The current market is entering a critical window period of internal and external environment. Internally, the market has been widely concerned about recent policy changes in China, especially the measures for existing housing loans and mortgage transfers. According to calculations by the China International Capital Bank team, if the average mortgage interest rate for existing loans is reduced by about 54-60bp, taking an individual with a 30-year RMB loan of 1 million yuan as an example, based on equal principal and interest, the monthly repayment amount is expected to decrease by about 500 yuan. However, even if redeemed, existing mortgage loans only partially solve the pressure of early repayment and expenditure, and may not provide much help in boosting housing demand. Of course, the Federal Reserve's interest rate cut is about to begin, which can further open up domestic interest rate cutting space, but the reduction may still be limited.
Externally, the September US presidential election and interest rate cut window are about to open. On Friday night, the number of non farm payroll workers in the United States did not completely quell market recession concerns, nor did it provide a clear signal of the magnitude of interest rate cuts. In addition, with the second debate of the US presidential election on September 10th, there have been many variables in the overseas market recently, and short-term uncertainty will have an impact on the market.
Fundamentally, the current economic growth momentum remains weak. From the perspective of micro enterprise profits, the profits of overseas Chinese funded stocks in the first half of the year increased slightly by 2.3% year-on-year, accelerating from 0.2% in 2023. But this is more cost driven, and demand is actually declining. In addition, companies generally adopt a contraction strategy, so the increase in ROE is more due to cost driven profit margins. The current market consensus expects an implied year-on-year growth of nearly 20% in the second half of the year, which we believe may be overly optimistic. However, it is worth noting that the profit of Hong Kong stocks is still better than that of A-shares by -3%, mainly because the profit structure of Hong Kong stocks is more advantageous: 1) the proportion of new economy in the industry structure is relatively high; 2) The contribution effect of top companies is more significant in terms of concentration. This once again supports our previous view that the elasticity of Hong Kong stocks is still greater than that of A-shares, and structural market conditions remain the main trend. Overall, the uncertainty of the domestic and international environment in the short term may continue to bring fluctuations, and we still believe that the elasticity of Hong Kong stocks is greater than that of A-shares. In terms of configuration, growth sectors that benefit from interest rate cuts in the short term may have higher elasticity, but in the medium term, the structural market with range fluctuations is still the main trend, corresponding to dividends and technological growth.