Intelligent Hong Kong Stock Analysis | Behind Powell's Dovishness, Interest Rate Cut Beneficiary Stocks React to the Wind

[Market Analysis]

The Hong Kong stock market has quietly broken through all moving averages, unlike the A-share market which remains stagnant below. It seems that international capital has a more keen sense. The Hang Seng Index closed up by 1.06%, but the trading volume was only 83.5 billion.

Unexpectedly, this time Powell released dovish remarks at the Jackson Hole Global Central Bank Annual Meeting: "The inflation rate has dropped significantly, the labor market is no longer overheated, the current financial market conditions are looser than before the epidemic, and it is time to adjust policies now. The direction forward is clear, and the timing and speed of rate cuts will depend on future data, evolving prospects, and balancing risks." Upon careful analysis, Powell's departure from the norm this time is mainly due to several reasons: firstly, the U.S. economy is not as strong as imagined, otherwise there would be no rush to appease the market; secondly, it is estimated to be somewhat related to U.S. National Security Advisor Sullivan's visit to China, as the current geopolitical situation is quite unstable, such as the clash between Hezbollah and Israel in the early hours of Sunday, escalating tensions in the Middle East. In order to prevent accidental conflicts, further communication and coordination between major powers are needed. Therefore, to ease the negotiation atmosphere, the Fed's cooperation in rate cuts is a wise move. Ultimately, all conflicts stem from nothing but economics and interests.

Following the analysis of Powell's speech, the futures market has increased bets on Fed rate cuts, with an expected rate cut of nearly 100 basis points by the end of the year; the probability of a 50 basis point rate cut in September has risen to 33% compared to before the speech. The rough path for rate cuts ahead is 25 basis points in September, 50 basis points in November, and another 25 basis points in December.

After establishing this rate cut path, the market will reallocate accordingly. The market's response is particularly strong in the CXO category, as emphasized repeatedly, because under rate cuts, investment intensity will increase, especially in capital expenditures, particularly in innovative drugs, which will significantly strengthen. Stocks like WuXi Biologics (02269), WuXi AppTec (02359), Hutchison China MediTech (03347), Kanglong Chemical (03759), have all risen by over 3%.

At the same time, interest-sensitive local property stocks in Hong Kong are naturally rising. Among them, Wharf Real Estate Investment Company (01997), Swire Properties (01972), New World Development (00016), Henderson Land Development (00012), Sun Hung Kai Properties (00014) have all risen by over 3%. Gold-related stocks are also steadily rising.

Over the weekend, Deputy Minister Dong Jianguo of the Ministry of Housing and Urban-Rural Development made a speech: researching the establishment of three systems - housing inspection, housing pension, and housing insurance, constructing a long-term housing safety management mechanism throughout the entire life cycle. Currently, 22 cities including Shanghai are conducting pilot projects. Among them, individual accounts for housing pension have been established through the payment of special maintenance funds for residential buildings. The focus of the pilot is for the government to establish a public account. This public account will likely consist of 2 accounts, an individual account + a public account. The money in the individual account is the special maintenance fund that homeowners have already paid when buying a house, so there is no need to pay again. The main focus now is to explore how the money in the public account should be allocated. The public account is funded by the government and is unrelated to individuals, possibly funded from land transfer fees, or a portion of property-related taxes and fees, or a portion of funds from the renovation of some old neighborhoods or urban renewal funds Some people believe that the housing pension is another form of real estate tax, but it is not. Property tax is a wealth tax levied by the state to support urban construction and public services, and is not directly related to the greening and public areas within residential communities. This public account will not increase the burden on homeowners. However, whether future "housing inspections" will be mandatory, how they will be charged, how repairs will be carried out after inspections, how insurance money will be used, etc., still need to be seen in specific follow-up policies. In the A-share market, companies related to housing inspections have performed well, such as Jianyan Institute (603183.SH) and Guojian Group (603060.SH). In the Hong Kong stock market, the focus is mainly on property management companies, such as Lvcheng Services (02869): with a 21.5% increase in mid-term net profit year-on-year, the stock rose by 5.81%, and Evergrande Property (06666): will hold a board meeting on August 30 to approve mid-term performance, with market expectations for its restructuring, leading to a more than 9% increase today.

Over the weekend, CCTV's website highlighted the concept of clean energy bases, mentioning that the "14th Five-Year Plan and 2035 Vision Goal Outline" proposes the construction of nine major clean energy bases, with seven located in western regions. This strategic layout is closely related to the resource endowment and location advantages of the western regions. Combined with the policy measures announced last Friday to further promote the formation of a new pattern in the development of the western regions, companies related to clean energy have attracted attention. In Shanghai, the first round of competitive allocation of offshore photovoltaic projects will start in 2024 with a scale of no less than 1 million kilowatts. Wind power leader Goldwind Technology (02208): achieved a net profit of 1.05 billion yuan in the second quarter, a year-on-year increase of +6252% and a quarter-on-quarter increase of +217%, significantly exceeding market expectations, attributed to turbine upgrades and overseas expansion. In addition, the company plans to repurchase some A-shares through centralized bidding trading, with a total repurchase amount of no less than 250 million yuan and not exceeding 500 million yuan; the repurchase price per share will not exceed 11.4 yuan. The stock surged by 8.52% today.

