Broker Morning Meeting Highlights | Divided Midterm Election Results Take Effect, Hang Seng Tech Rises 5.5%, Dividend Defensive Plays

Title context: Broker Morning Meeting Highlights | Divided Midterm Election Results Take Effect, Hang Seng Tech Rises 5.5%, Dividend Defensive Plays Text: On the previous trading day (November 5), the Shanghai Composite Index rose 0.10% to 3,689.91 points, the Shenzhen Component Index rose 1.19% to 11,471.09 points, and the ChiNext Index rose 0.87% to 2,566.80 points; combined turnover of the two markets was RMB2.117953 trillion; 4,869 stocks advanced and 624 declined, with 76 hitting the limit up and 1 hitting the limit down. Guosheng believes that the midterm elections produced a better-than-expected "blue wave," and a divided government strengthens checks and balances, but the existing policy direction is difficult to fully reverse; Huafu Securities believes that after a drawdown signal, the dividend index has a high probability of positive returns over long holding periods, highlighting its defensive value; CITIC SEC believes that falling interest rates combined with returning capital may bring a recovery rally in Hong Kong internet stocks; SDIC Securities believes that domestic production of electronic-grade hydroxylamine is about to ramp up, and the short-term supply-demand gap will continue to widen; Zhongtai believes that revenue in the medical device sector is steadily recovering, with profit improvement broadening. Guosheng: Macro | Comprehensive Assessment: Impact of Trump's Crushing Midterm Election Defeat The 2026 US midterm elections produced a better-than-expected "blue wave." The Democratic Party not only regained control of both the Senate and the House (the fifth time since World War II and the first since 2006 that both chambers changed hands in the same midterm election), but also made historic breakthroughs in several traditionally Republican-favored states, with Texas and Kansas electing Democratic senators for the first time since 1988 and 1932, respectively; in the gubernatorial elections, the Democratic Party won a majority of governorships nationwide for the first time in 16 years, and Texas ended more than 30 years of Republican control of the governor's office since 1995. In terms of policy, the divided government will strengthen checks on Trump, but the existing policy direction will be difficult to fully reverse. Domestically, fiscal expansion will be constrained and partisan gridlock may intensify, with attention needed on the expiration of the stopgap funding bill on 12/11 and the debt ceiling issue before Q2 2027; the direction of AI development is unlikely to change, but regulatory constraints may strengthen, especially with attention on the impact of gubernatorial changesthe five states where governorships flipped from red to blue have a combined data center capacity of 236GW, accounting for 38.4% of the US total; externally, Trump still holds considerable initiative in tariffs and military affairs, but under congressional checks, impeachment pressure, and pressure from the 2028 election, the likelihood of a short-term de-escalation in US-Iran tensions is greater than escalation. In markets, after the midterm results became clear, US stocks and gold rebounded notably, while US Treasury yields and the dollar pulled back briefly before turning range-bound, with directionality relatively weaker than equities and gold. The fading of election uncertainty boosted short-term risk appetite; over the medium term, various assets will still return to fundamentals and performance should diverge. Among them, US stocks are expected to recover in the short term, with AI risks in focus over the medium term; US Treasuries are relatively favored in the short term but will remain range-bound at elevated levels over the medium term; gold is expected to bottom out and recover in the short term, with the long-term upside logic unchanged; the dollar is weak in the short term but still supported by fundamentals over the medium term. Huafu Securities: Strategy | Dividends: Defensive Attributes and Long-Term Allocation Opportunities The dividend index delivered on its defensive value during this correction. From end-June to now (November 3, same below), the CSI Dividend Total Return Index rose 13.6%, while the CSI 300 Total Return Index fell 18.6%, a return gap of 32.2 percentage points. Year to date, the two rose 5.9% and fell 11.6%, respectively. Review of dividend index returns after drawdown signals. The backtest execution rule is to confirm the signal at close and position at the next