China Merchants Securities: Improved liquidity supports the Hong Kong stock market to rise, focusing on opportunities in innovative medicines and the internet sector.

CICC Securities' strategy research pointed out that after the recent rapid rise and gradual stabilization of Hibor rates, Powell's dovish stance, the changes in domestic and foreign liquidity all point to one conclusion: the narrative of tightening liquidity in the Hong Kong stock market has been marginally improved. CICC Securities believes that the improvement in liquidity narrative is enough to support a temporary rebound in Hong Kong stocks, narrowing the gap with the recent rapid rise in A shares. In terms of performance, the current profit growth rate of Hong Kong stocks is at a new high since 2022. However, in the previous bull markets, the Hong Kong stock index slightly lagged behind A shares, so in this round of allocation, it is recommended to focus on directions that are differentiated from A shares, and in terms of pace, it is recommended to prioritize innovative pharmaceuticals, then internet companies, and finally new consumption.