The bottom of overseas policies has emerged, and under the resonance of China US policies, Chinese stocks are facing a reversal opportunity! After the July 24th Politburo meeting, the domestic policy bottom has gradually been consolidated. Taking into account the recent signals of the Federal Reserve's monetary policy and the performance of overseas assets, we judge that the overseas policy bottom has emerged. The core factor that troubles the market is the turning point of the US China interest rate gap, which means that the last link of the A-share market bottom - the resonance of the US China "policy bottom" has formed!
Will Powell's hawkish statement delay the arrival of the bottom of overseas policies? We maintain our judgment for the past 11.4 years: the opportunity for the resonance of China US policies has emerged! Historically, when the Federal Reserve has not yet explicitly stated that the interest rate hike cycle has ended, if there is an excessively rapid decline in US bond rates, Federal Reserve officials often make hawkish statements to adjust market expectations. However, the two core indicators that determine the Fed's operations are still employment and inflation. Judging from factors such as the statement at the November interest rate meeting and US consumption and employment data, there are gradually signs of a shift in overseas monetary policy. On the other hand, the upcoming meeting between China and the US dollar signifies a marginal easing in Sino US relations, which often helps to repair A-share risk appetite.
Recently, the TMT market has further fermented. How to understand and prospect the TMT market? In 4.7, we put forward that "AI+" is comparable to "Mobile Internet plus" in 13 years, and we are optimistic about TMT market opportunities in 23 years. From the current perspective, TMT is still the intersection of the three quarter reports and economic expectations: (1) TMT has significant highlights in the industry comparison of the three quarter reports: the performance of the downstream media industry has significantly improved month on month (game/advertising marketing); The recovery of the consumer electronics industry chain is relatively obvious, and it has entered the end of the liquidation period to the early stage of recovery. Pay attention to investment opportunities; (2) In the guidance of the Guangfa Strategy 'Comparison Framework for Prosperity Expectation Industries', both media and electronics are recommended varieties for improving the prosperity expectation in November.
What are the guidelines for the third quarter report of the free cash flow framework? We established an industry comparison framework based on free cash flow in the 10.17 report. From the third quarter report, we can see the guidance of the free cash flow framework: (1) First, focus on the improvement of demand in the late clearance period: consumer electronics, semiconductors, real estate chain, and advertising marketing; (2) [Recovery period] Select industries with continuous improvement in revenue/orders/gross profit (clothing/soft drinks/ships/commercial vehicles); (3) [Expansion period] Optimize efficiency and quality, reduce free cash flow but increase production cycle, improve operational capacity, debt paying ability, and ROE: aviation equipment, inverters.
Welcome the opportunity of policy resonance between China and the United States, Chinese stocks set sail, and Hong Kong stocks have a higher elasticity! The bottom line of overseas policies has emerged, the convergence of interest rate differentials between China and the United States and the opportunity for foreign capital replenishment have arrived, and the convergence of valuation gaps in A-shares has basically been completed. At the same time, our proposed anti fragile response this year - the excess returns of the new investment paradigm "barbell strategy" combination may face a phased decline. Industry configuration: A-share: 1. Sino US policy bottom resonance, benefit valuation repair: non bank finance/innovative medicine; 2. Third quarter report clues: (1) Abundant free cash flow+improvement in clearance period demand: consumer electronics and upstream (passive components/panels), decoration and building materials, semiconductor (RF/storage), (2) taking the lead in initiating active replenishment+gross profit improvement: chemical fiber/white electronics/textile services. Hong Kong stocks: (1) Sensitivity to the contraction of interest rate differentials between China and the United States: pharmaceuticals/automobiles/Hong Kong stock internet; (2) Low capital expenditure and inventory, post clearance varieties with improved revenue: consumer electronics/semiconductor/real estate sales chain.
Risk Reminder: Geopolitical conflicts, unexpected outbreaks, tightening liquidity, and slower than expected growth.