CITIC Securities: The meeting between the Chinese and U.S. presidents went smoothly, Hong Kong stocks' risk appetite may rise, and U.S. stocks still have allocation value

According to the Zhitong Finance APP, CITIC Securities released a research report stating that on October 30, 2025, the Chinese and U.S. presidents met in Busan to discuss topics such as Sino-U.S. economic and trade relations and agreed to strengthen cooperation in economic and trade fields. The institution believes that the core driving force behind the current rise in U.S. stocks has returned to corporate fundamentals, and the easing of Sino-U.S. relations is expected to significantly reduce potential disturbances caused by additional risk factors. Against the backdrop of relatively eased Sino-U.S. relations and the overall liquidity in the U.S. remaining relatively ample, U.S. stocks still possess significant allocation value.

CITIC Securities recommends focusing on the technology sector in the U.S. stock market where valuations are more aligned with performance, the manufacturing sector benefiting from the re-industrialization process and policy benefits, midstream and upstream resource products, and the nuclear power industry. The institution believes that the risk appetite in the Hong Kong stock market may rise, suggesting attention to raw materials, the U.S. export sector, and sectors such as aviation and papermaking that may benefit from the appreciation of the renminbi.

CITIC Securities' main points are as follows:

The meeting between the Chinese and U.S. presidents went smoothly, deeply discussing Sino-U.S. economic and trade relations and agreeing to strengthen cooperation in economic and trade fields.

On October 30, 2025, the Chinese and U.S. presidents met in Busan. Xi Jinping pointed out that the economic and trade teams of both countries exchanged in-depth opinions on important economic and trade issues, forming a consensus on solving problems. Both teams should quickly refine and finalize follow-up work, maintain and implement the consensus well, and provide tangible results to give both China and the U.S. and the world economy a "sense of reassurance." The teams can continue to negotiate based on the principles of equality, respect, and mutual benefit, continuously compressing the list of issues and extending the list of cooperation.

The Sino-U.S. economic and trade teams made positive progress in Kuala Lumpur negotiations.

According to information from the Financial Associated Press, the consensus reached by the Sino-U.S. economic and trade teams through negotiations in Kuala Lumpur mainly includes the following aspects:

1. The U.S. side will cancel the 10% so-called "fentanyl tariff" imposed on Chinese goods, and the 24% reciprocal tariff on Chinese goods will continue to be suspended for one year; the Chinese side will adjust its countermeasures against the aforementioned tariffs from the U.S.; both sides agree to continue extending certain tariff exclusion measures.

2. The U.S. side will suspend the implementation of its September 29 announcement regarding the export control 50% penetration rule for one year; the Chinese side will suspend the implementation of the relevant export control measures announced on October 9 for one year and will study and refine specific plans.

3. The U.S. side will suspend the implementation of its 301 investigation measures against China's maritime, logistics, and shipbuilding industries for one year; after the U.S. suspends the relevant measures, the Chinese side will also suspend its countermeasures against the U.S. for one year.

4. Both sides also reached a consensus on fentanyl anti-drug cooperation, expanding agricultural product trade, and handling related corporate cases, further confirming the results of the Madrid economic and trade negotiations, with the U.S. making positive commitments in investment and other fields, and the Chinese side will properly resolve issues related to TikTok with the U.S.

U.S. stock market: The current rise in U.S. stocks has returned to corporate fundamentals, and the easing of Sino-U.S. relations is expected to significantly reduce potential disturbances caused by additional risk factors.

Since U.S. President Trump unilaterally claimed on October 10 that he intended to impose a 100% additional tariff on Chinese imports, U.S. stocks have rebounded from their low point at that time. As of October 29, the S&P 500 index and Nasdaq have risen by 5.2% and 7.9%, respectively. The sustained rise in U.S. stocks is mainly benefited from the continuous upward adjustment of earnings growth expectations since June this year, and during the current earnings season, representative technology companies such as Nvidia, Broadcom, and Micron have all released relatively optimistic earnings guidance As of October 24, the expected earnings growth rates for the S&P 500 Index, Nasdaq 100, and MAG7 (Apple, Microsoft, Amazon, Alphabet (Google), Tesla, Nvidia, Meta Platforms) for 2025 are 10.1%, 20.6%, and 20.8%, respectively (Bloomberg consensus). Therefore, the core factor driving the rise of U.S. stocks has returned to corporate fundamentals, and the successful meeting between the Chinese and U.S. presidents is expected to further alleviate potential risks posed by geopolitical factors. CITIC Securities believes that under the relatively eased Sino-U.S. relations and the overall ample liquidity in the U.S., U.S. stocks still possess significant allocation value, especially in the technology sector with strong fundamental growth. Looking ahead, as the OBBB Act gradually takes effect, it is recommended to focus on technology sectors in the U.S. stock market where valuations are more aligned with performance, manufacturing benefiting from the re-industrialization process and policy support, midstream and upstream resource products, and the nuclear power industry.

Hong Kong Stock Market: Risk appetite may rise, focus on raw materials, sectors exporting to the U.S., and aviation and paper industries that may benefit from the appreciation of the RMB.

Hong Kong stock investors have high expectations for the outcome of the Sino-U.S. presidential meeting. The Hong Kong stock market has significantly recovered from the declines caused by the rare earth export controls on October 9 and the subsequent threat of additional tariffs from the U.S. From the performance of the Hang Seng Index, the decline after the presidential meeting may reflect an adjustment of "good news fully priced in"; however, the meeting ultimately established a stable communication channel between China and the U.S., and the short-term uncertainties brought by Sino-U.S. frictions are expected to decrease significantly. CITIC Securities believes this may help boost the risk appetite in the Hong Kong stock market. In terms of negotiation results, the extension of rare earth export controls and the reduction of tariffs on exports to the U.S. may drive both volume and price increases in the raw materials sector; industries in the Hong Kong stock market with a high proportion of revenue from the U.S., including information technology, consumer staples and discretionary, and industrial sectors, will also benefit from the reduction in export tariffs. Additionally, historically, the signals of easing between China and the U.S. in November 2018 corresponded with a rebound in the RMB exchange rate, which can serve as a reference. If the RMB enters an appreciation channel subsequently, sectors such as aviation and paper may benefit significantly.

Risk Factors:

Global geopolitical frictions escalate beyond expectations; Sino-U.S. competition escalates beyond expectations; fluctuations in the U.S. economic fundamentals exceed expectations