Led by bank stocks, on October 14th, both markets staged a strong counterattack, with the main index once enveloping the previous day's阴线, approaching the 3300-point mark once again. The Shanghai Composite Index closed up by 2.07%, and the ChiNext Index rose by 2.6%. Debt restructuring, Huawei's HarmonyOS, commercial space flight, cybersecurity, financial technology, artificial intelligence, and connected vehicle-cloud topics were active, while real estate, semiconductors, and banking sectors led the gains. The market transaction volume exceeded 1.6 trillion yuan, with over 5000 stocks rising. The Hang Seng Dividend ETF (159726) surged by more than 4%.

At a press conference held by the State Council Information Office, the Ministry of Finance introduced that on the basis of accelerating the implementation of policies that have been determined, it will introduce a package of targeted incremental policy measures in the near future, focusing on stabilizing growth, expanding domestic demand, and resolving risks. At the same time, other policy tools are also under study, and the central finance still has a considerable debt-raising space and a deficit increase space.

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Bank stocks reacted directly to the press conference of the Ministry of Finance, especially the four major banks, which strongly attacked upwards, approaching historical highs again, and even some large banks' closing prices today have set historical highs.

Fiscal policy takes the baton, and incremental policies are on the way.

At the press conference held by the State Council Information Office on October 12th, the person in charge of the Ministry of Finance introduced the situation related to "increasing the counter-cyclical adjustment strength of fiscal policy and promoting high-quality economic development", and it was clear that a package of targeted incremental policy measures will be introduced in the near future. The main content includes plans to increase the debt limit scale in one go to replace the local government's existing implicit debt, issue special treasury bonds to supplement the core tier-one capital of state-owned large commercial banks, and use special bonds, special funds, tax policies, and other tools to promote the real estate market to stop falling and stabilize, and increase support and protection for key groups. In addition to these four policies, the Minister of Finance, Lan Fu'an, stated that the central finance still has considerable debt-raising space and a deficit increase space.

According to CICC calculations, fiscal increments of 7 trillion yuan to 8 trillion yuan (corresponding to a social financing growth rate of 10%, to match the corresponding M2 and nominal GDP growth rates) will help change the core issue faced by various economic departments at present, which is the inversion of investment returns and financing costs. If the subsequent scale meets expectations, it is expected that the market can get some support and turn to a structural market at the current level.

In addition, recently, the central bank's 500 billion yuan "swap facility" has been implemented, and relevant institutions may prefer high dividend assets. Xingye International believes that the market's reaction to the implementation of relevant policies is positive, and the market has voted with trust for high dividend assets, and the high dividend sector has the opportunity to become the main driver of the next wave of rise in Hong Kong stocks.

GF Securities stated that the central bank's swap facility helps to explore the value of dividend-type assets. Investing in the stock market through secondary pledge financing is a leveraged behavior, and the core demand for adding leverage to institutional funds is still to enhance the inherent stability of the capital market and reduce market volatility. Therefore, institutions are more motivated to prioritize the selection of high-quality assets with "stability" characteristics such as large market value, high dividends, central state-owned enterprises, and low valuation.

CITIC Securities pointed out that since the policy combination was introduced on September 24th, the increase in Hong Kong stocks has been significant, and multiple indicators show that Hong Kong stock investors' emotions are very hot. Foreign capital also shows a significant trend of increasing the allocation of Hong Kong stock market. CITIC Securities believes that although a round of rapid increases has passed, the valuation level of Hong Kong stocks is still in a position with high cost-effectiveness compared to the global market or historical situations, especially the valuation of growth and large financial sectors is at a lower historical position. Although the fastest stage of the rise driven by short squeeze transactions may have passed, under the background of gradually landing policies and investors' emotions still "excited", it is difficult to say that Hong Kong stocks have touched the top of the stage, and their valuation repair market is expected to continue until early November.

Hang Seng Dividend ETF (159726) and Hong Kong Central Enterprise Dividend ETF (513910) enjoy the triple attributes of Hong Kong stocks, central enterprises, and dividends, and have both high dividends and low valuations. Under the situation of the superimposed release of good news, their value is highlighted.Short-term adjustments are relatively sufficient, and there are structural opportunities.

China Asset Management Co., Ltd. (CCBAM) stated that last week, as incremental funds were quickly depleted, the market rose and then fell back. After the inflection point, fund selling led to the index entering an adjustment phase, and investor sentiment gradually cooled down. Currently, it appears that the index has fallen by half of its previous gains, and the short-term adjustment is relatively sufficient. The willingness of investors to trade remains high, and incremental policies are expected to continue to be introduced. The market is likely to be dominated by fluctuations and repetitions, with structural opportunities existing.

CITIC Securities indicated that there has been a significant change in policy signals, and market expectations have undergone a major reversal. Future continuous reinforcement of domestic demand policies may drive the price signal to arrive earlier, and the market trend will usher in a major inflection point. After the major reversal of expectations, the market is characterized by a concentrated entry of incremental funds led by retail investors, and the pulse-like rise will continue in the short term. The current stage is transitioning from a major reversal of expectations to a major inflection point in the market trend. With low price-to-book (P/B) ratios and domestic demand recovery as the core, once the price signal is confirmed, the market will usher in a major inflection point, leading to an annual-level bull market characterized by the resumption of the credit cycle. Investors will then have a better opportunity to enter the market.

