The Zhitong Finance APP was informed that the overseas team of Guosen Securities released a research report “Inflationary pressure in the United States has fallen, and policy warming has driven Hong Kong stocks to rise”. The team believes that the certainty that rent inflation in the United States will peak and fall in the foreseeable future is high, and the CPI has a high probability of rising. within control. In the next 2-3 months, the CPI may maintain a trend of slow decline or shock at a similar level (7.5%-7.9%). After rent inflation peaks and falls, the CPI may accelerate downward. Although from the perspective of capital, U.S. stocks are facing positives, but from the perspective of fundamentals, the risk of the United States entering a substantive recession still exists, and the trend of concentrated downward revision of U.S. stock performance is still deduced.Guosen’s overseas team maintains an overweight rating on Hong Kong stocks, and firstly recommends local life, software, and biopharmaceuticals
US CPI turned better in October, we believe the downward trend is sustainable
On November 10, the US Department of Labor announced the US CPI data for October. Among them, the CPI was +7.7% year-on-year, and the seasonal adjustment was +0.4%; the core CPI was +6.3% year-on-year, and the seasonal adjustment was +0.3%. This is the first time since March this year that the CPI has fallen below 8% year-on-year.
From the dismantling point of view, food in the non-core CPI (+10.9% year-on-year) showed a lagging and steady decline, and energy (+17.6% year-on-year) showed a steady and rapid decline. In the core CPI, rent (+6.9% year-on-year) is still in the acceleration channel, and non-food energy commodities (+5.1%) are maintained in a state of steady decline. Items with the least inflationary pressure are mainly consumer durables, including apparel (+4.1% yoy), used cars (+2.0% yoy), healthcare goods (+3.1% yoy), education and communication supplies (-9.1% yoy) .
At present, except for rent inflation, which is still rising, other inflation items are already in a state of resonance decline. We believe that the certainty that rent inflation will peak and fall in the foreseeable future is relatively high, and the CPI has a high probability of being under control. In the next 2-3 months, the CPI may maintain a trend of slow decline or shock at a similar level (7.5%-7.9%). After rent inflation peaks and falls, the CPI may accelerate downward.
U.S. stocks: Expectations of long-term interest rate hikes have dropped significantly, and fundamentals are still at risk
After the positive CPI announcement in October, the market on the one hand raised the probability of a 50bp rate hike in December, and on the other hand, sharply lowered its judgment on forward monetary policy. The June 2023 fed funds rate expectation fell from a high of 521bp to 493bp following the CPI announcement. The market judgment is moving closer to our judgment. In the near future, assuming that Fed officials do not give unexpected market guidance, U.S. stock “currency trading” transactions are expected to stabilize temporarily. After the rent CPI confirms the top, the last round of major “currency trading” transactions will be completed.
Although from the perspective of capital, U.S. stocks are facing positives, but from the perspective of fundamentals, the risk of the United States entering a substantive recession still exists, and the trend of concentrated downward revision of U.S. stock performance is still deduced. Therefore, we are cautious on US stocks.
Hong Kong stocks: Policies pick up, capital bottoms out, real estate leads the gains
This week, the market has received many signals of further recovery in policies, including the China Interbank Dealers Association’s announcement on November 10 that it will accept the 20 billion yuan rack-based registration and issuance of private real estate leader Longfor Group, and the Politburo has studied and optimized the “Twenty Prevention Measures” Wait. In addition, according to the China Index Research Institute, non-bank financing of real estate companies increased by 16.4% year-on-year in October, and credit debt financing increased year-on-year.
Under the influence of fundamentals, capital, exchange rates, and emotional resonance. The Hang Seng Index closed the week up 7.2%, and Hang Seng Technology closed the week up 7.0%. Among them, the Hong Kong Stock Connect real estate sector closed up 16.1%. We maintain the overweight rating of Hong Kong stocks, and we will first recommend local life, software, and biopharmaceuticals.
Risk warning: Uncertainty about the development of the epidemic, the risk of downturn in the economic cycle, the uncertainty of the international political situation, and the uncertainty of domestic monetary policy.