Hong Kong Stock Concept Tracking | Fed Rate Cut Good for Asia-Pacific Markets, Focus on Hong Kong Stocks with Dividend Distribution (with Concept Stocks)

On the 18th local time, the Federal Reserve of the United States concluded a two-day monetary policy meeting and announced a reduction of the federal funds rate target range to 4.75% to 5%, lowering it by 50 basis points. This is the first rate cut by the Fed since 2020. As expected by the market, the Fed has started a loose cycle. Analysts believe that historically, unless faced with a major economic crisis, the Fed rarely cuts rates by 50 basis points when starting a new rate-cutting cycle. With this first rate cut by the Fed in four years, global funds are eager to seek new growth opportunities, and the prospects in the Asia-Pacific market may be multifaceted. In terms of monetary policy, experts analyze that as inflation levels fall from highs, developed countries' monetary policies are entering a "shift" phase, with long-standing tight monetary policies loosening. Globally, this will help developing countries alleviate debt pressure, boost investment and consumption, and provide a more positive international economic environment for economic recovery. On September 19, the Hong Kong Monetary Authority announced a 50 basis point reduction in the benchmark interest rate to 5.25%, down from 5.75%. This came after the overnight announcement of a 50 basis point rate cut by the Federal Reserve. Under the linked exchange rate system implemented in Hong Kong, the Hong Kong Monetary Authority reduced the benchmark interest rate to 5.25% in response to a 50 basis point rate cut by the United States. In recent times, several central banks have announced rate cuts. In early August, the Bank of England cut the benchmark interest rate by 25 basis points to 5%; on September 4, the Bank of Canada announced a 25 basis point rate cut to 4.25%; the European Central Bank announced a rate cut on September 12; and on September 18, the Bank of Indonesia suddenly cut the benchmark interest rate by 25 basis points to 6%, the first rate cut by the Bank of Indonesia since February 2021. In terms of capital inflows, Southeast Asia has attracted a large number of investors who are flocking to this area full of potential in emerging markets. Reports indicate that in recent months, fund managers have significantly increased their holdings in sovereign bonds of Thailand, Indonesia, and Malaysia. Additionally, Indonesia, Malaysia, and the Philippines' stock markets have seen three consecutive months of net inflows of funds, which has propelled Southeast Asian currencies to stand out in the emerging markets this quarter, performing exceptionally well. Markets indicate that if the Federal Reserve cuts rates, it could lead to a rise in the Japanese yen, potentially causing concerns for investors in emerging markets. Southeast Asian markets may become the preferred choice for fund managers, with India likely attracting more inflows, while the Australian bond market may face challenges. In terms of market response, Southeast Asian stock markets have shown outstanding performance, with four out of the top five stock benchmarks in Asia this month belonging to Southeast Asian countries, with Thailand leading the pack. Investors are gradually realizing the wealth of opportunities for excess returns in the Southeast Asian markets, thanks to the forthcoming rate cut cycle, attractive asset valuations, and a series of supportive government policies. Overall, the rate cut by the Federal Reserve not only gives Asian central banks more policy space but also stimulates capital inflows and economic activity recovery, potentially creating a favorable situation for Asian markets. For the domestic market, Haitong Securities stated that the preemptive rate cut by the Federal Reserve may help improve A-share liquidity, with a focus on verifying long-term fundamental repairs. In terms of liquidity, the rate cut by the Federal Reserve may improve macro and micro liquidity for A-shares in the short to medium term, boosting their upward trajectory. In terms of fundamentals, the long-term trend of A-shares is related to their fundamentals, and the rate cut's boost to A-share fundamentals still needs to be observed. In terms of industry, in the short term, the financial industry, which directly benefits from improved macro liquidity, is leading the way, while consumer industries such as food and beauty, preferred by foreign investors, continue to perform well. In the medium term, the social services and power equipment sectors are gradually outperforming, while rate-sensitive technology industries