Zhitong Hong Kong Stock Analysis | Dividend Stocks Led by Banks Unite, Panama Canal Disturbs Shipping Stocks

[Anatomy of the Market]

Today, the Hong Kong stock market was relatively stable, opening high and fluctuating within a narrow range throughout the day, closing up 0.82%. However, the A-share market was dismal, with the micro-cap stock index dropping over 7%, and nearly 4,800 stocks in the entire market declining, with over 200 stocks hitting the daily limit down.

This differentiated performance ultimately reflects A-shares paying for past patches. Over the weekend, the China Securities Regulatory Commission issued investigation notices for several companies, which directly cooled market sentiment. The market is even more panicked about the "New National Nine Articles": "Opinions on Strictly Implementing the Delisting System" will officially take effect on January 1, 2025.

The new delisting regulations clearly state that, in addition to the previous requirement of being forced to delist after two consecutive years of fraud reaching a certain proportion, new conditions have been added: one year of serious fraud and three or more consecutive years of fraud, as well as new delisting standards for fund occupation and internal controls that receive an inability to express an opinion or a negative opinion. At the same time, financial delisting indicators have been further tightened, with the revenue standard for loss-making companies on the main board raised from 100 million yuan to 300 million yuan. The market has immediately seen a small table of stocks that are about to be delisted. Most of the stocks in the table are panicking and have been directly pressed to the limit down.

Last Friday, we talked about the 'Triple Witching Day' in the U.S. stock market. At such critical moments, U.S. PCE data is usually used to stabilize the situation, and indeed, the U.S. core PCE month-on-month growth rate in November was the lowest in six months, finally stabilizing the downward momentum.

U.S. President-elect Donald Trump stated on Sunday that he prefers to allow TikTok to continue operating in the U.S. for at least some time, claiming that videos he posted on the social media platform during his campaign received billions of views. This statement indicates that there may be some turning point, but it is still too early to say that the situation has completely eased. The ultimate fate of TikTok remains uncertain; even if it can continue to operate in the U.S., it is likely to face significant challenges.

Today, the Hong Kong stock market's stability was supported by bank stocks, which is not surprising. Stabilizing the index is certainly an important consideration, and various funds need to find a large-cap sector to cluster together to stabilize performance, with the largest capacity being Industrial and Commercial Bank of China (01398), which surged nearly 5% today. Additionally, based on the logic of dividends, it can also be explained that new funds are likely to be allocated in this direction, as bank interest rates have generally fallen below 2%. Therefore, related stable dividends such as expressway stocks like Anhui Wanshan Expressway (00995) and Jiangsu Ninghu Expressway (00177); and power stocks like Huadian International (01071) continue to be favored.

The shipping sector is experiencing numerous catalysts, with several shipping giants fully raising shipping fees starting January 1, 2025. For example, Mediterranean Shipping Company's rate for a 40-foot container on the West Coast of the U.S. will increase to $6,150, while the East Coast will rise to $7,150; COSCO Shipping's rate for the West Coast will be adjusted to $6,000, and $7,000 for the East Coast. The reasons include the arrival of the traditional peak consumption period at the end of the year, the upcoming Lunar New Year, concerns about strikes at East Coast ports leading to continuous shipments from factories, tight supply and demand for shipping space, and increased operating costs for shipping companies due to the Panama Canal Authority implementing a new system, as well as the Israel-Palestine conflict causing ships to reroute. The latest catalyst also includes Trump's desire to reclaim the "Panama Canal," to which the President of Panama refuted Trump's remarks, and Trump responded: "We'll see." The Panama Canal, as an important shipping passage connecting the Atlantic and Pacific Oceans, has a prominent strategic position and economic value. The global shipping landscape has once again become subtle. Today, shipping stocks collectively moved, with China COSCO Shipping Energy (01138), Orient Overseas (00316), and Pacific Shipping (02343) all rising over 5%.

