Strategic viewpoint

This week, the Hang Seng Index rose 292.88 points, or 1.03%, to close at 28765.4 points, with a total weekly turnover of HK $325.1 billion. In terms of industry, the top three industries with increases were health care 4.84%, non-daily consumer goods 1.92%, and industry 1.06%.

The biggest recent uncertainty is the friction between China and the United States, and the fact that the macroeconomic downward trend has not changed has put pressure on the stock market. In addition, the National Bureau of Statistics released its semi-annual report on China's economy, in which GDP growth slowed to 6.2% in the second quarter, a record low. CPI, although pork prices continued to rise in July led to a rebound in food prices, but non-food prices, oil, coal, steel prices are now up and down, recently fell. Therefore, the overall inflationary pressure is limited. From the perspective of investment, we should pay more attention to the changes in the growth rate of corporate profits, including the increase in commodity prices. But GDP's nominal growth rate rose from 7.8% to 8.3%, rising for the first time after a series of declines. The rebound in the nominal growth rate of GDP can be seen that there are signs of an inflection point in the current round of corporate profit growth, mainly due to the optimization of production capacity under the supply-side reform, and the utilization rate of capacity of industrial enterprises has been improved, so that the downward space of industrial product prices is limited, such as steel prices, coal prices and so on, there will no longer be a sharp rise and fall in the past. Therefore, one of the reasons for the decline in real GDP growth is that China has taken the initiative to reduce production in exchange for stable prices of industrial products.

In the past, the rapid growth of China's GDP is mainly driven by investment, and the side effect of high investment growth is the risk of high debt, which greatly increases the debt ratio, erodes the profits of enterprises, and finally leads to the result of overcapacity. However, the most striking performance in this semiannual report is consumption growth, and the contribution rate of consumption to GDP has increased significantly, which is mainly due to the implementation of policies such as tax cuts and supply-side reforms. Although the growth rate of total retail sales of consumer goods is as high as 8.4%, there are still some doubts about whether the market can maintain a relatively high growth rate of consumption in the context of the economic downturn. Therefore, we also need to observe the performance of the relevant economic data in the third quarter.

The Hang Seng Index has adjusted for more than two months since the end of consecutive gains in the first half of the year.We believe that the shock adjustment will remain the main tone of the market in the coming months. The next round of gains based on resonance between policy and fundamentals is expected to begin after the third quarter.

Market review

Hong Kong stocksThis week, the Hang Seng Index rose 292.88 points, or 1.03%, to close at 28765.4 points, with a total weekly turnover of HK $325.1 billion, while the Hang Seng China Enterprises Index rose 121.07 points, or 1.12%, to 10909.41 points.

In terms of A sharesThis week, the Shanghai Composite Index fell-0.22% to close at 2924.20 points, the Shenzhen Composite Index rose 0.16% to close at 9228.55 points, and the gem Index rose 1.57% to 1541.98 points.

1. Market trends

1.1 impact of major news

(1) Major economic data: national Development and Reform Commission: electricity consumption of the whole society in the first half of the year was 3.4 trillion kilowatt-hours, an increase of 5.0% over the same period last year; electricity generation in the first half of the year increased by 3.3% compared with the same period last year, slowing down 0.9% compared with the first quarter Ministry of Commerce: in the first half of the year, China's domestic investors made non-financial direct investment in 3582 overseas enterprises in 151 countries and regions around the world, with a total investment of 346.8 billion yuan, an increase of 0.1% over the same period last year. China's foreign direct investment was 63.73 billion yuan in June, an increase of 6.3% over the same period last year. Bureau of Statistics: in the second quarter, the GDP of the financial industry grew by 7.6% compared with the same period last year, the GDP of the real estate industry grew by 2.4% year-on-year, and the GDP of information transmission, software and information technology services increased by 20.1%.

(2) the Premier of the State Council presided over a forum of economic situation experts and entrepreneurs, saying that at present, there are many factors and difficulties and challenges affecting the domestic economy, and downward pressure has increased; it is necessary to adhere to the implementation of pro-active fiscal policy, prudent monetary policy and employment priority policy, timely pre-adjustment and fine-tuning, and make good use of counter-cyclical adjustment tools; it is necessary to earnestly fulfill the promise of reducing taxes and fees of nearly 2 trillion yuan for the whole year, and stabilize the expectations of enterprises. Dredge the transmission channels of monetary policy, reduce the financing costs of small and medium-sized enterprises, take the initiative to expand opening up, implement the system of pre-entry national treatment plus negative list management, and cultivate new hot spots of consumption and investment growth points guided by improving people's livelihood. focus on expanding effective investment, making good use of local government special debts, speeding up the construction of major projects, removing hidden obstacles to private investment, and promoting industrial transformation and upgrading.

