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the weak trend of macro price signals continues, and the response of internal policies still needs to be observed, while the external signal disturbance is not enough to affect domestic policies; since september, the inflow of supporting funds has decreased, and the stock price has accelerated to fully reflect market expectations. the bottoming process is expected to be shortened, and short-term capital game is expected to still dominate the market before the introduction of incremental policies; in terms of allocation, it is recommended to continue the bottom position of dividends and overseas going, and wait patiently for the turning point signal.

first, judging from the changes in the three major signals, in terms of price signals, the core cpi is close to its historical lowest level, and housing prices are still on a downward trend; in terms of external signals, the u.s. economy has not shown signs of recession, and the federal reserve may start a "risk management" interest rate cut in september. the situation of the u.s. election is still tense, and it is expected that the outcome will not be known until the final stage; in terms of policy signals, under the current environment of weak domestic demand, if the real estate industry continues to decline uncontrollably, it may create spillover risks, and monetary policy may be strengthened in the future to curb the spread of real estate risks.

secondly, from the perspective of the market bottoming out stage, central huijin has continued to reduce the scale of its purchases of stock etfs in the past two weeks. the reduction in "bottoming out" fund inflows may accelerate the progress of stock prices to fully reflect market expectations and sentiment, and shorten the bottoming out period of a-shares.

finally, from the perspective of allocation strategy, in an environment where economic fundamentals remain weak and long-term government bond interest rates continue to decline, the bottom-line value of dividends still exists, but the structure should avoid products with fundamental volatility risks; at the same time, excellent companies in the overseas sector that have fully reflected the risks of overseas recession and trade frictions have allocation value.

macro price signals continue to weaken

in terms of prices, the cpi in august rebounded due to the super-seasonal increase in food prices, but the core cpi was only 0.3% year-on-year, the lowest level since data statistics were available after the beginning of 2020, and only -0.2% month-on-month, the worst august reading performance since data statistics were available. in terms of breakdown, the prices of the three major durable consumer goods, transportation tools, communication tools, and household appliances, are still significantly lower than the historical seasonal average level. in addition, the cpi of the service industry, which has always grown strongly since last year, has shown signs of marginal deceleration. in terms of housing prices, the current second-hand housing prices are still showing a downward trend. according to the national urban second-hand housing iceberg index, in the second week of september (september 2 to 8), the monthly month-on-month decline in 20 first-tier and new first-tier cities across the country was in a state of decline. according to the shell app data, the number of second-hand housing transactions in the 75 sample cities we tracked was 16,818 in the second week of september, which is about 10% lower than the level before the "517" new policy.

the response of domestic policies needs to be observed.

increasemonetary policy measures to prevent the spread of real estate risks

at present, facing the weak domestic demand and the continued downward risk of real estate, the policy response method and intensity are extremely important. maintaining a reasonable net interest margin level in the banking industry is an important part of financial stability, but it has also become a constraint on the downward trend of mortgage interest rates and the full reduction of residents' actual borrowing costs. however, judging from the cases of overseas countries and regions, bank mortgage arrears were relatively stable in the early stage of house price decline, but the continued decline in house prices will eventually bring a stage of rapid increase in non-performing loan rates, and the bank's balance sheet will be directly damaged. the bank group of the research department of citic securities selected the sample housing mortgage-backed securities (rmbs) of the four state-owned banks to estimate that the sensitive housing loans in first-tier cities, second-tier cities, and other cities were about 3.3 trillion, 8.4 trillion, and 13.6 trillion yuan respectively. under the extreme assumption scenario, if the house price falls by 20% in the next year, the loss of sensitive housing loans will be about 1.9 trillion yuan, accounting for nearly 6.1% of the net assets of listed banks in 2024q1. to solve the above problems, trying to maintain the net interest margin to prevent risks is of extremely limited significance. what is more important is to curb the overshoot of asset prices. generally speaking, there are two approaches: first, to quickly lower mortgage rates, keep existing mortgage rates and new mortgage rates as consistent as possible, curb the trend of early loan repayments, and try to make mortgage rates close to rental returns or even inverted, so that houses can generate net cash income again, thereby stabilizing demand; second, to increase the purchase and storage efforts, slow down the decline in housing prices, and fully release rigid demand and improvement demand, and gradually correct residential valuations. considering that the first approach may require a substantial reduction in mortgage rates in the short term, it is difficult to achieve all at once in the actual implementation process, so a multi-pronged policy combination may be needed to avoid further spread of real estate risks.

external signal disturbances are not enough to affect domestic policies

1) the u.s. economy has not shown any signs of recession yet, and the federal reserve may start a “risk management” interest rate cut in september.the number of new non-farm payrolls in the united states in august was "tepid", with the main contribution coming from the service industry. the unemployment rate was basically stable, and the wage growth rate reached 3.8%, higher than market expectations. the overseas research group of citic securities research department believes that in the context of slowing inflation but with "flaws" and cooling employment but with resilience, the federal reserve is still in a "risk management" rather than "crisis response" decision-making framework. while protecting the labor market situation, it is also necessary to take into account the remaining sticky price environment and minimize the risk of inflation returning. therefore, the current employment and inflation situation in the united states is not enough to prompt the federal reserve to "trend" interest rate cuts to support the economy. in the future, the federal reserve's monetary policy operations are likely to be similar to the "camera decision" in the 1990s, with some declines and some increases. under the federal reserve's operating mode, it is expected that the risk-free interest rate difference between china and the united states will remain for some time to come, and china's monetary policy space will also be difficult to open up quickly in the short term. the federal reserve's interest rate cuts have only marginally eased the pressure on the rmb exchange rate and increased the flexibility of china's monetary policy operations for some time to come.

