The financial world has been buzzing with excitement following the long-anticipated decision by the Federal Reserve to cut interest rates, marking the first decrease in four yearsThis moment has not only captured headlines across various platforms but also influenced markets, with the A-share market in China seeing a noticeable surge in response to the news.

As investors and analysts scramble to understand the implications of this rate cut, numerous articles have emerged discussing what assets might benefit from this changeA quick review of the landscape is in orderFirst on the list are U.STreasury bonds, which have consistently demonstrated strong performance during past Fed rate cut cycles.

Unfortunately, for those looking to invest through QDII bond funds, the situation is not as favorableCurrently, out of the 25 QDII bond funds available in the market, most are either completely sold out or have restrictions on large purchases, making it challenging for investors to gain exposure.

For example, the Guofu USD Bond fund is currently limiting large purchases, while the majority of the others are either suspended for new investments or in a freeze on applicationsThis leaves investors with limited options when looking to capitalize on the benefits likely to arise from the Fed's decision.

Meanwhile, gold and U.S. equities are also often mentioned in discussions about the effects of lower interest ratesHowever, their performance during different phases of a rate cut can vary significantly, so investors must be strategic and identify the optimal times to enter these markets.

This brings us to an intriguing question: what about the Hong Kong stock market? With the recent developments regarding the Fed's interest rate cuts, there seems to be a promising opportunity arising in Hong Kong's financial landscape, primarily because of its distinct characteristics and economic ties.

Unlike the A-share market in China, which feels the impact of the Fed's decisions more indirectly, Hong Kong's stock market operates in a unique offshore U.S. dollar environment

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This makes it much more sensitive to changes in U.S. monetary policyFurthermore, with its current status as a global valuation oasis, Hong Kong offers a high price-performance ratio, making it more attractive to foreign investors compared to the A-share market.

Historically, during past rate cuts, Hong Kong's market often outperformed that of mainland ChinaIn addition, the composition of the Hong Kong stock market is heavily weighted towards new economy sectors, encapsulating a plethora of high-quality tech and internet giants.

Prominent players like JD.com and Tencent have recently shown signs of improvement, as they have managed to recover from past downturnsAcross several recent quarters, their performances have surpassed market expectations, reinforcing the notion that positive changes are taking place.

Furthermore, these leading internet companies have been actively engaged in enhancing shareholder returns, evidenced by aggressive stock buybacksTo date, companies listed in Hong Kong have repurchased shares worth over HKD 200 billion this year alone.

The immediate reaction from the Hong Kong stock market to the Fed's rate cut has been substantially positive, with the Hang Seng Index climbing by 2% and the Hang Seng Tech Index witnessing a substantial 3.25% increaseCompanies such as Meituan, Alibaba, Tencent Holdings, and Xiaomi all recorded gains exceeding 2% at certain points during the trading day.

Switching gears, let's examine which funds have increased their investments in Hong Kong equities amid this evolving backdropOne prevalent thought that tends to circulate around Hong Kong stocks is their previous dramatic declines, leading many to speculate about potential bottom-fishing opportunities, especially in sectors like pharmaceuticals and Chinese internet companiesHowever, this year signifies a shift towards the dividends offered by Hong Kong stocks.

Upon investigation, I identified a few funds that have notably increased their stakes in Hong Kong equities during the first half of this year

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These selected funds hold more than 20% of their portfolios in Hong Kong stocks, with all experiencing positive returns thus far this year.

Intriguingly, the only two exchange-traded funds (ETFs) are both centered on the dividend yield, and indeed, the performance of Hong Kong dividends has outpaced that of their A-share counterpartsThis is chiefly due to Hong Kong’s lower and more attractive valuations, along with higher overall dividend yields from its indices.

Looking at actively managed equity funds, the top contenders are largely names familiar to investors, with a significant focus on dividend strategiesA noteworthy mention is the Jingshi Hong Kong Equity Advantage Fund, which is the highest in terms of allocation to Hong Kong stocks, boasting an impressive allocation of over 80%.

Founded in January 2021, this fund has consistently maintained a high allocation to Hong Kong stocks, comfortably surpassing the 80% markIts performance in both 2022 and 2023 has been robust, even outpacing the Shanghai and Shenzhen 300 Index.

Under the guidance of Zhang Jintao, an experienced fund manager with more than eight years in product management, the fund has adopted a value-oriented investment style, focusing on bottom-up selection of high-quality companies and maintaining a balanced portfolio.

Zhang Jintao believes that the key to market recovery does not hinge solely on economic growth rates; instead, it fundamentally relies on increasing shareholder returns and creating stable long-term policy expectationsHis investment strategy thus emphasizes finding opportunities through low valuations, shareholder returns, and avoiding market saturation.

Another fund that merits discussion is the Baoying Quality Selection Fund, which has not only seen growth in its size but also garnered interest from institutional investors, with their presence in the fund increasing from 45% at the end of 2023 to an impressive 84%.

Despite its maximum drawdown reaching -7.78% this year, its stock exposure has remained on the conservative side

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