EB SECURITIES released a research report stating that both A-shares and Hong Kong stocks experienced volatile performance in October. Hong Kong stocks maintain relatively strong overall profitability, while assets such as internet, new consumption, and innovative pharmaceuticals remain relatively scarce. Despite months of consecutive gains, Hong Kong stocks still trade at low valuations, offering attractive long-term investment value. Against the backdrop of ongoing AI industry trends and the Fed's rate cut cycle, Hong Kong stocks may continue their volatile upward trajectory.

In terms of sector allocation, EB SECURITIES suggests focusing on TMT and advanced manufacturing in the medium term, while high-dividend and consumer sectors could serve as defensive plays during market fluctuations. Key views are as follows:

**A-Shares: Market May Sustain Strong Performance** A-shares showed mixed performance in October, with the Shanghai Composite Index rising 2.7%, while the STAR 50 Index fell 1.6%. Sector performance diverged, with coal, communications, and banking outperforming.

The market is expected to remain strong due to supportive policies, including China's 15th Five-Year Plan and ongoing U.S.-China trade talks. Additionally, the Fed's potential rate cuts in October may further boost risk appetite.

**Sector Allocation:** - **Medium-term focus:** TMT and advanced manufacturing. - **Defensive plays during volatility:** High-dividend and consumer sectors (e.g., banking, utilities, food & beverage, beauty care).

**Hong Kong Stocks: "Barbell" Strategy Recommended** With the Fed's rate cut cycle underway, Hong Kong stocks may continue their volatile uptrend. The market offers strong profitability and scarce assets in internet, new consumption, and biotech. Despite recent gains, valuations remain low, making long-term allocation attractive.

**Investment Strategy:** 1. **Tech & Growth:** Focus on domestically supported sectors like semiconductors and advanced manufacturing amid U.S.-China tensions. 2. **Internet Tech:** Companies with independent growth drivers. 3. **High-Dividend, Low-Volatility:** Sectors like communications, utilities, and banking for stable returns.

**Risks:** Policy delays, worsening U.S.-China relations, and unexpected risk events.