CITIC Construction Investment believes that debt resolution marks the end of the contraction phase of the previous fiscal cycle, indicating the end of the bear market in stocks. This is why we consider the recent press conference of the Ministry of Finance as a reconfirmation of the right-side signal for the stock market.

Against the backdrop of very active trading volumes, the chip sector, which represents both "China's core assets" and "new quality productivity," is expected to become the main theme of the market in the next phase.

Currently, the domestic economic cycle is in a marginal strengthening phase, and the chip sector has three core logics:

Firstly, the fundamentals are solid, with a resonance of upward cycles both domestically and internationally. Global and Chinese semiconductor sales have achieved positive year-on-year growth for ten consecutive months, and have maintained double-digit year-on-year increases since the beginning of the year. In August, global semiconductor sales reached a historical high. This is mainly due to the improvement of supply chain inventories in the automotive and industrial control sectors, as well as the increase in AI demand, with semiconductors still in a high prosperity phase.

Secondly, the demand for domestic products is strong, and investment amounts have repeatedly reached new highs. With the development of AI, several new electronic products have been released recently. Huawei's autumn new product launch included the Huawei Smart Screen product V5 Max 110 and several other products like the Smart Border R7, reflecting a strong demand for chips.

Lastly, chips have a very high correlation with the economy and continue to benefit from policy efforts. Reviewing past market trends, when policies are implemented, the market's main focus is often on growth sectors that are highly correlated with the economy and in the same cycle. Chips benefit from policy friendliness, and the market is more elastic. For example, in the cyclical bull markets of 2016-2017, 2020, and the major cyclical rebound in November 2022, chips were not absent.

Overall, CCBAM expects the market to shift from a general rise in indices to a differentiated market focusing on main themes. The chip sector, benefiting from the resonance of favorable policies and positive fundamentals, is expected to gather stronger consensus.Due to permission restrictions, new stock investors cannot purchase stocks on the ChiNext and STAR Market (requiring 2 years of stock experience), so many new stock investors will choose to buy related index ETFs. The chip ETF (159995) is the largest product in the entire market with the same standard, allowing you to get 30 leading stocks in the entire A-share chip industry chain with one click. Investors outside the market can pay attention to its connected A class, 008887, and connected C class 008888.

The semiconductor materials ETF (562590) and its connected fund (A class: 020356, C class: 020357) closely track the China Securities Semiconductor Materials Equipment Index. The semiconductor equipment (53.1%) and semiconductor materials (22.6%) in the index have a high proportion, with a total weight exceeding 75%, fully focusing on the index theme.

Hong Kong stocks still have high configuration value.

It is reported that Chief Executive of the Hong Kong Special Administrative Region Li Jiacheng will deliver the 2024 Policy Address on October 16, attracting high attention from all walks of life. There are reports that Li Jiacheng will announce a series of measures at that time to consolidate Hong Kong's position as a global financial center.

After a sharp short-term rise, the Hang Seng Technology Index has accumulated a lot of profit-taking, so it fell last week, digesting the profit-taking and completing the turnover, with investors' average holding costs continuously rising. Overall, it is a healthy trend of a bull market. From the perspective of the trend, the Hang Seng Technology Index quickly rose and broke through the previous high points multiple times, and it is also in line with the trend of the trend to retrace. At present, the overheated sentiment has been somewhat relieved, and the index fluctuation range has gradually converged. It is believed that no matter from the perspective of policy, fundamentals, liquidity, or the market's own cycle, it still has high configuration value.

From the perspective of market liquidity, the overseas interest rate reduction cycle is likely to continue, and the external liquidity disturbance to the Hong Kong stock market is gradually decreasing, which is the general trend. From the latest employment data, it is not a recession expectation and confirms the direction of a soft landing, which is beneficial to risk assets. In addition, the current main pricing factor is the expectation of China's fiscal policy efforts + the expectation of a soft landing in the United States, and the risk of overseas economic downturn is not prominent for the time being, just keep observing.

On the policy front, since the end of September, policy shifts have given birth to "China's asset confidence revaluation," and the big prelude has just begun. To deal with the "debt-deflation cycle" trap faced by China's economy, a series of measures have been introduced to boost equity asset prices, stabilize the real estate market, stimulate economic growth, and expand domestic demand consumption, and corresponding measures will continue to be implemented in response to subsequent situations.

From the perspective of fundamentals, in the first half of 2024, the Hang Seng Technology Index's operating income continued to grow by 8.93% year-on-year, maintaining an improving trend. The cumulative net profit attributable to the parent company has passed the inflection point since 2022, showing a trend of recovery, with a significant increase of 100.45% in the first half of 2024, and the results of cost reduction and efficiency improvement are significant. The Hang Seng Technology Index, as a representative of the technology sector, has a significant advantage in performance. From a micro perspective, the index component companies have many highlights, and their growth and vitality lay the foundation for the subsequent improvement of performance.

In addition, the Hang Seng Technology Index (PE: 25.97, PB: 2.79) valuation level is still a valuation lowland compared with global technology stocks, and there is still a large space for subsequent valuation increases. From a cyclical perspective, after the Hong Kong stock market bottomed out at the end of October 2022 and entered a horizontal consolidation period, the cycle is ahead of the A-share market, and the bottoming interval is more fully interpreted through turnover, and the probability of entering the upward cycle is higher.

At present, the first stage of the market's valuation repair has come to an end, and the second stage is likely to focus on structural differentiation around fundamentals and policies. With the adjustment coming, Hang Seng Technology and others are expected to usher in more long-term funds driven by fundamentals due to liquidity and fundamental advantages.