewhat relaxed, the minimum down payment ratio for the second house has been reduced to 15%, and we believe that the stimulation of the market still needs further observation.
However, overall, the market welcomes this policy relaxation.
The Hong Kong stock market opened high, and the Hang Seng Index has risen by more than 2%.
The Fed's unexpected rate cut triggered an upward signal in the Hong Kong stock market.
First, on September 18, the Fed officially started the rate-cutting cycle, and the interest rate cut of 50BP was slightly higher than market expectations; the next day, the Hong Kong Monetary Authority followed with a 50BP rate cut.
Looking at the impact of past interest rate cuts overseas on the Hong Kong market, the improvement of overseas liquidity expectations is beneficial to support the rise of the Hong Kong stock market from the denominator side.
In addition, as major overseas central banks have successively cut interest rates, the restrictive external policy environment continues to ease, and the RMB exchange rate continues to rise, rising from 7.11 and once breaking through 7.04, expanding domestic policy space.
The expectation of increased economic support policies has heated up, boosting the risk preference of the Hong Kong stock market, and also helping to improve the expected numerator.
At present, the bottom characteristics of the Hong Kong stock market are obvious, and the low expectation corresponds to a healthy micro transaction structure, with high allocation value.
From the perspective of valuation level, the current valuation of the Hang Seng Index is below the historical average of the past 10 years by 1 standard deviation, and the historical percentile is only about 12%.
Compared with other major overseas stock indices, the historical valuation percentile of developed or emerging market stock indices is mostly above 70%, and the valuation of the Hong Kong stock market is at a low level.
On the one hand, the low valuation of the Hong Kong stock market is suppressed by the rapid interest rate hikes overseas in the past three years, and on the other hand, it also reflects the pricing of the Hong Kong stock market's earnings expectations.
At present, the micro transaction structure of the Hong Kong stock market is healthier, and the bottom characteristics are obvious.
Drawing on the experience of the Fed's rate cut in 2019, this year's Hong Kong stock market will be more optimistic.
The U.S. manufacturing PMI in September was 47, which has been in the contraction range for three consecutive months and has reached a new low in 15 months; the expansion speed of the service industry has slowed down slightly, and it is expected that the Fed will continue to cut interest rates this year.
This round of the Fed's rate cut is similar to the preemptive rate cut in 2019, which has reference significance for the performance of the Hong Kong stock market.
The judgment of the U.S. economic situation in 2019 has not changed significantly, but it has emphasized the uncertainty of the economic outlook and needs preemptive rate cuts to support and avoid economic cooling; the Hong Kong stock market fluctuated downward and bottomed out after the Fed's rate cut and then fluctuated upward.
Compared with the performance of the Hong Kong stock market in 2019, the current price-to-earnings ratio of the Hang Seng Index is only 9 times (11 times in 2019), without high expectations or implied unexpected returns.
Risk factors: the progress of domestic economic recovery is not as expected; international geopolitical events heat up; overseas recession expectations repeatedly disturb.