Guotai Haitong: US Midterm Election Results Settle In, Seeking "Safe-Haven Assets" in Equities

Guotai Haitong released a research report stating that with the US midterm election results settling in, coupled with rising concerns over AI investment returns and persistent geopolitical risks, the market may continue to seek "safe-haven assets" within equities in the short term. Structurally, for Hong Kong stocks in Q4, the firm emphasizes the bottom-position value of high-dividend assets while favoring flexible targets tied to the expansion of AI application scenarios in Q3 reports and potential inclusions in the Hang Seng Tech Index following its Q3 adjustment. Guotai Haitong's main views are as follows: Asset performance: Hong Kong stocks rebounded notably over the past week, led by internet, consumer staples, and innovative drugs. From a global perspective, major equity assets rebounded significantly over the past week, with India's Sensex 30, Hang Seng Tech, and STAR 50 leading gains; sector performance across major markets showed strong correlation, with consumer discretionary, consumer staples, and healthcare outperforming, while energy, financials, and utilities lagged. Macro liquidity: Overseas liquidity expectations tightened over the past week. On central bank policy, US October nonfarm payrolls released over the past week came in stronger than expected, indicating the US economy remains resilient and rate hike expectations have picked up somewhat. On rate hike expectations, the market expects the Fed to hike once each in December this year and June next year. Micro liquidity: 1) Inflows: Southbound saw net outflows this week, while foreign capital saw net inflows. Southbound funds saw a net outflow of HK$3.2 billion over the past week, mainly reducing positions in hardware, pharmaceuticals, and consumer discretionary retail; foreign capital saw net inflows, with active foreign funds turning to inflows after eight consecutive weeks of net outflows, and international intermediaries mainly adding positions in non-ferrous metals, hardware, and software. 2) Outflows: Hong Kong IPO activity slowed this week, and industrial capital saw net reductions. No new IPO listings occurred in Hong Kong over the past week; industrial capital in Hong Kong stocks saw overall net reductions of HK$24 billion over the past week, versus net reductions of HK$16.4 billion the prior week. Market sentiment: Short-selling sentiment in Hong Kong stocks picked up this week, and volatility rose. Over the past week, after the US midterm election results settled in, volatility broadly increased across major equity markets. On short-selling sentiment, Hang Seng Index short-selling sentiment declined over the past week while Hang Seng Tech short-selling sentiment rose, with communication services and energy seeing the largest declines in short-selling share. Relative to A-shares, the AH premium/turnover/value traded/risk premium of Hong Kong stocks versus A-shares indicate that relative sentiment on Hong Kong stocks has strengthened marginally. Micro fundamentals: Earnings expectations for Hong Kong stocks have recently been revised upward. Hong Kong stocks are about to enter the Q3 earnings disclosure period; based on analyst consensus, the 2026 EPS consensus estimate for the Hang Seng Index was revised upward over the past week. By sector, earnings expectations for Hong Kong industrials, financials, and consumer discretionary were revised upward, while consumer staples and real estate/construction saw notable downward revisions. Valuation positioning: Hang Seng Tech valuation remains low from a medium-term perspective. As of 2026/11/6, the PE ratios of the Hang Seng Index/Hang Seng Tech were 11.2x/21.7x, respectively, at 64%/43% historical percentiles on a rolling 3-year basis. Compared with overseas markets, Hang Seng Tech's PE valuation sits at the 20.8th percentile over the past 8 years, ranking toward the lower end among mainstream broad-based indices. Risk warnings: Middle East conflict spreading beyond expectations, Fed tightening beyond expectations, US dollar strengthening beyond expectations.