trading day's close, tracking subsequent 1-, 3-, 6-, and 12-month returns, using the total return basis with dividend reinvestment. The probability of positive returns is higher over long holding periods. The average return over a 1-month holding period was 2.6%, with a positive-return probability of 72.7%; over 6 months, 4.9% and 66.7%; over 12 months, 12.3% and 76.2%. Longer holding periods provide more room for return accumulation. The return performance of the dividend index after drawdown signals shifts markedly depending on the subsequent market direction. In strong rebound scenarios, all 6 samples achieved positive absolute returns, but only 2 samples achieved excess returns; this group had an average absolute return of 45.1% and an average excess return of -7.3 percentage points. In moderate recovery scenarios, the average excess return of the samples was 4.0 percentage points. In scenarios of continued pressure, the strategy had a relative advantage, with an average excess return of 6.5 percentage points, but an average absolute return of -10.4%, with only 37.5% of samples showing positive returns. Compilation differences among various dividend indices and current allocation value. The five types of dividend indices differ in sample pools, selection logic, weighting rules, and risk constraints. At the current point, dividend assets still have a stable cash return foundation. The PE and PB percentiles of the CSI Dividend Index are 99.75% and 99.42%, respectively, with a dividend yield of 4.51%. The dividend yields of the Hong Kong Stock Connect Central SOE Dividend Index and the Hong Kong Stock Connect Dividend Low Volatility Index are 5.46% and 5.17%, respectively. Stable dividend yields also form a solid valuation anchor, giving dividend assets relative resilience during periods of declining risk appetite. From a dynamic positioning perspective, active equity public funds tended to increase positions in the CSI Dividend Index in 26Q3, with holdings up 1.76pct QoQ, reflecting a defensive reallocation tendency among funds. CITIC SEC: Internet | Interest Rate Turning Point Plus Returning Capital, Bullish on a Recovery Rally in Hong Kong Internet Stocks On November 5, the Hang Seng Tech Index closed up 5.5%, the largest single-day gain since end-February 2025. We believe that falling US Treasury yields combined with returning capital may bring a new round of recovery in Hong Kong internet stocks. Expectations of falling US Treasury yields have risen after the midterm elections; this is a relatively slow-moving variable, and global liquidity spillover is expected to bring sustained capital replenishment. On valuation, the Hang Seng Tech NTM PE is 17.6x, at the 16.2% percentile of the past 5 years; rate-sensitive Hang Seng Tech at low valuations is expected to benefit first; on flows, foreign and domestic allocations to internet stocks remain at low levels, while foreign net inflows in October have already exceeded the total for the first three quarters, and replenishment is underway; on earnings, the Non-GAAP net profit growth of leading internet companies bottomed in 26Q2, and is expected to grow 8%/37% YoY in Q3/Q4, with EPS recovery entering a realization phase. Falling rates open up valuation space, capital replenishment provides incremental support, earnings realization consolidates the foundation, and with the continued advancement of AI commercialization in China, we remain firmly bullish on Hong Kong internet stocks. SDIC Securities: Environmental Protection & Utilities & BSE | Domestic Production of Electronic-Grade Hydroxylamine About to Ramp Up, Short-Term Supply-Demand Gap to Continue Widening AI computing power expansion drives incremental demand for advanced cleaning consumables. Hydroxylamine, with its dual attributes of strong reducing properties and weak alkalinity, can effectively break down metal oxides and cross-linked residues that are difficult to remove with traditional solvents and plasma ashing through redox and nucleophilic reactions. Although cleaning agents have evolved through four generations of technology, in advanced logic, 3D NAND, and G5-level high-end scenarios, hydroxylamine-free solutions are constrained by extreme corrosion margins, deep-hole mass transfer limitations, and metal protection requirements, making full substitution difficult, thus establishing hydroxylamine's indispensable role in high-end wet cleaning processes. With growing AI computing demand, aggressive HBM/DRAM capacity expansion and 3D NAND layer stacking are driving a dual leap in wafer capacity and cleaning step