Hong Kong Stock Market Closing (08.01) | Hang Seng Index fell by 0.23%, property stocks across the board declined, while Hong Kong utilities, gold stocks, etc. rose

According to the Wisdom Financial APP, the Hong Kong stock market failed to continue yesterday's strong rally, with the three major indices showing a weak trend today. As of the close, the Hang Seng Index fell by 0.23% or 39.64 points to 17,304.96 points, with a total daily turnover of 94.051 billion Hong Kong dollars; the Hang Seng China Enterprises Index fell by 0.34% to 6,086.4 points; and the Hang Seng Tech Index fell by 1.15% to 3,476.58 points.

Guangda Securities pointed out that the current policy effects still need further verification, but it can be foreseen that if the real estate market does not improve for a long time, policies are likely to continue to tighten. Signs of marginal improvement in the domestic economic fundamentals are expected to continue. The recovery of the Hong Kong stock market will require further policy stimulus or confirmation of a turnaround in domestic economic data.

Performance of Blue-Chip Stocks

China Resources Power (00006) led the gains in blue-chip stocks. At the close, it rose by 5.02% to 52.3 Hong Kong dollars, with a turnover of 659 million Hong Kong dollars, contributing 5.57 points to the Hang Seng Index. Federal Reserve Chairman Powell signaled a dovish stance overnight, hinting at a rate cut as early as September. Some analysts pointed out that as the probability of a rate cut in September in the United States further increases, the interest rate advantage of the utilities sector is expected to widen. Coupled with the current low valuations, this is expected to support the sector's performance.

In other blue-chip stocks, Link Real Estate Investment Trust (00823) rose by 3.33% to 34.1 Hong Kong dollars, contributing 4.51 points to the Hang Seng Index; CLP Holdings (00002) rose by 3.13% to 69.15 Hong Kong dollars, contributing 6.84 points to the Hang Seng Index; China Evergrande Group (00881) fell by 6.55% to 11.42 Hong Kong dollars, dragging down the Hang Seng Index by 1.02 points; and HSBC Holdings (00011) fell by 3.65% to 92.35 Hong Kong dollars, dragging down the Hang Seng Index by 4.31 points.

Hot Sectors

On the market, large-cap tech stocks were all in the red, with Tencent bucking the trend with a nearly 1% increase. Sales data for the top 100 real estate companies in July turned from positive to negative, leading to a decline in property stocks; Citigroup expects weak retail sales data for July, putting pressure on sports goods stocks; automobile dealers, cement stocks, home appliance stocks, and automobile stocks all fell. On the other hand, demand for rail transit equipment is strong, with high-speed rail construction stocks leading the gains; Powell opens the door to a rate cut in September, leading to a rise in gold stocks; some pharmaceutical and medical stocks, telecommunications stocks, Hong Kong utilities stocks, and gaming stocks are performing well.

1. Rise in Gold Stocks. At the close, Lingbao Gold (03330) rose by 3.49% to 3.56 Hong Kong dollars; China Gold International (02099) rose by 2.35% to 43.6 Hong Kong dollars; Shandong Gold (01787) rose by 2.1% to 16.54 Hong Kong dollars; Zhaojin Mining (01818) rose by 1.86% to 14.24 Hong Kong dollars.

Federal Reserve Chairman Powell stated that the committee had a thorough discussion on rate cuts at the recent meeting and reached a consensus. If the data supports it, the policy rate could be lowered as early as September. The interest rate futures market has increased bets on nearly three rate cuts by the Federal Reserve this year. In addition, tensions in the Middle East escalated suddenly, with Hamas leader Haniyeh being killed in an attack in Iran. This event will escalate Middle East geopolitics, and Iran will retaliate against Israel. Spot gold briefly broke through the $2450 per ounce level, the first time since July 18th 2. Some pharmaceutical and medical stocks are strong. As of the close, Mason Health (02415) rose by 25% to HKD 2.1; Junshengtai Pharmaceutical-B (02511) rose by 10.62% to HKD 1.25; Yisi Health (02138) rose by 7.62% to HKD 1.13; Dingdang Health (09886) rose by 5.1% to HKD 1.03.

With the Fed's interest rate cut approaching, interest rate-sensitive industries such as pharmaceuticals are seeing positive expectations. In addition, recent favorable policies for innovative drugs have been frequent. Shanghai recently issued the "Opinions on Supporting the Full Chain Innovation and Development of the Biopharmaceutical Industry," providing important policy support and guidance for the development of the biopharmaceutical industry. Guojin Securities previously pointed out that with the increasing probability of a US dollar interest rate cut, the valuation of emerging market innovative assets is expected to recover. Coupled with breakthroughs in Chinese innovation and research and development, the market is expected to usher in a good investment opportunity for the innovative drug sector in the second half of the year.