(3) the Office of the Financial Commission of the State Council issued 11 measures to expand the opening up of the financial industry to the outside world, including: allowing foreign institutions to rate all types of bonds in the interbank bond market and exchange bond market; encouraging overseas financial institutions to participate in the establishment and investment of financial subsidiaries of commercial banks; allowing overseas financial management institutions to set up holding wealth management companies; and allowing overseas financial institutions to invest in the establishment and participation of pension management companies. Support wholly foreign-owned establishment or participation in money brokerage companies; advance the transition period from 51% to 100% for the ratio of foreign capital shares in life insurance to 2020; allow foreign investors to hold more than 25% of the shares in insurance asset management companies; cancel the 30-year operating life requirement for access to foreign insurance companies; and lift the restrictions on the ratio of foreign investment shares to securities firms, funds and futures companies in 2020 ahead of schedule. Foreign-funded institutions are allowed to obtain a Class A main underwriting license in the interbank bond market, and it is further convenient for foreign institutional investors to invest in the interbank bond market.

(4) the Central Bank issued the report on China's Regional Financial Operation (2019): a prudent monetary policy should be appropriately loose and tight, counter-cyclical adjustment should be implemented in a timely and appropriate manner, and timely pre-adjustment and fine-tuning should be made in accordance with changes in the economic growth and price situation. Broad money M2 and the growth rate of social financing scale match the nominal growth rate of GDP; we should effectively prevent and defuse financial risks in key areas, and balance the relationship between promoting development and preventing risks. A triangular supporting framework will be formed between implementing a prudent monetary policy, enhancing the vitality of micro-subjects and giving full play to the function of the capital market, so as to promote the virtuous circle of the national economy as a whole.

(5) in the power industry, the joint-stock reform plans of a number of power trading institutions have been reported to the relevant departments, and after being approved for the record, more than 20% of the shares will be selected by means of public recruitment. This is a microcosm of the most exciting part of the overall acceleration of electricity reform and breaking the monopoly to welcome the new this year.

(5) in the pharmaceutical industry, according to the summary information of a symposium on centralized procurement of drugs in 47th, the second round of bidding is still the previous 25, but the scope of bidding should be extended from 47th cities to all provinces and regions of the country, including public hospitals, designated private hospitals and military hospitals in all regions, and 70% of the national consumption is invited for bidding, but the price requirement is even lower.

(6) with regard to the real estate industry, the Ministry of Finance openly solicited opinions from the public on the Land value-added tax Law of the people's Republic of China. The draft for soliciting opinions brings collective real estate into the scope of taxation, and proposes to abolish the adjustment fee for land value-added income, so as to stabilize the overall burden of collective real estate before and after legislation.

(7) for the cement industry, the profit of the cement industry in the first half of the year is expected to reach 80 billion yuan, an increase of nearly 20% over the same period last year. In the first half of the year, the country's cumulative cement output was 1.045 billion tons, an increase of 6.8 percent over the same period last year, the highest growth rate in the past five years. Market analysts believe that the profitability of the industry for the whole year may be the same as last year, or even better.

(8) in the fuel cell industry, the Ministry of Industry and Information Technology is working with other ministries to study a new subsidy policy for fuel cells. the relevant subsidy idea is not to supplement the whole vehicle plant as before, but to consider subsidizing manufacturers that produce core components. In particular, enterprises with core technology will receive stronger policy support.

(9) in the aquaculture industry, the Ministry of Agriculture and villages: there have been 48 outbreaks of African classical swine fever this year, with a significant decrease in the number of monthly outbreaks. 24 provinces (regions) have lifted the blockade of the epidemic areas, and the order of pig production and marketing is being gradually restored.

(10) in terms of the 5G industrial chain, China Telecom Corporation launched the collection of 5G equipment in 12 provinces and cities, and planned to purchase by leasing. Single-source procurement suppliers include Huawei, ZTE Corporation, Ericsson, Nokia and Datang Communications.

(11) in the game industry, the fourth batch of imported game version numbers have been issued this year, with a total of 24, including NetEase, Inc and Tencent.

1.2 Corporate dynamics

Vinda International (03331.HK)

July eighteenthVida InternationalThe results for the first half of 2019 showed that for the six months ended June 30, 2019, revenue was HK $7.891 billion, up 7.6% from a year earlier; gross profit was HK $2.217 billion, up 1.8% from a year earlier; profit attributable to equity holders of the company was HK $440 million, up 5.4% from a year earlier; an interim dividend of HK $0.07 per share is proposed.

