Smart Decision Reference | The magnitude of interest rate cuts is the main catalyst to watch for the performance of internet giants

[Editor's Market View]

The trend of the Hong Kong stock market has diverged from the A-share market, with the Hang Seng Index holding up against pressure at the annual line last week.

The social financing data released over the weekend was not ideal, especially with M1 growth continuing to decline. In response, officials from relevant departments of the central bank made a rare statement: the monetary policy will be more flexible, moderate, precise, and effective, with increased regulatory intensity. They will accelerate the implementation of financial policy measures already introduced, introduce some incremental policy measures, further reduce the financing costs for enterprises and residents, and maintain reasonable and adequate liquidity. This implies that the central bank may further cut reserve requirements and interest rates in the future, and may also adjust downward the interest rates on existing housing loans. Note that this Friday (September 20th), the People's Bank of China will announce the LPR quotation for September.

The highlight of this week is the Federal Reserve's interest rate meeting. Nick Timiraos, a Wall Street Journal reporter known as a mouthpiece for the Federal Reserve, published an article titled "The Fed's Dilemma on Rate Cuts: Big Step or Small Step?", revealing internal debates within the Federal Reserve regarding the first rate cut, significantly increasing the possibility of a 50 basis point cut. If there is a 50 basis point cut, it will greatly boost the Hong Kong stock market. However, if it is only 25 basis points, attention should also be paid to the possibility of the Bank of Japan unexpectedly raising interest rates at its rate meeting on September 20th.

The Office of the United States Trade Representative announced that starting from September 27th, tariffs on Chinese-made electric vehicles will be raised to 100%, tariffs on solar panels will be raised to 50%, and tariffs on electric vehicle batteries, key minerals, steel, aluminum, masks, and gantry cranes will be raised to 25%. Tariffs on other products, including semiconductor chips, will also be increased over the next two years. Although the proportion is not large, there may be some emotional impact.

Overall, the market needs to digest economic data, with the extent of rate cuts being the main catalyst. The performance of internet giants is a key point to watch.

In terms of hot topics, the 9th Huawei Global Connectivity Conference will be held from September 19th to September 21st, 2024, and the Huawei concept may gain momentum. The Ministry of Industry and Information Technology is promoting domestically produced argon fluoride lithography machines with a resolution of ≤65nm. This means that mature chips with a process above 28nm are expected to achieve full domestic production, and efforts to catch up in high-end technology are already underway, boosting confidence in domestic chip production.

[Stock Picks of the Week]

Kangfang Biotech (09926)

Partner Summit raises an additional $235 million in refinancing. On September 12, 2024, Summit Therapeutics announced that the company has accepted acquisition offers from several leading biotechnology institutions and individual investors to purchase approximately 10.35 million shares of the company's common stock at $22.70 per share (the closing price on September 11, 2024), raising a total of approximately $235 million in refinancing. Summit will use the net proceeds to advance AK112/SMT112 clinical development, including indications such as non-small cell lung cancer, colorectal cancer, and triple-negative breast cancer.

AK112 in combination with AK117 shows promising data. At ESMO in September 2024, AK112 in combination or not with AK117 Lefalumab and FOLFOXIRI was selected for an oral presentation as a phase 2 study for first-line treatment of metastatic colorectal cancer The results show that the ORR of FOLFOXIRI + Avastin and FOLFOXIRI + Avastin + Leflunomide groups are 81.8% and 88.2% respectively, with 9m PFS rates of 81.4% and 86.2% respectively, and both have a DCR of 100%.

Multiple Phase III clinical trials are progressing efficiently. Currently, Avastin is conducting over 25 clinical trials in 17 indications areas including lung cancer, pancreatic cancer, breast cancer, liver cancer, colorectal cancer, etc., through monotherapy and combination therapy. As the world's first approved and marketed dual-targeted drug with "immunotherapy + anti-angiogenesis" synergistic mechanism, Avastin has demonstrated excellent safety and clinical benefits. With the continuous advancement of global multicenter clinical trials, it is expected to further change the global landscape of cancer treatment.

[Industry Observation]

The heat of mergers and acquisitions is high, with various news being intensively released: On September 10th, the Director of the Shanghai State-owned Assets Supervision and Administration Commission published an article in the Liberation Daily titled "Focusing on Core Competitiveness to Deepen the Reform of State-owned Assets and State-owned Enterprises," mentioning the comprehensive allocation of state-owned capital in a larger scope, deeper level, and broader fields to promote strategic restructuring across groups and levels. On September 11th, Tan Zuojun, Deputy Director of the State-owned Assets Supervision and Administration Commission of the State Council, stated that central enterprises are encouraged to strengthen cooperation with various types of ownership enterprises and actively engage in equity cooperation with private enterprises and other social capital.

Data shows that since May 2024, A-share listed companies have disclosed a total of 46 major asset restructuring projects, with 7 equity restructuring projects submitted to the China Securities Regulatory Commission for registration. The relevant person in charge of the CSRC stated that overall, the market-oriented reform of mergers and acquisitions has achieved positive results, with landmark mergers and acquisitions cases emerging successively, showing that mergers and acquisitions in "hard technology" enterprises are more active, contributing to technological innovation and resource integration.

The Hong Kong stock market continues to focus on securities-related mergers and acquisitions, such as Zhongjin Company (03908) and China Galaxy (06881) of the China Investment Corporation (CIC) group; CITIC Securities (06030) and CITIC Construction Investment (06066) of the CITIC group.

[Data Analysis]

Data released by the Hong Kong Exchanges and Clearing Limited (HKEX) shows that the total number of open contracts for Hang Seng Index Futures (September) is 117,848, with a net open interest of 46,376 contracts. The settlement date for Hang Seng Index Futures is September 27, 2024.

Looking at the distribution of bull and bear positions in the Hang Seng Index, at the 17,369 level, the bearish warrants are closer to the axis, providing momentum for the Hang Seng Index to go long. This week focuses on the FOMC's interest rate decision, with institutions expecting a 25-point cut. The Hang Seng Index is expected to rise this week.

[Editor's Note]

Since 2015, the AH premium index has fluctuated between 120 and 155, reaching a low of 113 and a high of 161 (in February this year). Currently, the AH premium index has returned to 160, nearing its limit. From this perspective, it is a relatively good time for Hong Kong stock investment [Disclaimer] This VIP information product is for communication and discussion purposes only, and does not constitute any investment advice. Reproduction without authorization is strictly prohibited. For more high-quality information and data products, please log in to theSecurities Timesapp for inquiries.