3. High-speed rail infrastructure stocks perform well. As of the close, Times Electric (03898) rose by 6.24% to HKD 30.65; CRRC (01766) rose by 4.75% to HKD 5.07; Guangshen Railway (00525) rose by 3.78% to HKD 2.47; China Railway Signal (03969) rose by 3.4% to HKD 3.35.

According to China Railway Group statistics, from January to June 2024, national railways completed fixed asset investment of 337.3 billion yuan, a year-on-year increase of 10.63%, reaching a new high for the same period in history. Shanxi Securities stated that against the background of the increase in national railway passenger and freight volume and the improvement of China Railway Group's profit-making ability, combined with policy support for equipment renewal, the bank believes that national railway equipment investment is expected to increase, and the demand for EMUs and locomotives may exceed expectations. In addition, CRRC signed contracts totaling approximately 45.99 billion yuan in the period from June to July 2024, including a contract for advanced maintenance of EMUs worth about 13.68 billion yuan, showing a strong performance.

4. Real estate stocks across the board decline. As of the close, Yuexiu Property (00123) fell by 9% to HKD 4.55; Shimao Group (00813) fell by 6.76% to HKD 0.69; Sunac China (01918) fell by 4.72% to HKD 1.01; Vanke (02202) fell by 4.2% to HKD 4.11.

According to the China Index Research Institute, from January to July 2024, the total sales of the top 100 real estate companies amounted to 2.39094 trillion yuan, a year-on-year decrease of 40.1%, narrowing by 1.5 percentage points compared to the previous month. In July, the sales of the top 100 real estate companies decreased by 19.4% year-on-year and decreased by 35.2% month-on-month. According to Ke Rui Real Estate, in July 2024, the top 100 real estate companies achieved a sales turnover of 279.07 billion yuan, a decrease of 36.4% month-on-month and a decrease of 19.7% year-on-year, with the monthly performance scale continuing to remain at a historically low level.

Open Source Securities stated that from a data perspective, the sales market cooled down in July, with the sales data of the top 100 real estate companies turning from positive to negative on a month-on-month basis. Although the year-on-year decline in cumulative sales scale has narrowed, it is still at the lowest level in nearly six years. The bank believes that with the clear signal of stabilizing the real estate market, after the release of the new real estate policies on May 17, first-tier cities have responded one after another to optimize home purchase measures. The policies on the demand side and the financial side are worth looking forward to after the central government has set the direction for real estate development 5. Car dealers with significant declines. As of the close, China ZhengTong Auto Services Holdings (00881) fell by 6.55% to HKD 11.42; Meidong Auto (01268) fell by 4.85% to HKD 1.96; Yongda Auto (03669) fell by 1.28% to HKD 1.54.

The latest "China Automobile Dealers Inventory Alert Index Survey" released by the China Automobile Circulation Association shows that in July 2024, the inventory alert index for Chinese automobile dealers was 59.4%, up 1.6 percentage points year-on-year and down 2.9 percentage points month-on-month. The inventory alert index is above the boom-bust line, indicating a downturn in the automotive circulation industry. The China Automobile Circulation Association pointed out that the operating conditions of dealers are below expectations, with compressed new car profit margins, inventory backlog, and weak market demand being the main issues at present.

Hot Stocks in Focus

1. New Oriental-S (09901) falls after earnings release, closing down by 7.85% to HKD 50.45.

New Oriental announced unaudited comprehensive financial results for the fourth quarter ending in May this year, with revenue of USD 1.137 billion, up 32.1% year-on-year; operating profit of USD 10.527 million, down 78.1% year-on-year; net profit of RMB 26.972 million, down 6.9% year-on-year. Non-GAAP net profit attributable to New Oriental shareholders was USD 36.9 million, down 40.5% year-on-year.

2. Goodbaby International (01086) announces profit growth, closing up by 6.25% to HKD 0.68.

Goodbaby International announced that it expects to achieve a net profit of approximately HKD 160 million to 200 million in the first half of 2024, compared to approximately HKD 29.9 million in the same period last year. The increase in net profit is mainly attributed to the growth in gross profit, which is driven by revenue growth, favorable brand revenue mix, brand profit margin improvement, and lower input costs leading to gross margin improvement.

3. Prada (01913) continues to rise, closing up by 5.67% to HKD 59.6.

Macquarie noted that based on Prada's strong performance in the second quarter and the improvement in operating leverage, it has raised its net profit forecasts for 2024 to 2026 by 2.7%, 6.8%, and 6.2% respectively. The target price has been raised by 2% to HKD 70, maintaining its "outperform the market" rating, believing that the next catalyst will be the penetration rate of its Miu Miu brand in markets outside Asia