frequency. It is estimated that by 2030, global theoretical demand for G4/G5-grade electronic hydroxylamine will reach 20,500 tonnes, with a CAGR of 13.5% from 2024 to 2030. Domestic substitution under process route restructuring. Electronic-grade hydroxylamine is constrained by extreme ppb/ppt-level purity requirements, 2-3 year long-cycle fab certification, and high-risk safety production barriers, leaving effective industry supply tight and highly concentrated for a long time. Overseas leader BASF's capacity is physically embedded in its caprolactam main plant; lacking independent expansion motivation, it also faces high energy and carbon tax cost pressure in Europe, weakening supply elasticity. Domestic companies, by switching underlying process routes to a green circular industrial chain centered on ketoxime hydrolysis, have not only achieved closed-loop material utilization and independent hydroxylamine supply, freeing themselves from physical dependence on the main plant, but also significantly reduced full costs; after crossing purity and certification barriers, they are expected to achieve rapid share penetration. Domestic ramp-up to fill the total gap, with structural shortages remaining in high-end supply. On the supply side, assuming BASF maintains existing capacity of about 7,200 tonnes/year, domestic expansion becomes the core source of global supply increments. Driven by this, the global supply-demand gap may gradually narrow; however, the actual effective supply of high-end products such as G5-grade remains deeply constrained by extreme purity control, process adaptation capability, and long-cycle fab customer certification barriers. On pricing, short-term tight supply-demand will support prices in an upward channel; after the concentrated realization of domestic capacity post-2028, product prices are expected to face some correction pressure, but given their technical barriers and electronic-grade material attributes, their price center will remain significantly premium to traditional industrial-grade products. Zhongtai: Pharma | Medical Device Sector 2026 Q3 Report Summary: Revenue Steadily Recovering, Profit Improvement Broadening Domestic negative factors continue to be digested, sector revenue is steadily recovering, and the scope of profit improvement has further expanded. In the first three quarters of 2026, listed medical device companies recorded revenue of RMB200.312 billion, up 8.22% YoY, and non-recurring net profit of RMB23.899 billion, up 10.92% YoY. Divergence among sub-sectors was pronounced; revenue growth from high to low was low-value consumables (+18.45%), medical equipment (+9.60%), high-value consumables (+2.06%), and in-vitro diagnostics (+1.83%); non-recurring net profit growth from high to low was low-value consumables (+70.37%), in-vitro diagnostics (+60.63%), medical equipment (-2.03%), and high-value consumables (-3.25%). Among them, low-value consumables were still mainly driven by the volume-price resonance in gloves and a low base, with non-glove categories maintaining revenue growth; profit remained under pressure in the first three quarters but improved slightly in Q3; medical equipment saw demand recovery combined with new business ramp-up, maintaining relatively fast revenue growth, with profit still under pressure in the first three quarters but improving YoY in Q3; high-value consumables maintained steady revenue, with innovative product ramp-up and overseas expansion continuing to contribute incremental growth; in-vitro diagnostics revenue stabilized marginally, and excluding ICL, routine IVD revenue and profit also continued to recover. 2026Q3 revenue continued to recover, with all four major sub-sectors achieving positive non-recurring net profit growth. In 2026Q3, the medical device sector's overall revenue grew 9.00% YoY, and non-recurring net profit grew 24.92% YoY. Revenue growth of the four core sub-sectors from high to low was low-value consumables (+20.75%), medical equipment (+8.40%), in-vitro diagnostics (+4.99%), and high-value consumables (+2.56%); non-recurring net profit growth from high to low was in-vitro diagnostics (+130.82%), low-value consumables (+75.86%), high-value consumables (+11.36%), and medical equipment (+4.73%). Low-value consumables continued to be driven by glove prosperity, while the high profit growth in in-vitro diagnostics still benefited from the low base of ICL impairments; profit growth in high-value consumables and medical equipment turned from negative to positive, further broadening the scope of profitability improvement in the sector.