Huachuang Securities: Hong Kong stock trading volume has dropped, and the market may enter a "Risk on" phase with improved liquidity environment.

Huachuang Securities released a research report stating that Hong Kong stocks still have a valuation advantage over A shares; Trump's victory and the domestic NPC's 10 trillion fiscal plan being implemented, signal that the market may enter a Risk on moment, with the liquidity environment expected to further improve in the next 3-6 months. In terms of trading activity, overall turnover and turnover rate of Hong Kong stocks have continued to decline since the Hang Seng Index peaked on 10/7; as of 11/11, the average daily turnover of the Hang Seng Index in the past four weeks was 185.1 billion yuan, at the 96th percentile over the past 10 years; the average daily turnover rate of the Hang Seng Index over the past four weeks was 0.35%, at the 95th percentile over the last 10 years. Huachuang Securities' main points are as follows: 1. Hong Kong stocks still have a valuation advantage, and with the improvement of the liquidity environment, the market may enter a Risk on moment. Hong Kong stocks still have a valuation advantage, with the liquidity environment expected to further improve in the next 3-6 months. From a valuation perspective, the overall P/E ratio, absolute value, and percentile of the P/B ratio of the Hong Kong stock market are lower than those of A shares, indicating a clear valuation advantage for Hong Kong stocks. As of 24/11/11, the Hang Seng Index had a P/E ratio of 9.5 times (37th percentile since 2010), while the Shanghai Composite Index had a P/E ratio of 14.8 times (70th percentile since 2010). At the same time, as mentioned by the firm, Trump's victory and the implementation of the NPC's 10 trillion fiscal plan in China signal that the market may enter a Risk on moment. Similar to the U.S. presidential elections in 2016 and 2020, after the elections, risk assets entered an upward trend, while safe assets faced a correction. Before the implementation of Trump's new policies, investors were reluctant to bet that the economic fundamentals could continue to improve over the next year, and there may be more challenges ahead. During this period, with EPS pricing still weak, the market may be more influenced by the expansion of remaining liquidity. Domestically, the NPC announced the implementation of a 10 trillion fiscal plan on 11/8, for the capital market, there is an incremental possibility of policies before next year's two sessions, with little risk of being definitively refuted, the probability of risk preference rising is significantly greater than that of falling, and the logic of the continued expansion of remaining liquidity may continue. 2. Most industries in Hong Kong stocks have seen downward revisions in profit forecasts over the past month. In the past month, profit forecasts for most industries in Hong Kong stocks have been revised downward, with only the financial sector receiving upward revisions. As of 24/10/31, over the past month, the 2024 EPS growth rate of Hong Kong stocks (Bloomberg consensus expectations) overall saw a small increase, with the Hang Seng Index up by 0.4%, Hang Seng Technology down by 2.1%, the Hang Seng H-Share Index ETF up by 0.3%, and the Hang Seng Composite Index down by 0.5%; in the Hang Seng industry index, most industries have seen downward revisions in profit forecasts, with only the financial industry up by 2.3%; the real estate and construction industry down by 17.7%, and the healthcare industry down by 5.4%, with significant downward revisions. 3. Hong Kong stocks overall declined, with a decrease in trading activity. In the past month, Hong Kong stocks overall declined, with the industrial sector seeing an increase in opposition. As of 24/11/11, over the past month, Hong Kong stocks overall declined, with the main indices such as the Hang Seng Index down by 3.9%, Hang Seng Technology down by 1.8%, and the Hang Seng State-owned Enterprises Index down by 3.5%; in terms of style, the Hang Seng large-cap index fell by 3.7%, the Hang Seng mid-cap index fell by 1.6%, and the Hang Seng small-cap index rose by 1%, indicating a preference for small-cap style. In terms of industries, only the industrial sector saw an increase (with a change in the past month of 0.5%, the same below); energy (-10.8%), healthcare (-7.8%), and telecommunications (-5.6%) industries experienced significant declines. Southbound capital flows exceeded 80 billion Hong Kong dollars in October. As of October 31, net inflows of southbound capital reached 583.4 billion Hong Kong dollars in the first 10 months of this year, with a net inflow of 83.8 billion Hong Kong dollars in October. Recently, the main inflows went to sectors such as commerce and retail, electronics, banking, and pharmaceuticals, with a noticeable increase in inflow speed. Among the top 10 stocks with net inflows/outflows of southbound capital in October, BABA-W (net inflow of 25.9 billion Hong Kong dollars, the same below), XIAOMI-W (5.9 billion Hong Kong dollars), and Semiconductor Manufacturing International Corporation (5.7 billion Hong Kong dollars) were the top three net inflows; MEITUAN-W (net outflow of 11.2 billion Hong Kong dollars), HKEX (3.1 billion Hong Kong dollars), and CNOOC (2.7 billion Hong Kong dollars) were the top three net outflows. The turnover and turnover rate of the Hang Seng Index declined. In terms of trading activity, overall turnover and turnover rate of Hong Kong stocks have continued to decline since the Hang Seng Index peaked on 10/7; as of 11/11, the average daily turnover of the Hang Seng Index in the past four weeks was 185.1 billion yuan, at the 96th percentile over the past 10 years; the average daily turnover rate of the Hang Seng Index over the past four weeks was 0.35%, at the 95th percentile over the last 10 years. 4. Hong Kong Stock Golden Stock Portfolio Huachuang Strategy collaborated with industry analysts to select the November Hong Kong Stock Golden Stock Portfolio. Combining industry analysis recommendations from Huachuang, the November Hong Kong Stock Golden Stock Portfolio includes TENCENT (00700), MNSO (09896), POP MART (09992), BYD ELECTRONIC (00285), among others. Risks: 1. Economic recovery may fall short of expectations. 2. Weak overseas economies may impact related industries and domestic exports. 3. Historical experience does not necessarily predict the future: Due to changes in market environments and other factors, experiences drawn from historical data may become ineffective in the future.