The 2024 World Robot Conference was recently held, with 27 humanoid robots making a collective appearance. Among them, Ubtech Robotics (09880) showcased the "Humanoid Robot Industrial Scene Solution" for the first time. In addition, on August 22, Ubtech Technology officially signed a strategic cooperation agreement with Suzhou Mediston Medical Technology Co., Ltd., to jointly establish a joint venture company to carry out in-depth cooperation in AI intelligent services and medical care and wellness fields. On the same day, Ubtech also signed a cooperation agreement with the Innovation Center and FAW Audi, jointly developing intelligent solutions for humanoid robots, introducing humanoid robots into intelligent handling, quality inspection, and process material operation positions on automobile production lines, promoting the large-scale application of humanoid robots in automobile factories. Ubtech, as the most authentic robot company in the market, lacks performance catalysts, but rose by 6.63% today. Another minimally invasive robot company, MicroPort Robotics-B (02252), is scheduled to hold a board meeting on August 28 to approve mid-term performance. The stock surged by over 13% today, indicating good performance, attracting active market participation.

"Black Myth: Wukong" has become extremely popular, with mysterious forces starting to make moves, causing the game distribution platform Steam to suffer 280,000 malicious attacks overnight. However, this has not stopped its expanding influence. The positive news about this game continues to spread, such as stimulating the continuous upgrading of displays. The game adopts advanced rendering technology, reaching new heights in terms of image quality and smooth operation, leading players to increasingly demand higher display performance, making it difficult for traditional esports monitors to meet the needs of players pursuing the ultimate visual experience MiniLED is expected to stand out. Related varieties such as BOE Varitronix (00710) and TCL Electronics (01070) have performed well.

XPeng Motors-W (09868) announced that co-founder, executive director, chairman, CEO, and controlling shareholder He Xiaopeng purchased a total of 1 million Class A ordinary shares in the company from August 21 to August 23 at an average price of HKD 27.13 per share, and also purchased a total of 1.4199 million American depositary shares through his wholly-owned Galaxy Dynasty at an average price of USD 7.02 per ADS. After the completion, He Xiaopeng will hold approximately 18.8% of the total issued share capital of the company. He also informed the company that, in compliance with applicable laws and regulatory requirements, he plans to further increase his holdings. The founder's use of real money to increase holdings has had a very good effect, directly leading to a 7% increase.

[Sector Focus]

Since the beginning of this year, the solid-state battery industry, which is in a downturn compared to lithium batteries, has been hot. According to GGII's forecast, by 2024, solid-state batteries (semi-solid) are expected to achieve large-scale installation, with an annual installation capacity expected to exceed 5GWh.

The biggest change in solid-state batteries lies in the three major technological routes of solid-state electrolyte materials: sulfides, oxides, and polymers. Among them, oxide electrolytes have a wide electrochemical window range, but poor interface contact performance. Polymer electrolytes have better interface contact, but the ion conductivity and chemical stability need to be improved. Sulfide electrolytes have good ion conductivity, but insufficient chemical stability. Overall, the development of oxide solid-state batteries is relatively advanced at the current stage, with relatively low costs; the sulfide route is seen as the most promising for the future, with relatively high costs; while the performance of the polymer route is relatively limited.

Samsung has explicitly chosen sulfides as the direction for the development of solid-state batteries. Among domestic companies, CATL (300750.SZ) has matured in the development of sulfide solid-state batteries. Currently, Ganfeng Lithium (01772) is developing second-generation semi-solid-state battery products, which are planned to use NCM633 or high-performance single crystal NCM811 as the cathode material, and the electrolyte solution will use the company's self-developed ceramic oxide PEO film, mainly GARNET and LISICON type oxides.

[Stock Analysis]

Yadea Group (01585): Sales trend is improving, overseas market share is expected to increase

The company announced its interim results, with revenue of RMB 14.414 billion; gross profit of RMB 2.594 billion; and net profit attributable to shareholders of RMB 1.034 billion. In addition, the Consumer Goods Industry Department of the Ministry of Industry and Information Technology released the first batch of enterprises that meet the "Regulatory Conditions for the Electric Bicycle Industry" on July 30, with Yadea included.

Analysis: The company has been the global sales leader for seven consecutive years since 2017, maintaining a leading position in the industry. The total sales of electric scooters and bicycles decreased from 8.2107 million units in the first half of 2023 to 6.3826 million units in the same period of 2024, but sales gradually recovered in May and June 2024, showing an improving trend. The overall gross profit margin increased from 16.9% in the first half of 2023 to 18% in the same period of 2024 The advantage of the full industry chain layout is highlighted, and the profit space is further opened up. 1) Battery: Acquired Huayu, continuously improving the battery layout, and has now built a "three-horse carriage" of graphene batteries, carbon fiber lithium batteries, and sodium batteries. 2) Motor: The company is layouting in the motor field, gradually mastering the core technology of motors. 3) Controller: Acquired the most core BSM controller manufacturer of the four electric systems - Lingbo Electronics. The overseas policy dividend brings incremental demand to the industry, and electric two-wheelers are expected to replace fuel motorcycles with high penetration rates in Southeast Asia, becoming an important means of transportation in the Southeast Asian region. The company is accelerating the development of overseas markets, expanding its distribution network to more than 90 countries including Europe, Southeast Asia, South America, and Central America, gradually improving its overseas market layout. At the same time, the company is comprehensively promoting the construction of overseas bases, accelerating capacity expansion, and the market share in overseas markets is expected to increase.

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