TF International Securities: Chinese concept stocks still have attractive valuations, with a high risk-return ratio.

Tianfeng Overseas released a Hong Kong stock strategy report, pointing out that the Hang Seng Index has once again surpassed the 18000 point mark. Compared to global markets, Chinese assets still offer good value for money. With expectations of gradual recovery and improving fundamental factors, Chinese concept stocks in the Hong Kong market still offer attractive valuations and high risk-return ratios. Key areas and targets to focus on in the Hong Kong stock market include: 1. Internet platforms - Tencent, Alibaba, Meituan, Kuaishou, Bilibili, Pinduoduo; 2. New energy vehicles - Nio, Xpeng; 3. New consumption - POP MART, MNSO, Luckin Coffee; 4. Online travel agencies - Ctrip Group, Tongcheng Travel; 5. Web3 FinTech - OSL GROUP; Additionally, companies like New Oriental that are expected to benefit from policy reversals are also worth considering. The dot plot released by the Federal Reserve on September 18th showed that the median expectation for the federal funds rate in 2024 is 4.4% (compared to 5.1% in June), implying a potential 50 basis point rate cut before the end of the year. In terms of funding, Hong Kong Stock Connect saw a net inflow of 5.452 billion RMB last week, with the narrower inflow mainly due to the Mid-Autumn Festival holiday resulting in the Shanghai-Hong Kong Stock Connect being open for only two days. On September 20th, the People's Bank of China authorized the National Interbank Funding Center to announce the Loan Prime Rate (LPR): 1-year LPR at 3.35%, and 5-year LPR at 3.85%, both unchanged from the previous month. On September 17th, 2024, Midea Group Co., Ltd (00300) successfully listed on the main board of the Hong Kong Stock Exchange, becoming the largest IPO in Hong Kong of the year and the largest in nearly three years. As of September 20th, the Hang Seng Index's 12-month forward P/E ratio is discounted by -1.5 standard deviations from the median since 2019, roughly around a historical percentile of 14.5%. The Hang Seng Index's forward P/E discount relative to the MSCI Global Index is -2.8 standard deviations, roughly at the 7.7% percentile since 2019. The equity risk premium of the Hang Seng Index is lower than the historical median by 1.2 standard deviations, around 77.4% percentile historically.