Core Viewpoint - The performance of the Hong Kong stock market is influenced by the alignment of the economic cycles of the US and China, with the current situation indicating a "split" market response to the recent US interest rate cut [1][10]. Group 1: Interest Rate Cuts and Market Response - There are two types of interest rate cuts by the Federal Reserve: "preventive" and "recessionary," with historical data showing that Hong Kong stocks perform significantly better during preventive cuts [3][6]. - In the case of preventive cuts, such as in 2019, the Hong Kong stock market rose by 11%, with the Hang Seng Tech Index increasing by 20% due to cheaper financing for technology companies [6]. - Conversely, during recessionary cuts, like in 2008, the Hong Kong market plummeted by 40%, as investors favored stable sectors like utilities and consumer staples [8]. Group 2: Variables Affecting Hong Kong Stocks - The current economic cycle is misaligned between the US and China, with the US focusing on a "soft landing" while China is gradually recovering, introducing three unexpected variables that complicate the market outlook [10]. - The first variable is US political interference, particularly from figures like Trump, which could disrupt the Federal Reserve's interest rate strategy and create uncertainty in the market [10][11]. - The second variable is the impact of AI on technology stocks, which now must invest heavily in AI to remain competitive, potentially leading to a stronger performance in this sector if economic conditions are favorable [13]. - The third and most critical variable is the Chinese economic fundamentals, as many Hong Kong-listed companies rely on the mainland market for revenue; without improvement in China's economy, stock prices may struggle to rise despite US interest rate cuts [15]. Group 3: Future Market Scenarios - The Hong Kong stock market is expected to "split" in its performance based on various economic conditions: if the US continues to lower rates and China's economy shows moderate recovery, growth stocks in technology and healthcare may lead the market [17]. - If the US implements aggressive rate cuts and Chinese consumer data exceeds expectations, sectors like real estate and industrials could also benefit from lower financing costs [17]. - In a scenario where the US refrains from further cuts and China's economy shows no significant improvement, investors may need to focus on stable sectors like utilities and high-dividend stocks to mitigate risks [17]. Conclusion - The Hong Kong stock market is influenced by both US interest rate policies and Chinese economic fundamentals, with the potential for growth dependent on the strength of the underlying economic conditions in China [19].

Core Viewpoint - The current macroeconomic backdrop, including stagflation risks in the U.S. and the misalignment of economic cycles between China and the U.S., suggests that the Hong Kong stock market (HK stock market) is unlikely to replicate historical trends during the Federal Reserve's (Fed) interest rate cut cycle, leading to significant structural differentiation instead [1][3]. Summary by Sections 1. Impact of Fed Rate Cuts on HK Stock Market - Historical experience indicates that during Fed rate cut cycles, the HK stock market typically exhibits "preventive rate cut rallies" and "recessionary rate cut declines" [1]. - The performance of the HK stock market during these cycles shows distinct characteristics: preventive rate cuts generally lead to positive market performance, while recessionary cuts result in market pressure [7][11]. 2. Differentiation in Market Performance - The analysis reveals that aside from the Hang Seng Technology Index, other styles (such as large-cap and small-cap stocks, as well as dividend styles) have not shown independent trends during past rate cut cycles, indicating a high correlation with the Hang Seng Index [10]. - In recessionary rate cuts, defensive sectors like utilities and consumer staples tend to perform better due to reduced market risk appetite, while in preventive cuts, high-growth sectors like technology and pharmaceuticals are favored [11]. 3. Current Rate Cut Context - The current rate cut cycle is characterized by greater uncertainty regarding the Fed's path, influenced by political pressures and the ongoing AI revolution reshaping capital expenditure in the tech sector [2][49]. - The performance of the HK stock market in the coming quarters will be closely tied to the recovery of the Chinese economy, with a focus on liquidity-sensitive growth sectors as a core strategy under optimistic scenarios [2][50]. 4. Historical Rate Cut Analysis - The analysis categorizes Fed rate cut cycles since 1970 into "preventive" and "recessionary" based on whether the economy entered a recession during the cut period [4]. - Preventive rate cuts are generally shorter and involve smaller cuts, while recessionary cuts tend to last longer and involve larger reductions [4]. 5. Future Scenarios for HK Stock Market - Three potential scenarios for the HK stock market are outlined: 1. **Baseline Scenario**: Gradual Fed rate cuts with moderate recovery in the Chinese economy, leading to a valuation-driven market with growth sectors outperforming [51]. 2. **Optimistic Scenario**: More aggressive Fed cuts without triggering recession fears, resulting in a favorable liquidity environment for growth stocks [53]. 3. **Pessimistic Scenario**: Fed pauses or slows rate cuts due to persistent inflation, leading to a return to fundamentals driven by the Chinese economy's recovery [54]. 6. Strategic Focus - The strategic focus should be on liquidity-sensitive growth sectors in baseline and optimistic scenarios, while in pessimistic scenarios, the emphasis should shift to defensive assets and closely monitoring Chinese macroeconomic data [55].

Core Viewpoint - The recent Federal Reserve interest rate cut on September 18, 2024, is set against a complex macroeconomic backdrop, including risks of stagflation in the U.S. and misalignment in the economic cycles of China and the U.S., suggesting that the Hong Kong stock market may not replicate historical trends but instead exhibit significant structural differentiation [1][2]. Group 1: Historical Context and Market Behavior - Historical experience indicates that during Fed rate cut cycles, the Hong Kong stock market typically shows a "preventive rate cut rally" or a "recessionary rate cut decline" pattern [1]. - In terms of market style, the Hang Seng Technology Index has demonstrated a "high win rate and high return" characteristic during preventive rate cut cycles, while other styles have not shown independent trends [1][2]. - Industry-wise, defensive sectors like utilities and consumer staples tend to perform better during recessionary rate cuts, while high-growth sectors such as technology and pharmaceuticals excel during preventive rate cuts [1][2][3]. Group 2: Current Economic Landscape - The current macroeconomic environment is more complex than historical experiences, with the U.S. economy facing stagflation risks and ongoing misalignment with China's economic cycle, making it difficult for the Hong Kong market to follow a straightforward trend [2][3]. - The upcoming October monetary policy meeting is crucial for assessing the future pace and intensity of rate cuts, influenced by various structural variables, including political pressures and the ongoing AI industry revolution [3][4]. Group 3: Future Outlook and Scenarios - The performance of the Hong Kong stock market in the next one to two quarters will depend not only on the Fed's rate cut path but also on the recovery process of the Chinese economy [2][52]. - Three potential scenarios are outlined: 1. **Baseline Scenario**: Gradual Fed rate cuts with a moderate recovery in the Chinese economy, favoring growth-sensitive sectors [52][53]. 2. **Optimistic Scenario**: More aggressive Fed cuts without triggering recession fears, leading to a favorable liquidity environment for growth stocks [55]. 3. **Pessimistic Scenario**: Fed pauses or slows rate cuts due to persistent inflation, putting pressure on the Hong Kong market, which will depend heavily on the recovery of the Chinese economy [56]. Group 4: Structural Opportunities - The analysis indicates that different types of rate cut cycles lead to distinct long-term performances in the Hong Kong market, with preventive rate cuts generally resulting in positive returns for the Hang Seng Index [9][10]. - The Hang Seng Technology Index has shown superior performance during preventive rate cuts, benefiting from lower discount rates and improved financing conditions [12][13]. - Defensive sectors tend to outperform during recessionary rate cuts, while growth sectors thrive in preventive cut environments, highlighting the importance of sector selection in investment strategies [13][14].