like electronics and computers are gaining an edge. Looking ahead, Haitong believes that Chinese manufacturing, with superior fundamentals, is likely to become the main theme in the medium term for A-shares. As for the Hong Kong stock market, the focus is on dividend stocks, including banks, insurers, Chinese telecoms, and energy companies. With the reduction in US interest rates, funds are expected to flow into Asian markets such as Japan, Taiwan, and Korea, potentially attracting or flowing into undervalued Hong Kong stocks. These large-cap tech stocks should also benefit from this trend. EB Securities international securities strategist Wu Li Xian stated that utilities, Chinese telecoms, and gold stocks in the Hong Kong stock market are sectors that could benefit from future rate cuts. The first two sectors have more attractive potential returns under US rate cuts compared to US bonds. For investors looking for long-term income, they may consider China Mobile Limited (00941) and CLP Holdings (00002). For investors seeking both income and stock price appreciation, China Telecom Corporation (00728) may be a good option. UBS research reports also indicate that the lower interest rate environment in Hong Kong is more favorable for the market fundamentals, reducing the debt burden for households and non-financial corporations, injecting growth momentum into the overall economy. Rate cuts will attract capital inflows into Hong Kong's risk assets, triggering a revaluation focus. The bank recommends 6 Hong Kong stocks that will benefit from the rate cut cycle, including Power Assets (00008), HK Telecom (06823), Cathay Pacific Airways (00293), Swire Properties (01972), HKBN (01310), and Wharf Real Estate Investment Company (01997). Furthermore, the bank also recommends Power Assets, Cathay Pacific, Henderson Land (00012), New World Development, China Communications (00002), Sands China (01928), Galaxy Entertainment (00027), and AIA (01299) as preferred stocks in the Hong Kong market. Related concept stocks: China Mobile Limited (00941): China Mobile Limited disclosedAnnouncement of Customer Data in June 2023: In June 2023, the total number of mobile business customers of the company was 985 million households, with a net increase of 2.278 million customers this month; the number of 5G plan customers was 722 million households. The total number of wired broadband business customers was 286 million households, with a net increase of 1.96 million customers this month.China Telecom Corporation (00728): The company recently announced that as of June 2023, the number of mobile users was 402 million, with a net increase of 790,000 users in that month and a cumulative net increase of 10.73 million users for the year. The number of 5G plan users was 295 million, with a net increase of 4.24 million users in that month and a cumulative net increase of 26.9 million users for the year. The number of fixed broadband users was 186 million, with a net increase of 610,000 users in that month and a cumulative net increase of 5.36 million users for the year. The number of fixed telephone users was 103 million, with a net decrease of 70,000 users in that month and a cumulative net decrease of 1.77 million users for the year. CLP Holdings (00002): The company is a major investment holding company engaged in power generation and supply. The company operates a power generation portfolio, including coal, gas, nuclear, wind, hydropower, and CECEP Solar Energy. In Hong Kong, the company operates a vertically integrated electricity business, providing highly reliable electricity supply to 80% of Hong Kong residents. Outside of Hong Kong, the group invests in energy businesses in mainland China, India, Southeast Asia, Taiwan, and Australia, with a diverse power generation portfolio using coal, gas, nuclear, and renewable energy sources as fuel. CATHAY PAC AIR (00293): On September 17, CATHAY PAC AIR announced the passenger and cargo volume data for August 2024, with passenger numbers exceeding two million for the second consecutive month. In August 2024, CATHAY PAC AIR had 2.069 million passengers, a 15.9% increase from the same month in 2023. Revenue passenger kilometers for the month increased by 15.9% year-on-year. HKBN (06823): The Chief Operating Officer of HKBN's membership program The Club, Zhou Mingcheng, revealed that the current number of members has reached nearly 4 million. Together with a large base of partner merchants, HKBN recently launched a one-stop solution Club Biz, aimed at serving commercial customers, especially small and medium enterprises. They hope to further expand their B2B business in the future.