The Fed raises interest rates for the first time in three years! How will the market react?

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Weekly Outlook | Hawkish U-turn, NVIDIA stands out alone, how will risk assets be repriced?

Market Outlook Weekly Call

Live Stream Recap | In-Depth Analysis of the AI Computing Power Sector: NVIDIA's Valuation Reset, Guarantee Risks, and Key Beneficiaries

💡 Key Takeaways

Macroeconomy: Waller sets a hawkish tone at Jackson Hole,The probability of a rate hike in September jumped from around 30% to over 50%, with long-end yields staying high and term premium recovering, putting short-term pressure on risk assets for repricing.

US stocks：Neutral with volatility, the market is not broadly embracing growth but rather reordering within the tech sector; sectors with high earnings visibility such as software, cybersecurity, and financials are picking up the slack,AI hardware leader (NVIDIA) remains the main theme, while volatility amplifies for pure high-valuation hardware supply chains.

Hong Kong stocks：Structural bottoming amid weak volatilitySuppressed by high US Treasury yields and Alibaba's placement volatility, but southbound capital quickly flowed back in without a systematic retreat; the strategy isHigh dividend yield with a margin of safety + resource hedging (CNOOC) + improved financial sector profitability, while maintaining a left-side waiting stance for the tech sector.

Configuration: In an environment of rising interest ratesLow-beta portfolios tend to benefit relatively; absent strong policy support, sectors with low reliance on domestic demand,such as innovative drugs, CXO, and non-ferrous metals, still offer opportunities for excess returns. Mid-September marks the next key catalyst window for the Chinese market.

I. Macro Observation

1.1 International Macro: Jackson Hole sets a hawkish tone; why did the probability of a September rate hike jump?

US core PCE price index rose 0.2% month-on-month in July,remaining flat year-on-year at 3.3%in line with market expectations,indicating that underlying inflationary pressures are stabilizing; however, the Fed's preferredheadline PCE year-over-year remains as high as 3.7%, still significantly distant from the 2% target. Real personal consumption expenditures, adjusted for inflation, were flat month-on-month, cooling from the robust growth seen in May and June. Overall, the "last mile" of disinflation remains sticky, creating constraints for a policy pivot.

Warsh made his debut at Jackson Hole as Fed Chair, signaling a more hawkish stance than the July FOMC meeting: inflation is "concerning," and the primary focus should remain on price stability. Following the speech, the yield on 2-year U.S. Treasuries jumped,with the probability of a September rate hike rising from around 30% before the speech to over 50%. Due to the lack of clear clarification on the policy framework and reaction function, the market struggled to accurately interpret policy intentions, which was also the main reason for the simultaneous pullback in stocks and gold on Friday.

implied Fed rate hike expectations (Source: CME FedWatch, 2026-08-29)

30-Year UST Yield (Source: Google Finance, 2026-08-29)

1.2 Domestic Macro: Industrial profit growth slows amid a boom in the electronics supply chain; what is the impact of real estate deleveraging?

China in JulyIndustrial profits rose 11.0% year-on-year, and industrial revenue increased 6.5% year-on-year, marking a significant slowdown from June's +18.3% and +11.4%, respectively. On a seasonally adjusted basis, industrial profits declined 3.2% month-on-month.Significant structural divergence: Cumulative profit growth in the computer, communication, and electronics sectors surged to 105%,，Integrated circuits, complete computer systems, and discrete semiconductor devices were the main drivers of high growth; coal profit growth has seen one-sided improvement since the beginning of the year, while instruments, electrical machinery, and specialized equipment have also rebounded to varying degrees.

On August 28, the Ministry of Housing and Urban-Rural Development and two other departments issued the "Notice on Improving the Sales System for Commercial Housing," and the PBOC released opinions on reforming real estate credit management on the same day. Under the new regulations, the number of investment projects that developers can support with equivalent cash flow has decreased, and turnover rates have declined. The short-term drag on construction starts and fixed asset investment remains a concern; however, given that real estate investment is already at a low level and policies continue to support the delivery of existing projects and financing,the medium-term impact is largely controllable, and the monthly year-on-year low for investment may occur in the second half of this year,with sales and investment expected to stabilize after an initial dip.

China's Industrial Profits (Jan-Jul) (Source: National Bureau of Statistics of China, 2026-08-29)

II. Market Views

2.1 US Stock Market: S&P and Nasdaq edge up, semiconductors under pressure; why is the main theme shifting to rebalancing in September?

