Guosen: The A-share technology industry may have an advantage under the interest rate-sensitive and fundamentally boosted US rate cut cycle.

Guosen released a research report stating that in the A-share style during the interest rate reduction cycle, growth has momentum, funds prefer large caps, and the technology industry with interest rate sensitivity and fundamental support may have an advantage. With the gradual easing of overseas liquidity and the start of a new technology cycle, after the valuation repair of small and medium-sized growth companies in the early stage, large-cap growth may become the dominant style in this interest rate reduction cycle. In terms of industries, at the molecular level, consider industries with high growth in interim reports and fundamental logic; at the denominator level, consider industries sensitive to changes in discount rates; in terms of funds, consider industries preferred by foreign funds. By taking into account fundamentals, discounted models, and fund preferences, the sectors with the highest returns in this interest rate reduction cycle may be those with higher economic prospects, such as the electronics industry. How to define the current market: Profit-making effect stabilizes, but sentiment has not shown significant improvement The profit-making effect is similar to the early stage of valuation repair and general rise, where strategic funds increase their positions to boost risk appetite. From September 18th to September 20th, the market showed some rebound characteristics. In terms of the ratio of rising and falling stocks, on September 19th, the number of companies that rose in the Shanghai and Shenzhen markets was close to 4800, and the ratio of rising and falling stocks exceeded 10:1. The ratio of rising and falling stocks reached 1.82 for the whole week, indicating a strong profit-making effect in the market. From the perspective of trading volume, the pattern of shrinking volume games since the third quarter continues, but on September 20th, the daily trading volume of strategic funds increased to over 19 billion. Excluding the impact of the Shanghai and Shenzhen 300 ETF shares merger, the change in the broad-based shares rose to the highest level since mid-July, indicating a positive change in the willingness of strategic funds to increase their positions. End of the drop in dividend assets, what to look for next? Basing on dividends, allocating basic positions, selecting cash cows, and emphasizing forward dividend forecasts. Dividend assets have stabilized in the past week, with the crowd returning to near the average level for the year and the peak of selling pressure already past. While there are flaws in the return on equity and earnings growth rates lower than seasonal factors in the numerator, the prospect of the banking sector fully trading the "downward pressure on loan interest rates squeezing spreads" and the reversal of the rise in cash cows before June, the attractiveness of forward dividend yields in dividend assets has re-emerged. Industry-wise, based on cash flow perspectives, layout dividend diffusion (communications, agriculture, nonferrous metals, food, utilities), and on a stock combination level, select stocks based on the "cash cow model" and "forward dividend forecast model." How to understand this interest rate reduction cycle, and what key points to focus on in the future? The Fed cut interest rates by 50 bps, but future decisions remain flexible. The Fed chose to cut interest rates by 50 bps at the September FOMC meeting, lowering the federal funds target range to 4.75% - 5.00%, with the dot plot indicating four rate cuts this year and next. Looking at the marginal change in expectations for the subsequent interest rate path since the meeting, the probability of another 50 bps rate cut in November has increased by over 10% in the past half week. This interest rate cut is closer to a recessionary cut, but it does not rule out a significant recalibration after weak labor market data in August and September, with the election also influencing future interest rate paths. Powell's qualitative statement on the interest rate cut decision is "recalibration based on inflation and employment conditions," and the magnitude and pace of future rate cuts will be based on future economic data, with the 50 bps cut not being a direct indicator for future rate cuts.