EB SECURITIES: The Fed's rate cut cycle has started, Hong Kong stocks may continue to fluctuate upward.

EB SECURITIES published a research report stating that the performance of the A-share and Hong Kong stock markets in October was volatile. The overall profitability of the Hong Kong stock market is relatively strong, with assets in sectors such as the internet, new consumption, and innovative drugs relatively scarce. In addition, despite the continuous rise in the Hong Kong stock market for several months, the overall valuation is still relatively low, and the long-term cost-effectiveness of allocation is still high. With the continuous development of the AI industry trend and the beginning of the Fed's interest rate cut cycle, the Hong Kong stock market may continue to be volatile and rise in the future. In terms of industry allocation, the focus in the medium term is on the TMT and advanced manufacturing sectors, with a focus on stagnant directions if the market experiences volatility, such as high dividend and consumer sectors. EB SECURITIES' main points are as follows: Volatile performance of the A-share and Hong Kong stock markets in October The main indices of A-shares fluctuated in October. Influenced by overseas expectations, a decline in market risk appetite, among other factors, as of October 28th, the major A-share indices showed significant differentiation, with the Shanghai Composite Index recording the highest increase of 2.7% in October, while the Science and Technology Innovation Index had the largest decline of 1.6%. The sectors saw significant differences in gains in October, with industries like coal, communications, and banking performing well. There were some corrections in the Hong Kong stock market in October. Influenced by increased uncertainty overseas and a decline in domestic risk appetite, the overall trend of the Hong Kong stock market was volatile in October. As of October 28th, the Hang Seng Hong Kong 35, Hang Seng H-Share Index ETF, Hang Seng Index, Hang Seng Composite Index, and Hang Seng Technology Index had increases of 0.2%, -1.9%, -1.9%, -2.3%, -5.8%, respectively. A-share perspective: Market may continue to show strong performance The market is expected to maintain a strong performance. On one hand, the Fourth Plenary Session of the 20th Central Committee of the Communist Party of China approved the "Proposals of the Central Committee of the Communist Party of China on Formulating the 15th Five-Year Plan for National Economic and Social Development", which outlined the main goals of economic and social development for the "15th Five-Year Plan" period, boosting market confidence with new policy deployments. On the other hand, a new round of Sino-US economic and trade negotiations is taking place in Malaysia, together with the expectation of further interest rate cuts by the Fed in October, which may increase market risk appetite. Overall, multiple favorable factors are expected to support the market's strong performance in the short term. In terms of industry allocation, the focus in the medium term is on the TMT and advanced manufacturing sectors, with a focus on stagnant directions if the market experiences volatility, such as high dividend and consumer sectors. In a liquidity-driven market, the TMT sector is more likely to become the main theme in the medium term, as it may be in this round. If the market turns to fundamental-driven, considering the current market may be in the medium term, advanced manufacturing deserves special attention. If the market experiences volatility, focus on stagnant directions, such as high dividend and consumer sectors, including industries like banking, utilities, food and beverage, beauty and personal care. Hong Kong stock perspective: Focus on "dumbbell" allocation As the Fed's interest rate cut cycle begins, Hong Kong stocks may continue to be volatile and rise in the future. The overall profitability of the Hong Kong stock market is relatively strong, with assets in sectors such as the internet, new consumption, and innovative drugs relatively scarce. In addition, despite the continuous rise in Hong Kong stocks for several months, the overall valuation is still relatively low, and the long-term cost-effectiveness of allocation is still high. With the continuous development of the AI industry trend and the beginning of the Fed's interest rate cut cycle, the Hong Kong stock market may continue to be volatile and rise in the future. Focus on technology growth and high dividend advantage "dumbbell" strategy. 1) Focus on concepts related to self-controllable, chip, and high-end manufacturing that are expected to continue to receive domestic support policies in the context of the Sino-US game. 2) Focus on some internet technology companies with independent cyclicality. 3) Continue to focus on high dividend and low volatility strategies, including industries such as communications, utilities, and banking. The high dividend strategy can still serve as a stable income base. Risk warning Policies are not implemented as expected; a significant deterioration in US-China relations; unexpected risk events occur.