During the Chinese National Day holiday, there were a lot of things happening in the international market, which also made the A-share jokesters not idle. It is recommended to pay attention to Tencent Holdings, Kuaishou, Meituan, Pinduoduo, Alibaba, Bilibili, etc.

Editor's note: A shares "opening the door" dragged down Hong Kong stock once again fell sharply, but Hong Kong stocks, which are closely related to U.S. and A-shares, may no longer need to be too pessimistic.

Author: Simon

During the Chinese National Day holiday, there were a lot of things happening in the international market, and it also made the A-share jokers not idle.

In the week from October 3 to 7, the US stock market took a standard roller coaster, first rising sharply for two days, then trading sideways for one day, and then falling sharply for the next two days back to the starting point. The jokesters summarized the logic of this trend well:

A shares closed, US stocks rose sharply:

Feder : Can interest rate hike be slow?

Credits : I'm fine!

Hang Seng Index : 1,000 points of interest!

is approaching A-share opening , and US stocks plummeted:

US employment data: I am very strong, raise interest rates quickly!

OPEC +: Reduce production! Didn't expect it?

Crimea: Why did my bridge get blown up?

cannot be said to target my big A, but it can be said to be "precise rhythm". Sure enough, on the first trading day after the holiday, both Hong Kong stocks and A-shares were negatively affected. Big A once again staged a 3,000-point defense battle (eventually lost), while Hang Seng Index plummeted by more than 500 points, and on October 5, the increase of more than 1,000 points in was about to be wiped out.

Putting aside entertainment jokes, the current market confirmation is still in a very sluggish state, and the rebound brought about by the positive news side is only a flash in the pan. The "bad" that occurred in last week may continue to put pressure on the stock market.

1. Unexpected production cuts + strong employment = U.S. stocks are in aided?

htmlOn October 5, OPEC+, led by Saudi and Russia, announced a 2 million barrels per day production cut from November, setting the largest scale of production cut since the epidemic in 2020.

This unexpected move benefited oil prices first. WTI crude oil price rose nearly 5% last Friday, up more than 20% since its lows, and entered a "technical bull market." This is obviously something the United States does not want to see. The White House rarely issued a statement denounced OPEC+, and some insiders even said that the White House regards production cuts as "hostile acts" and "political declarations."

WTI crude oil trend Source: Huashengtong

It is inevitable that the United States will get angry like this. At present, the Federal Reserve is raising interest rates to curb out-of-control inflation. The United States has even sold its oil reserves to cooperate. finally saw signs of inflation reaching its peak and it is very likely to be wiped out by rebounding oil prices. The Federal Reserve will be even more difficult, and the US economy is likely to land hard.

This is unbearable for the White House.

But the market performance on October 5 was not too bad, and the "internal factors" of the United States became the key to determining the success or failure of the market. And this key is the employment data in the United States. Unfortunately, this data hit the US stock market hard.

Although the number of new non-farm employment in September was the smallest monthly increase since April 2021, it still exceeded market expectations. And what's more serious is that the unemployment rate unexpectedly fell to 3.5%, the lowest level in 50 years. Judging from historical data, the strong employment market in will be firm in 's Federal Reserve's determination to raise interest rates . Bank of America counts the 15 rate hike cycles of the Federal Reserve in the past 60 years. When the Federal Reserve raised interest rates for the last time in each cycle, the US unemployment rate was 5.7%.

Source: BofA

That is to say, in the face of the current extremely low unemployment rate of , the Federal Reserve's determination to continue hiking interest rates and maintain a tightening state is difficult to shake. and OPEC+'s unexpected production cuts, U.S. inflation may face a situation where it is attacked from both sides, and it will be difficult for the Federal Reserve to return to its previous easing state.

But in fact, since the 2008 financial crisis, the loose policies maintained by the Federal Reserve (including low interest rates, QE, etc.) have been one of the important factors that have continued to bullish in the US stock market in the past 10 years, and can even be said to be one of the indispensable factors.

But now, this factor has completely disappeared. According to Fed officials' forecasts, interest rates will remain above 3% by 2025, while interest rates have not exceeded 2.5% at the highest in the past 15 years. can be said that the US stock market has lost a "thigh" that is enough to support its bull market.

2. When will Hong Kong stocks bottom?

Although the US stock market has performed poorly this year, in fact, Dow Jones Index has only fallen from its high point by about 20%. If the bear market continues, then the decline space for US stocks is still relatively large.

