CICC: Hong Kong stock market may benefit in the short term from interest rate cuts, with growth sectors potentially having higher resilience.

CICC has released a research report stating that, overall, the short-term uncertainty in the domestic and international environment may continue to bring volatility, and it still believes that the Hong Kong stock market is more resilient than the A-share market. In terms of allocation, the growth sector benefiting from interest rate cuts in the short term may have higher resilience, but in the medium term, the structural market with range-bound fluctuations is still the main theme, corresponding to dividends and technology growth. The current market is entering a key window period for internal and external environments. Internally, the market has recently been paying close attention to domestic policy changes, especially measures regarding existing home mortgages and mortgage extensions. According to CICC Bank's calculations, if the average existing mortgage interest rate is reduced by about 54-60 basis points, for example, for an individual with a RMB 1 million 30-year mortgage, the monthly repayment amount under equal principal and interest repayment is expected to decrease by around 500 yuan. However, even if implemented, existing mortgages only partially address early repayment and expenditure pressures, and do not provide much help in boosting housing demand. Of course, the Fed's interest rate cut is about to begin, which could further open up space for domestic interest rate cuts, but the magnitude of the cut may still be limited. Externally, the US presidential election and interest rate cut window in September are approaching. The non-farm payroll numbers released on Friday evening did not completely alleviate the market's recession concerns, nor did they provide a clear signal of the extent of the interest rate cut. In addition, with the second debate of the US presidential election scheduled for September 10, there have been more variables in overseas markets recently, and short-term uncertainties will have an impact on the market. Fundamentally, the current economic growth momentum remains weak. From the perspective of micro-enterprise profits, in the first half of the year, the profits of overseas Chinese-funded stocks increased slightly by 2.3% year-on-year, accelerating from 0.2% in 2023. However, this is more cost-driven, with demand actually declining. In addition, companies are generally adopting contraction strategies, so the increase in ROE is more due to the cost-driven profit margin. The current market consensus expects a nearly 20% year-on-year growth in the second half of the year, which the bank believes may be too optimistic. However, it is worth noting that Hong Kong stock earnings are still better than A-shares at -3%, mainly because the earnings structure of Hong Kong stocks is more advantageous: 1) a higher proportion of new economy in industry structure; 2) a more obvious contribution effect from top companies in concentration. This once again supports our previous view that the Hong Kong stock market is still more resilient than the A-share market, and the structural market is still the main theme.