CICC: The proportion of discretionary consumer Hong Kong stocks in 24Q3 increased the most, with BABA-W (09988) being highly favored after its inclusion.

: CROWDSTAR (03690)The number of funds holding W(03690) and XIAOMI-W(01810) has increased the most, while the number of funds holding CNOOC, China Mobile Limited, CGN POWER (01164), and PetroChina (00857) has decreased significantly.In addition, in terms of the concentration of heavy positions, the top 3 heavy positions account for 39.1% of the market value of the top 100 heavy positions, a decrease of 2.8 percentage points from the second quarter, while the top 10 heavy positions account for 59.2% of the market value of the top 100 heavy positions, up from 58.0% in the second quarter. Prospects: Increase in short-term external disturbances; overall continuation of a volatile pattern, structure remains the main focus CICC stated that after experiencing a significant rise at the end of September, especially during the National Day holiday period, which exceeded the expectations of most investors, a combination of overdrawn emotions and cooled policy expectations led to a pullback in A-shares and Hong Kong stocks after the National Day holiday, essentially giving back nearly half of the previous gains and oscillating around 20,000 points. To some extent, the market's retreat is not surprising, at least in line with expectations and previous indications. On the one hand, it is because market expectations have been overly priced in, with the emotions (implied equity risk premium) factored in at 22,500 points for the Hang Seng Index equivalent to the optimistic sentiment corresponding to the market's peak following the optimization of epidemic policies in 2023. Maintaining this level of optimism would be difficult. On the other hand, the limited policy strength means that maintaining the optimistic sentiment seen at the beginning of 2023 requires stronger policy support, as the current policy strength and fundamental conditions still differ from those during the optimization of the epidemic policies in 2023. Therefore, after reaching the level of 22,500 points as mentioned in the previous report, the index began to adjust. After a month of sideways trading, recent nominations by some hawkish members of the Trump administration have brought to light the risks that were previously ignored, causing a noticeable pullback in Hong Kong stocks. CICC had previously warned in a research report that assets such as the Chinese market and export chains did not have a clear reaction to the "Trump trade," indicating an expectation gap and the need to monitor disturbance risks. Looking ahead, short-term external disturbances are increasing, and further volatility cannot be ruled out, so caution is advised. However, the volatile pattern remains the benchmark assumption, and there is no need to be overly pessimistic. In the medium term, the root cause of all the problems related to declining demand, low inflation, weak credit, and resulting profit declines lies in credit contraction, stemming from the inverted relationship between return expectations and financing costs. The "correct" solution lies in continuing to reduce actual financing costs. CICC's calculations show that a further 40-60bp in reduction of the 5-year LPR could eliminate the inversion. Boosting return expectations is another aspect, and CICC's calculations show that an additional 7-8 trillion yuan in fiscal expenditures can match the current nominal growth in social financing, even making up for the output gap since the epidemic. However, the constraints of high leverage, interest rates, and exchange rates, as well as the policy's "stimulatory" response function, imply that there will be incremental stimulus, but excessive expectations are unrealistic unless external pressures increase. Under the macro assumptions outlined above, CKH HOLDINGS' profitability has a bottom, but the extent is limited, so the market has not completely escaped the volatile pattern. "Rebound is intermittent, structure is the main focus," resembling more of a weak balance in a structural market upturn following 2019. In the context of the overall volatile pattern assumption, shifting toward a structured approach of gradually positioning on the left side downturn and moderately profiting on the right side uptrend seems to be an effective strategy. In terms of sectors, it is recommended to focus on three categories: sectors undergoing self-supply adjustments and policy cycles, potentially benefiting from marginal demand improvement, such as internet-related consumer services, home appliances, textiles, and electronics; sectors supported by policies, such as appliances and automobiles in the "old for new" program, as well as industries trending in self-reliant technology such as computers and semiconductors; and stable return sectors, such as state-owned enterprises with high dividend yields.