The Spring Festival-related themes are also being speculated in advance. According to Maoyan Professional Edition, as of December 19, 2024, at 20:00, five films are scheduled to be released on the first day of the Lunar New Year (January 29), including "The Legend of the Condor Heroes: The Great Hero," "Nezha: The Devil Child Rises," "Fengshen Part Two: The Battle of Xiqi," and "Detective Chinatown 1900," which have garnered high attention. Among them, the producer of "Fengshen" is Alibaba Pictures, and Alibaba participated in part of the production and promotion of "The Legend of the Condor Heroes." Today, Alibaba Pictures (01060) rose over 8%. Additionally, the aviation sector is stimulated by the tight Spring Festival travel, such as Air China (00753), which also has a solid logic, as mentioned earlier.

The customs export data for construction machinery in November is quite impressive. According to a research report by Tianfeng Machinery, excavators: the amount has turned positive for the first time in July after a complete year of decline, with positive growth continuing from August to November and showing an accelerating trend; in November, excavator export value increased by 29.7% year-on-year, with all regions except Russia and Oceania showing positive growth. The quantity in November increased by 37.9% year-on-year, with a cumulative increase of 21.2% year-on-year this year. Cranes: crane exports in November increased by 24.9% year-on-year, with a cumulative increase of 25.6% year-to-date; tower cranes increased by 17.3% year-on-year in November, recovering after four consecutive months of negative exports from June to September. Concrete: the total export of concrete mixers/pump trucks/pumps increased by 14% year-on-year in November, with a year-to-date increase of 45.4%. Overall, the trend is one of growth, and today, China National Heavy Duty Truck Group (03808), Zoomlion Heavy Industry Science and Technology (01157), and Weichai Power (02338) all showed stable performance.

Recently popular in the market, the leading Weimeng (02013) in the WeChat small store concept has accumulated an 88% increase over three trading days. Today, Dongfang Zhenxuan (01797) rose again by 5.87%, mainly benefiting from the holiday peak seasons of Christmas, New Year's Eve, and the Spring Festival, with investors hoping for some surprises in the data. The leading self-controllable chip company SMIC (00981) has shown resilience, rising again by 2.83% today.

NVIDIA is expected to unveil the next-generation GB300 AI server product line at the GTC conference in March next year, and suppliers like Hon Hai have recently entered the GB300 research and design phase. It is reported that NVIDIA has preliminarily confirmed the GB300 order configuration, with Hon Hai remaining the largest supplier, expected to launch the actual machine in the first half of next year. The foundry Hongteng Precision (06088) is worth paying attention to.

Recently, it has been reported that the Yangtze River Group plans to acquire Thames Water in the UK. A spokesperson for the China Yangtze Power Company (01038) stated that they do not comment on the reports but have always studied any opportunities that are beneficial for company development and enhancing shareholder returns. The spokesperson cited the interim performance report of the group, mentioning that the financial foundation remains robust, holding HKD 9.2 billion in cash as of the end of June, with a net debt ratio at a healthy level of 9.8%, providing financial flexibility to cope with various market uncertainties and support new acquisition opportunities It is estimated that even if the acquisition takes a long time, the fundamentals of CK Infrastructure Holdings Limited (01038) are indeed strong, with a rise of over 3% today.

Last week, news about a potential merger between Japan's second-largest automaker Honda and third-largest automaker Nissan resurfaced. According to two insiders, Honda and Nissan are expected to announce the start of business integration talks on Monday, with negotiations expected to be completed by June next year. Due to the lengthy negotiation period and the fact that this topic has been discussed before, today's news had little impact on the market, and Dongfeng Motor Group Company Limited (00489) instead fell over 6%.

On December 23, media reported that mainland Chinese investors are highly enthusiastic about Hong Kong stocks in 2024. As of December 20, mainland investors have purchased HKD 778 billion (approximately USD 100 billion) worth of Hong Kong stocks through the Stock Connect this year, setting a record high since the launch of Stock Connect in 2016. In the fourth quarter, the trading share of mainland investors in the Hong Kong market reached a record 45%. While the influx of domestic capital certainly enhances their influence, the situation dominated by foreign capital is still difficult to change.