Taken together, although the financial data this time is not as good as the same period last year, it is mainly affected by the exchange rate (Vinda International's main business is in the mainland, accounting for about 75%, Hong Kong and Malaysia account for 25%, and the financial report is settled in Hong Kong dollars). After adjusting the impact of the exchange rate, revenue still maintains double-digit high-speed growth, cost control, net profit performance is good, reflecting a stable profitability.

From the perspective of the industry as a whole, Vader is one of the four leading household paper enterprises in China, with a market share of 11.5%, only slightly lower than Hengan Internationgal Group's 11.6%.At present, the competition in China's household paper market is fierce, which is conducive to the elimination of small and medium-sized household paper enterprises with poor anti-risk ability, and further strengthen the industry head effect. Vida International, as the leader of the industry, has potential in the future.

Weiqian (China) (HK.00538)

Shanghai leading Restaurant Management Co., Ltd.Weiqian (China)One of the subsidiaries of Holdings Limited is one of the fast leisure restaurant chain operators in China. In March 2007, the company was listed on the main board of the Hong Kong Stock Exchange. It has become the first fast leisure restaurant chain operator listed in Hong Kong with the mainland as its main business base.

Weiqian (China) issued an announcement on July 17, that is, unaudited operating statistics for the second quarter ended June 30, 2019; the announcement showed that the group's same-store sales growth rate increased by 4.8% year-on-year, and fast leisure restaurant business sales increased by 6.4% year-on-year. Affected by the news, the company's share price rose 15.92% on July 18 and 21.02% in two days.

It is reported that sales of comparable stores in Weiqian (China) and Hong Kong increased by-0.6% and-7.5% respectively in the first half of 2018, with sales growth of same-store Q1 and Q2 in mainland China by 0.6% and-1.8% respectively. Comparable store sales in mainland China and Hong Kong grew by 2.2% and-6.8% respectively in 2017, and comparable store sales declined by 8.1% in 2016 compared with the same period last year.

To sum up, the rise in Weiqian (China) share price comes from the direct stimulus of positive financial data.Judging from the listed share price, the company's valuation is already at an all-time low; in the future, if the company's store operation efficiency is further improved and labor costs are properly controlled, it may be expected to open a new upsurge.

two。 Market data analysis

2.1 list of major indices

Main index comparison

2.2 Overview of industry data

The top three gainers in the Hang Seng Index this week were Sino Biopharmaceutical 5.63 per cent, CSPC Pharmaceutical 5.56 per cent and Geely Automobile 5.17 per cent. The top three stocks that fell were CNOOC Limited-2.53%, Wharf Real Estate Investment-1.70% and CITIC Limited-1.67%.

In terms of the Hong Kong stock industry, the top three industries with increases were health care 4.84%, non-daily consumer goods 1.92%, and industry 1.06%. In addition, in terms of valuation, the optional consumer sector remains at the top of the list, followed by daily consumption and health care.

2.3 Market sentiment

This week, turnover in the Hang Seng Index was HK $325.1 billion, down slightly from HK $340.2 billion last week. The proportion of short selling in the whole market reached 15.99%, slightly lower than the 16.02% last week.The top three short sellers in the sector were insurance Ⅱ, automobile and auto parts, and consumer service Ⅱ, which were 23.89%, 21.47% and 21.20%, respectively.

This week, the premium index of Hang Seng AH shares was 126.66, down slightly from last week.In terms of peripheral market sentiment, the VIX index rose slightly this week, closing at 13.47 on Friday, and the market panic was relatively stable.

3. Analysis of capital flow between the two places

In terms of capital flow, this week, the cumulative net inflow of southbound capital transactions reached 3.269 billion yuan (RMB), lower than the inflow level of 3.931 billion yuan (RMB) last week. Of this total, the net inflow of Hong Kong stocks in Shanghai was 1.283 billion yuan (RMB), slightly higher than last week's net inflow of 1.241 billion yuan (RMB), while the net inflow of Hong Kong stocks in Shenzhen was 1.986 billion yuan (RMB), down from 2.69 billion yuan (RMB) last week.

In terms of individual stocks on the board of Hong Kong stocks.From the perspective of the degree of activity of southward capital buying and selling, this week, the financial, real estate, consumer and other sectors were more active. The top three net buyers were China Pacific Insurance, Sino Biopharmaceutical, and ANTA Sports Products. The top three net sellers were China Evergrande Group, R & F Real Estate and Sunac China.

4. Risk hint

Economic stall and decline in the coming months, policy tightening, geopolitical risks, and a sharp devaluation of the renminbi.