$S&P 500 Index (.SPX.US)$Up 0.49% for the week, $Nasdaq Composite Index (.IXIC.US)$up 0.85%,and $PHLX Semiconductor Index (.SOX.US)$ down about 2.3% for the week, $Russell 2000 (LIST20783.US)$ down about 1.5%. Capital is not broadly embracing growth but rather reallocating within the tech sector. The main trading theme in September is shifting from earnings season to rebalancing and policy expectation games.

MaintainedNeutral with a bias toward volatility:NVIDIA's earnings beat expectations, driving a rebound in some large-cap tech and software stocks, as the market focused its trading on leading companies with stronger fundamental realization.Waller's clearer hawkish anti-inflation signals pushed up short-term rates and the probability of a September rate hike,putting pressure on growth stocks, especially semiconductors,, but this is essentially a"Credit repair." Sectors with higher earnings visibility, such as software, cybersecurity, and finance, are expected to continue attracting inflows, with AI hardware leaders remaining the main investment theme.。

Valuations and earnings continue to provide support: Of the S&P 500 companies that have reported earnings (485 firms), after excluding one-time investment gains from big tech,EPS growth remains around 27%; the S&P 500's forward 12-month P/E ratio stands at 20.2 (as of August 27).Following Jackson Hole, the 2-year US Treasury yield rose to 4.34% (+11bps), and the 10-year yield climbed to 4.72%-4.73%, with the market-implied probability of a September rate hike revised up from approximately 35% toapproximately 56%-58%.。

S&P 500 forward 12-month P/E ratio at 20.2 (as of Aug 27, Source: Bloomberg, compiled by Futu Private Wealth)

🔍 Spotlight Stocks

$NVIDIA (NVDA.US)$ : Global leader in AI computing infrastructure

- Earnings elasticity outperforms scale expansion:The FY27 Q2 earnings report confirms that the AI infrastructure supercycle has entered its main upward phase. The company provideda midpoint revenue guidance of $108 billion for FY27 Q3, representing approximately +90% YoY and +12% QoQ growth, surpassing the consensus estimate of $104.6 billion, with an operating margin of around 66%.This indicates that its growth is not solely driven by price hikes, but rather the result of a triple resonance: architectural leadership, tight supply, and clear customer ROI.

Rationale:

- Smooth generational product transition is a key support:Blackwell did not experience premature decay, and Rubin successfully took over the baton. Management providedguidance for FY28 revenue to grow approximately +70% YoY,and clarified that this remains a result of supply constraints, with demand further diversifying across customers, use cases, and geographies. The company has increasedits supply and capacity commitments from $119 billion to $279 billion,with AI cloud service commitments reaching $36 billion.

- Valuation remains attractive:Currently trading ata forward FY27 P/E ratio of approximately 14x;Q3 Non-GAAP gross margin guidance is around 74%, potentially dipping to 71%-72% in Q4. The pressure mainly stems from higher memory costs, but gross profit dollars are still expected to grow alongside revenue, supported by strong pricing power.

NVIDIA Valuation (Source: Bloomberg, compiled by Futu Private Wealth Investment Research)

2.2 Hong Kong Stock Market: Hang Seng Index fell 1.63% for the week; southbound capital flowed back rapidly. How much room is there for bottoming out amid weak fluctuations?

Last Week's Review:

The index fell 1.63% for the full week, with total turnover reaching approximately HK$126.5 billion (daily average of ~HK$25.3 billion), showing little change week-over-week. Net inflows via the Stock Connect totaled HK$9.77 billion for the week (with HK$4.8 billion flowing back over the three days from August 26-28).On August 24, the market dropped sharply by 1.89% in a single day, primarily driven by Alibaba's HK$80 billion placement and industry news such as NVIDIA's mass production of CPOs. This sparked concerns about squeezed capital expenditure in sectors like optical communications, memory semiconductors, and PCBs.

This Week's Outlook:

Structural bottoming amid weak volatility：At the index level, performance remains constrained by high long-end US Treasury yields (the 10-year yield hovering around 4.7%), the post-Jackson Hole spike in short-end rates, and disruption from Alibaba's large-scale placement. The discount rate pressure on Hong Kong-listed tech stocks has not yet eased; however, medium-term capital has not systematically withdrawn. Following event-driven shocks, southbound funds quickly flowed back in, still viewing Hong Kong stocks as allocable assets, but with greater emphasis onhigh-dividend safety margins, the hedging attributes of resource sectors, and improved profitability in financials,while maintaining a left-side waiting stance on technology stocks.

