"Pre-Market Outlook": Hawkish adjustments do not undermine mainstream rate cut expectations, steady recovery in gambling revenue allows for medium-term deployment of gambling stocks

According to the Economic News Agency on the 4th, the Hang Seng Index ended its three-day decline, rebounding by 251 points. Overnight, U.S. technology stocks led the gains, and Hong Kong's technology stocks followed suit, driving the Hang Seng Index to soften before rising again, closing at 26,209, up 51 points or 0.2%, with a main board turnover of nearly HKD 120.4 billion. The Hang Seng China Enterprises Index closed at 9,277, up 19 points or 0.2%. The Hang Seng Technology Index closed at 5,910, down 12 points or 0.2%. \* Guo Jiayao: There is still a high chance of interest rate cuts next month, while the pace of cuts next year is more worth noting * Recently, Hong Kong stocks have seen a significant decline in trading volume, but the Hang Seng Index has consolidated around 26,000 for several days, showing a relatively quiet overall trend. Guo Jiayao, Director of Business Development at the Hong Kong Family Office, told the Economic News Agency that the Hang Seng Index's decline has stabilized since this week due to the stabilization of Sino-U.S. news, along with clearer prospects for U.S. Federal Reserve interest rate cuts and expectations of easing from the People's Bank of China. Multiple pieces of news have settled, leading to a lack of catalysts in the market, causing previously hot growth stocks such as technology and new consumption stocks to retreat. Funds are shifting towards dividend-paying stocks as the interest rate cut cycle begins, and it is expected that the market will tend to rotate funds, with the Hang Seng Index fluctuating around 25,800 to 26,500. Previously, the Chairman of the U.S. Federal Reserve sent a hawkish signal regarding interest rate cut expectations, significantly reducing the chances of a cut next month. However, Guo Jiayao stated that according to interest rate futures, a 0.25 basis point cut next month remains the mainstream opinion. Additionally, the Federal Reserve has paused its balance sheet reduction, clearly indicating a signal of easing, making it less likely that there will be no rate cut. However, he also mentioned that after the Federal Reserve completes its last meeting of the year next month, the market will pay more attention to the pace of rate cuts next year, as U.S. interest rates have shifted from tightening to neutral, and whether the pace of future easing will slow down will influence market expectations. \* The trend of rising gambling revenue remains unchanged, and the recovery of gambling revenue indirectly benefits non-gaming income * Recently, Macau announced that its gambling revenue for October was MOP 24.09 billion, an annual increase of 15.9% and a monthly surge of 31.7%, exceeding expectations. At the same time, yesterday, SA SA INT'L (00178) issued a profit warning, expecting to earn 50% to 56% more for the interim period ending in mid-September this year, approximately MOP 48.5 million to 50.5 million, mainly due to the continuous increase in the number of visitors from Hong Kong and Macau. Guo Jiayao agrees that Macau's gambling revenue is recovering well, with data rebounding in October after a decline in September. He expects that gambling revenue will have a greater chance of maintaining a growth trend. As the stock prices of gaming companies have collectively retreated, it may be worthwhile to consider medium-term deployments at current prices. Although the increase in gaming revenue does not directly reflect the performance of non-gaming businesses, Guo Jiayao believes that not all visitors to Macau are gamblers. The rise in gambling revenue indirectly indicates an increase in foot traffic, and tourists who do not participate in gambling will turn to non-gaming facilities for entertainment, thus indirectly proving the increase in non-gaming business income. Therefore, he suggests deploying gaming stocks with more non-gaming businesses, such as Galaxy Entertainment (00027), as current valuations are more attractive than before, and around HKD 38 could be a good entry point. \* Changes in consumer habits limit SA SA's profits * As for SA SA, Guo Jiayao believes that after the profit warning, today's trading volume for SA SA is still not enthusiastic, indicating that the market remains cautious about SA SA's future. He pointed out that SA SA's good mid-term growth this time is due to a low base, benefiting from the increase in foot traffic from Hong Kong and Macau, but still falling short of previous peaks. Additionally, current changes in consumer habits mean that travelers find it easier to purchase imported products and do not necessarily have to rely on offline retail stores like SA SA. He expects that SA SA's future growth will also be limited (hc)