Hong Kong stocks performed even worse. The Hang Seng Index at has fallen below 18,000 points and hit a new low in nearly 10 years, and the retracement from its high point has approached 45%. Investors can't help but ask, when will the Hong Kong stock market bottom?

Haitong Securities reviewed the background of the bottoming out of Hong Kong stocks in history and found that 's trend is highly correlated with A-shares and US stocks . The main reason is that Hong Kong stocks are the offshore market , fundamental is determined by the mainland economy, and liquidity is affected by overseas markets. Hong Kong dollar is directly linked to the US dollar, and foreign investment transactions account for 41.2% in 2020 (23.2% of US capital), indicating that Hong Kong stocks and US stock trends are closely related.

Source: Haitong Securities

However, in recent years, the southbound funds have continued to flow into Hong Kong stocks. In August this year, the transaction volume of southbound funds accounted for 13.3% of the total transaction volume of Hong Kong stocks. Since mid-September, the inflow of southbound funds has recovered faster. Before the National Day, the last Hong Kong Stock Connect trading day, the net inflow of nearly HK$6 billion in a single day, hitting a high since June 30. In September, the Hong Kong Stock Connect net purchases of were nearly HK$35 billion, while the net purchases from the beginning of the year reached HK$252.9 billion. Therefore, the connection between the Hong Kong stock market capital market and A-shares is becoming increasingly close.

Since 2000, Hong Kong stocks have experienced five outsoles, which occurred in April 2003, October 2008, , October 2011, February 2016 and March 2020 respectively. By sorting out the bottom characteristics of these five times, Haitong Securities found that the bottoming of Hong Kong stocks often requires the US stocks and A-shares to stabilize and rebound.

Source: Haitong Securities

In 2020, due to the impact of the new crown epidemic, the stock indexes of the three places also bottomed out simultaneously after the Federal Reserve released a large amount of liquidity. Therefore, , from historical experience, when Hong Kong stocks can bottom out, they may still need to wait for A-shares and US stocks to stabilize. For A-shares, domestic economic fundamentals are the key points, among which real estate is one of the important factors. Haitong believes that , with the implementation of policies to ensure the delivery of housing and stabilize growth, is expected to catalyze a round of rise again, thus forming a positive pulling effect on Hong Kong stocks. But as mentioned above, the situation in the US stock market is more complex and difficult, and it is not yet clear when it will bottom out. According to historical rules, US stocks usually bottom out in the middle and late stages of the recession, and it is expected that US stocks may have opportunities at the beginning of next year, which still has a negative impact on Hong Kong stocks.

Therefore, Hong Kong stocks may need to continue to wait until they bottom out and stabilize. However, does not have to be too pessimistic about Hong Kong stocks, given the extremely low valuation level and relative bottom area of ​​Hong Kong stocks, and A-shares are expected to start a new round of rises.

3. Which companies are worth paying attention to in the layout?

Tianfeng Securities believes that China's macroeconomics is in a recovery cycle, and further efforts to stabilize growth in the fourth quarter are worth looking forward to. In addition, the CSRC plans to launch new measures to expand capital market cooperation between the mainland and Hong Kong ( Hong Kong SAR government advocates the increase of RMB stock trading counters, Shanghai and Shenzhen Stock Exchanges guide WVR companies to be included in the Hong Kong Stock Connect inspection arrangements, etc.), which may help boost market sentiment.

In addition, domestic platform economic governance tends to return to normal, and as key rectification cases are gradually implemented, uncertainty has been significantly alleviated. The Q2 performance of most platform companies exceeded market expectations, with strong revenue resilience in some areas, and the overall cost reduction and efficiency increase in the industry was significant. Under the solid and feasible cost-effective strategy, the downward trend in this round of China's Internet industry's phased profit expectations is expected to basically end, and the turning point of the performance cycle is expected to be established.

In short, the valuation of the Internet industry is probably at a historical bottom, the policy environment is improved, and the profit turning point is expected to be established, and the medium-term risk-return ratio is very attractive.It is recommended to pay attention to Tencent Holdings (00700.HK), Kuaishou (01024.HK), Meituan (03690.HK), Pinduoduo (PDD), Alibaba (09988.HK), Bilibili (09626.HK), etc.