In terms of data,the total scale of lock-up expiries in the third quarter approached HK$670 billion,with short-term supply pressure that cannot be ignored;the Hang Seng Index's forward 12-month P/E ratio stood at 11.7 (as of August 28),remaining in the lower range, with valuation safety margins still attractive.

HSI forward 12-month P/E ratio: 11.7 (as of Aug 28; Source: Bloomberg, compiled by Futu Private Wealth)

🔍 Spotlight Stocks

$CNOOC (00883.HK)$ : Core energy assets combining resource flexibility, a low-cost margin of safety, and certainty in long-term production growth

- Earnings elasticity outperforms scale expansion:Net profit attributable to parent company shareholders for Q2 2026 is estimated at RMB 46.67-46.7 billion, representing a year-on-year increase of approximately 41.5%-44.5% and a quarter-on-quarter increase of about +19%, with profit growth continuing to outpace revenue growth, driven by the combined effects of price improvements, cost control, and the release of operating leverage; in the first half of the yearnet cash flow from operating activities reached RMB 141.6 billion, up 29.7% year-on-year, outpacing net profit growth, with major costs per barrel of oil equivalent at approximately USD 29.7.

Rationale:

- Oil price cycles are the most direct driver:Realized oil price in Q2 was approximately USD 95.1-95.9/barrel, with the discount narrowing to approximately USD 0.55-1.6 compared to the Q2 Brent average price of USD 96.7-96.8/barrel, significantly better than before; geopolitical conflicts and disruptions in the Strait of Hormuz are keeping the oil price center oscillating at high levels, providing continued support for second-half earnings.

- Short-term focus on dividend capacity: Oil prices show significant elasticity, For every $10/barrel increase in Brent crude, the company's 2026 net profit attributable to shareholders is estimated to increase by approximately RMB 30 billion; even if Brent falls back to around $70/barrel, the company's net profit can still remain at approximately RMB 145 billion.。Supported by strong cash flow and low leverage, there is substantial room for high dividend payouts while maintaining high capital expenditure.

CNOOC Valuation (Source: Bloomberg, compiled by Futu Private Wealth Investment Research)

3. Key Focus This Week

What key events should investors pay attention to this week?

– September 1-2 / G20 Digital Economy Ministers' Meeting (North Carolina, USA): Tech giants such as Musk, Jensen Huang, and Altman are in attendance. The Trump administration is pushing for global acceptance of the 'Carolina Principles,' which advocate for light-touch AI regulation. Key focus areas include the global tone on AI regulation and statements from tech leaders.

– September 4 / US August Non-Farm Payrolls Report: Marketexpects an addition of 55,000 jobs(previous value: July unexpectedly saw a decrease of 23,000). If the figure significantly exceeds expectations, it will alleviate concerns about labor market weakness and support risk appetite; if it falls short, it will reinforce the policy divergence between 'economic cooling vs. sticky inflation.'

4. Major Bank Perspectives

US Stock Market Summary: Short-term indices show resilience, but earnings distribution will narrow. Sectors with higher earnings visibility, such as software, cybersecurity, and financials, are expected to continue attracting capital, while AI hardware leaders remain the main theme. Before September, the market is likely to oscillate around trades related to further rate hikes or prolonged high interest rates, leading to significantly amplified volatility in pure high-valuation hardware supply chains. If interest rates continue to rise,high-beta factors are the most vulnerable;conversely, in an environment where high interest rates persist longer,Low-beta portfolios tend to benefit relatively。

Hong Kong Stock Market Summary: The 10-year US Treasury yield remains volatile near the high level of 4.7%, with short-end yields spiking after Jackson Hole. Discount rate pressure on Hong Kong-listed tech stocks remains unresolved, leading to a greater emphasis in allocation onhigh-dividend safety margins, the hedging attributes of resource sectors, and improved profitability in financials,, while maintaining a contrarian "wait-and-see" stance on technology. Mid-September marks the next key catalyst window for the Chinese market, with AI business progress by Hong Kong-listed hyperscale cloud providers and large model leaders serving as potential drivers; if strong policies are not introduced, sectors with lower dependence on domestic demand such asinnovative drugs, CXO (Contract Research/Manufacturing Organizations), and non-ferrous metals(relative overweight directions) still offer opportunities for excess returns.

[Investment Advisory Information]

Yu Shilin, Licensed Representative, Central Entity Number: ATQ882

Yang Yi, Licensed Representative, Central Registration Number: BUR210

Sun Bihan, Licensed Representative, Central Entity Reference Number: BWS708

To obtain the full report, please contact your Private Wealth Relationship Manager (RM).

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