CITIC SEC: Q3 US stock earnings may continue high growth; Hong Kong stock fundamental expectations have entered a bottoming phase.

CITIC SEC released a research report stating that with the decoupling of US stock performance from interest rates during the domestic long holiday, investors' focus will shift next week to the upcoming Q3 US earnings season. LSEG consensus estimates show that the S&P 500's 26Q3 revenue and earnings year-over-year growth rates are expected to reach 1.2%/45.0%, respectively, retreating somewhat on a quarter-over-quarter basis. At the industry level, earnings year-over-year growth rates for energy, information technology, materials, and health care all exceed 50%. The high growth in US stock earnings may no longer be concentrated only in leading technology companies, and the earnings contribution from non-technology sectors is clearly strengthening. For Hong Kong stocks, although the overseas rate hike cycle combined with the restart of AI momentum trades continues to weigh on liquidity, fundamental expectations have already bottomed, and earnings growth expectations for major broad-based indices have begun to be revised upward. Industry earnings expectation adjustments are significantly divergent, with some sub-sectors seeing upward revisions, while earnings expectations for domestic demand-related industries still face downward revision pressure. The upcoming Q3 results will be an important basis for judging the progress of recovery. Investors are advised to remain patient with Hong Kong stocks, and the dividend strategy is expected to remain relatively outperforming in the short term. The main views of CITIC SEC are as follows: 2026Q3 US stock earnings may continue high growth, and the growth momentum is spreading from technology giants to a broader range of industries According to LSEG consensus estimates, the S&P 500 Q3 revenue/earnings year-over-year growth rates are expected to be 11.2%/45.0%, respectively, while the Nasdaq 100 is expected to be 22.9%/45.2%. Structurally, MAG 8 Q3 revenue and earnings year-over-year growth rates are expected to be 24.3% and 41.4%, respectively; excluding MAG 8, the revenue/earnings year-over-year growth rates of the remaining 492 S&P 500 constituents reach 8.8%/50.0%, respectively, with the earnings growth rate rising significantly from 32.9% in Q2. At the industry level, earnings year-over-year growth rates for energy, information technology, materials, and health care all exceed 50%, with energy and information technology leading. The high growth in 2026Q3 US stock earnings may no longer be concentrated only in leading technology companies, and the earnings contribution from non-technology sectors is clearly strengthening. Full-year 2026 US stock earnings expectations continue to be revised upward, and marginal improvement comes more from non-technology giants, further balancing the structure of earnings growth As of October 9, the S&P 500 full-year earnings growth expectation rose to 34.9%, revised up 1.2 percentage points from the end of August; the Nasdaq 100 earnings growth expectation rose to 53.3%. During the same period, the MAG 8 earnings growth expectation remained at a high level of 57.5%, but was slightly revised down 0.2 percentage points from the end of August; excluding MAG 8, the earnings growth expectation for the remaining 492 S&P 500 constituents rose to 26.5%, revised up 1.7 percentage points from the end of August, a more pronounced upward revision. Among sub-sectors, energy saw the most significant upward revision in earnings expectations, while revenue expectations for technology hardware and semiconductors improved simultaneously, which may indicate that US stock earnings upward revisions have gradually spread from leading technology stocks to cyclical and manufacturing chains. The degree of Q4 earnings delivery and 2027 earnings guidance will become key focuses for the market going forward. Overseas rate hike cycle combined with restart of AI momentum trades continues to weigh on Hong Kong stock liquidity Currently, the derivatives market has fairly fully reflected expectations that the Federal Reserve, Bank of Japan, and European Central Bank will continue raising rates. Among these, market-implied expectations show that the Federal Reserve may still raise rates three times by June next year. However, as concerns over sovereign credit in overseas developed countries further intensify, overseas risk-free rates may still continue to rise. The calculated composite discount rate for Hong Kong stocks has risen from 3.1% at the end of February this year to 3.9% in early October, and Hong Kong stock valuations continue to be suppressed. The strengthening of the overseas AI industry trend may drive funds to further concentrate in related markets, and the pace of southbound capital inflows is an important variable for alleviating liquidity pressure on Hong Kong stocks. If the RMB exchange rate gradually stabilizes going forward and drives an acceleration in southbound capital inflows, liquidity pressure on Hong Kong stocks is expected to ease. Hong Kong stock fundamental expectations have entered a bottoming phase, earnings growth expectations for major broad-based indices have begun to be revised upward, and structural improvement after the interim reports provides support for market stabilization Industry earnings expectation adjustments are significantly divergent, with some sub-sectors seeing upward revisions, while earnings expectations for domestic demand-related industries still face downward revision pressure. The upcoming Q3 results will be an important basis for judging the progress of recovery. After two consecutive months of correction, the valuation attractiveness of Hong Kong stocks is gradually emerging. If a series of new domestic property policies can improve household wealth expectations and drive a recovery in domestic demand, the Hong Kong stock market is favored to see a "earnings + valuation" double boost in Q4 this year. In the short term, however, the fundamental turning point for the large consumer sector still needs to be verified, and combined with high overseas risk-free rates and the restart of AI momentum trades, investors are advised to remain patient with Hong Kong stocks, and the dividend strategy is expected to remain relatively outperforming in the short term. If in October the Hong Kong stock CKH HOLDINGS consumer sector continues to adjust and the Q3 earnings turning point is confirmed, a better allocation opportunity may emerge before the MSCI quarterly rebalancing at the end of November. Risk factors 1) Global central banks continue to tighten monetary policy beyond expectations; 2) global geopolitical conflicts escalate again; 3) friction in China-US technology, trade, and financial areas intensifies; 4) China's policy intensity, implementation effects, or economic recovery fall short of expectations.