【Sector Focus】

The Ministry of Industry and Information Technology announced that the overall operation of the telecommunications industry has been stable in the first eleven months of this year. The telecommunications business volume has achieved steady growth, with the construction of network infrastructure such as 5G, gigabit optical networks, and the Internet of Things being advanced, and the scale of connected users continuing to expand, with mobile internet access traffic growing rapidly. During this period, the cumulative telecommunications business revenue reached RMB 1.59 trillion, a year-on-year increase of 2.6%. The total telecommunications business volume, calculated at constant prices from the previous year, grew by 10%.

The scale of mobile phone users has steadily increased, with the number of 5G users exceeding 1 billion. As of the end of November, the total number of mobile phone users among the three major telecommunications companies and China Broadcasting Network reached 1.79 billion, a net increase of 46.82 million compared to the end of last year. Among them, the number of 5G mobile phone users reached 1.002 billion, a net increase of 180 million compared to the end of last year, accounting for 56% of mobile phone users, an increase of 9.4 percentage points compared to the end of last year.

As of the end of November, the total number of 5G base stations in mainland China reached 4.191 million, a net increase of 815,000 compared to the end of last year, accounting for 33.2% of the total number of mobile base stations, an increase of 4.1 percentage points compared to the end of last year.

China has become the country with the most 5G users in the world, and the upcoming 5.5G will continue to bring growth potential, with major players including China Unicom (00762) and China Telecom (00728); other equipment manufacturers include ZTE Corporation (00763), China Tower Corporation Limited (00788), and Yangtze Optical Fibre and Cable Joint Stock Limited Company (06869).

【Stock Picking】

Samsonite International S.A. (01910): Has repurchased nearly HKD 1.2 billion this year, showing improvement in the fourth quarter and continuing to push for a U.S. stock listing.

The company announced that from December 16 to 20, it repurchased approximately 3.74 million shares, accounting for 0.26% of the total share capital, with a repurchase amount of approximately HKD 78.51 million. As of now, Samsonite has repurchased approximately 60.37 million shares this year, accounting for 4.13% of the total share capital, with a repurchase amount of approximately HKD 1.176 billion.

Comment: The large-scale repurchase this year reflects the company's optimism about its future prospects. It plans to rename itself "Samsonite Group Limited." The business is expected to move towards more diversified development. Although the company's performance in the third quarter was below expectations, management stated that there has been an improvement in the fourth quarter compared to the third quarter Samsonite Group, which includes multiple brands, holds an 18% share of the global luggage market, solidifying its leading position.

The company operates several proprietary brands, including Samsonite, Tumi, and American Tourister, covering consumer segments across high, medium, and low-end markets. Through global expansion, the company's market share has steadily increased, with a market share of 3.8% in the global luggage market last year, second only to LV and Kering Group. It is expected that Samsonite will benefit from the synergistic development of multiple brands, with market share likely to steadily increase. Samsonite has successively acquired the French fashion luggage brand Lipault, the second-largest mobile phone case brand in the United States Speck, the outdoor and adventure backpack brand Gregory, the Italian luggage brand ChicAccent, the high-end business luggage brand Tumi, and the largest American and globally top luggage shopping website eBags.

From a brand and channel perspective, in the first half of 2024, Tumi's net sales increased by 0.3%, while American Tourister's net sales slightly decreased by 0.9%. The company's direct-to-consumer channel saw a net sales increase of 4.7%, accounting for 38.1% of total net sales in the first half of 2024, compared to 37.7% in the first half of 2023. In the first half of 2024, the company's gross profit margin rose from 58.8% in the same period last year to 60.2%, setting a record for the first half of the year, with improvements seen in all regions. Since August, Samsonite has frequently repurchased shares, spending approximately HKD 200 million on buybacks in October alone. The company continues to advance its listing on the US stock market.

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