2) the situation of the us election remains tense and the outcome is expected to be known only in the final stage.the first televised debate between harris and trump did not have many substantive changes. harris promoted her economic subsidy policy, abortion rights protection, and commitment to us allies in the debate, while trump once again emphasized his consistent policy positions in the fields of tariffs, borders, energy, etc. the overall content of the debate was more emotional and mutual attacks. neither candidate proposed a new china policy, nor did they use china policy as the main campaign strategy. in terms of china trade policy, according to the calculations of the overseas policy group and macroeconomic group of citic securities research department, in extreme cases, a simple static calculation of trump's policy of imposing a 60% tariff, if implemented, will drag down my country's exports by 8.3 percentage points. however, considering that many companies have responded to this by re-exporting or building factories overseas after 2018, the actual impact is expected to be much smaller than this extreme case; the democratic party's competition with china is more systematic, and the united states may continue to promote the construction of "nearshore" and "friendly shore" alternative industrial chains. the current de facto exemptions from tariffs may continue to decrease, which will have a more far-reaching impact on the global industrial chain pattern. after the first debate, according to the average poll data of real clear politics (rcp), as of september 15, harris was slightly ahead of trump in the overall polls with 49.0% to 47.3%. however, judging from the historical pattern of election polls, this gap is completely within the margin of error. judging from the final results of the past five us elections, the democratic party usually has to lead by more than 3 percentage points in the popular vote to ensure victory. judging from the past two elections, poll data has always underestimated trump's support rate, and there are often frequent unexpected events near the election. we believe that the current election situation is still tense, and there is still uncertainty about the future us government's trade policy toward china.

the bottom grinding process is expected to be shortened.incremental policy

short-term capital game will still dominate the market before the introduction

we estimate that the scale of central huijin's purchase of stock etfs in the past three weeks was 36.4 billion yuan, 14.3 billion yuan and 2 billion yuan respectively. the inflow scale has slowed down significantly since september, and the market adjustment speed has also accelerated after the balance of funds was broken. however, we believe that the accelerated clearing of price signals in the capital market is not a bad thing. taking hong kong stocks as an example, the cumulative returns of the hang seng index and the hang seng technology index in the past month reached 1.5% and 2.8%, while the shanghai composite index and wind all a were -6.0% and -5.3% respectively, which also corresponded to the deterioration of macro fundamentals, but the performance of hong kong stocks was obviously stronger. since the beginning of this year, southbound funds have accumulated net purchases of hong kong stocks of more than 440 billion yuan, with 33 weeks of net inflows in 36 weeks. the performance of core blue-chip stocks in hong kong stocks has also been much better than that of a-share blue-chip stocks this year. this situation where the macro fundamentals are consistent but the stock price trends are differentiated fully demonstrates that as long as the market prices can be fully cleared and reflect pessimistic expectations, structural differentiation and opportunities can appear before the entire macro economy stabilizes, and even the turning point at the index level can bottom out ahead of the fundamentals. however, if the hong kong stock market completes the adjustment ahead of schedule, it may continue to siphon funds from the a-share market. for the a-share market, if there is no major policy change to reverse investors' expectations before full liquidation, the bottoming process will most likely continue, and short-term game funds are the main force driving and leading the market. it is expected that after the fed cuts interest rates in the second half of september, the domestic policy efforts and the rebound of fund game may resonate in stages.

the bonus range is shrinking.but the bonus plus going overseas

the bottom warehouse configuration is still the best choice

1) the underlying value of dividends still exists, but structurally, we should avoid products with fundamental volatility risks.there are two main reasons for the recent continuous correction of dividend assets. first, investors are concerned about the fundamentals of dividend assets. the balance sheets of some companies in the banking sector deteriorated marginally during the interim report season. the growth rate of domestic electricity consumption has slowed down significantly since july, and the operating cash flow of some central enterprises with chinese characters has deteriorated significantly in the interim reports. secondly, there are changes at the short-term trading level. in recent weeks, central huijin has continued to reduce the scale of its purchase of stock etfs, and there are signs of expanding the scope of purchases. the csi 1000 and chinext-related etfs have also seen abnormally increased trading. due to the large increase in dividend assets and overly consistent expectations, short-term funds and quantitative funds involved in them are likely to withdraw quickly once they find a slowdown in the trend or a rotation of styles, thereby amplifying volatility. however, we believe that the logic of allocating dividends has not changed. in an environment where economic fundamentals are still weak and long-term treasury bond interest rates continue to decline, dividend assets that can provide stable cash returns are still scarce assets, but we need to avoid varieties with obvious negative expectations in fundamentals.

2) in terms of configuration, continue to hold the dividends and the bottom position for overseas expansion, and wait patiently for the turning point signal.it is still recommended to focus ondividendandgoing to seathe two main lines will turn to the main lines of high-performance growth and domestic demand after the market inflection point appears. in terms of specific products, it is expected that dividend strategies will continue to diverge. it is recommended to continue to focus on dividend low-volatility assets with stable free cash return rates.hydropower, nuclear power, with stable growth in premiumsproperty and casualty insurancein addition, we believe that domestic exports will not deteriorate as quickly as the market expects, and the risks of overseas recession and trade friction have been fully reflected.excellent companies in the overseas marketre-allocation value, these companies are relatively concentratedmachinery, home appliancesandcommercial vehiclesas the three signals of policy, price and external factors continue to be verified, it is expected that the focus of allocation will shift to high-quality growth and domestic demand again. it is recommended to focus onelectronics (intelligent driving and autonomous semiconductor control), machinery (equipment upgrading and overseas competition)the leading manufacturing industry, anti-corruption has a significant impact on pricingmedicine (industry integration, overseas expansion),as well ashong kong stocks' internet and consumer leaderscompany.