Galaxy Securities: Expectations for the Fed to cut interest rates to strengthen domestic policies are worth looking forward to

The Zhitong Finance App learned that Galaxy Securities released a research report saying that expectations of the Fed's interest rate cut heated up last week. As of December 5, the CME “Federal Reserve Watch” tool shows that the probability of cutting interest rates by 25 basis points next week is 86.2%. Looking ahead, the upcoming Politburo meeting, the Central Economic Work Conference, and the Federal Reserve interest rate meeting to be held in December are expected to provide medium- to long-term policy directions and short-term liquidity signals for the market. In terms of allocation, it is recommended to focus on the following sectors: First, sectors benefiting from rising expectations of the Federal Reserve's interest rate cuts, such as precious metals. Second, the Central Economic Work Conference focuses on areas that may be highlighted or supported by industrial policies, such as new quality productivity, domestic consumption, etc. Third, as investors' risk appetite improves, and after early valuation adjustments, the technology growth sector is expected to usher in recovery opportunities.

Major asset classes: Global market risk appetite increased last week (December 1 to December 5), but there are mixed expectations for inflation. First, risk assets are generally rising, and major global stock indexes, especially Asian and technology stocks, industrial metals, and energy, are showing strong performance. The recent surge in LME copper delivery orders recorded a single-day increase since 2013. Among them, demand from warehouses in Taiwan and South Korea was particularly strong, directly driving LME copper prices to break through record highs recently. Second, safe-haven assets are under pressure, gold has declined, and the prices of major treasury bonds have fallen. Again, the US dollar weakened, and the US dollar depreciated against most major currencies. Finally, agricultural products generally declined, mainly affected by supply and demand or weather forecasts. Expectations for the Fed to cut interest rates heated up last week. As of December 5, the CME “Federal Reserve Watch” tool shows that the probability of cutting interest rates by 25 basis points next week is 86.2%.

A-share market: (1) Last week, the A-share market showed a volatile recovery trend. Most of the major broad-based indices recorded increases, and the entire A index rose 0.72%. The GEM index led the increase, reaching 1.86%. In terms of style, the market style was relatively dominant last week; the cyclical style rose by more than 2%, while the consumer style fluctuated and pulled back. (2) There was no shortage of highlights in the A-share market last week, such as commercial aerospace and industrial metals, but transactions continued to shrink. In the short term, the important policy window at the end of the year is approaching. Focus on the upcoming December Politburo meeting and the Central Economic Work Conference. The policy arrangements will point the direction for economic work in 2026, and at the same time have important indicative significance for the structural market. Combined with the proposed draft of the “15th Five-Year Plan”, the conference is expected to focus on self-reliance and self-improvement at the level of science and technology, emphasize the strategic position of expanding domestic demand, and provide strategic guidance on scientific and technological innovation, boosting consumption, investing in people, fighting internal volume, and stabilizing the property market.

From an overseas perspective, the Federal Reserve's interest rate meeting is about to be held next week. Market games are intensifying. Concern is being paid to the interest rate meeting resolution and the impact of Powell's statement after the meeting on global capital flows. At the end of the year, the market rotated rapidly, or was still dominated by a volatile structure. At the same time, the medium- to long-term positive logic of the A-share market remains unchanged. The regulatory authorities will lower the risk factors for insurers' stock investment, which will further unleash the potential of insurance funds to enter the market and inject more incremental liquidity into the market. Chairman Wu Qing clearly proposed a number of key measures aimed at improving the inclusiveness and adaptability of the capital market system and establishing a solid institutional foundation for the long-term healthy development of the market.

Hong Kong stock market: Last week, most of the world's major stock indexes rose. Among them, the three major indices of Hong Kong stocks rose at the upper middle level. The Hang Seng Index rose 0.87%, the Hang Seng Technology Index rose 1.13%, and the Hang Seng China Enterprise Index rose 0.75%. Among the Hong Kong stock tier-1 industries, 7 industries rose and 4 fell last week. Among them, the materials, energy, and industrial indices had the highest increases, rising 8.23%, 2.64%, and 2.62% respectively; daily consumption, healthcare, and real estate industry indices had the highest declines, falling 0.81%, 0.44%, and 0.20%, respectively. Among the secondary sector of Hong Kong stocks, non-ferrous metals, defense and military, machinery, hardware and equipment, and construction industries registered the highest increases, while the indices for durable consumer goods, textiles and clothing, daily consumption and retail, real estate investment trusts, and corporate services registered the highest declines.