Anatomy of the large cap market.

Today's market trends in both places appeared divergent. A-shares experienced adjustments, while the Hong Kong stock market remained sunny, opening high and steadily rising, and closing up 2.87%, with trading volume expanding to 112.8 billion. Most of the nearly 10 billion yuan increment comes from the Mainland, which may also attract some bearish foreign capital to cover their positions.

Investors have been looking forward to the Lujiazui forum, and here are the main points: the China Securities Regulatory Commission will issue 'Eight Points for the Science and Technology Innovation Board', which marks a new wave of reforms for the board. Supporting Science and Technology Innovation Board-listed companies to carry out mergers and acquisitions of upstream and downstream industry chain, which can enhance the industry's synergy effect. For the Science and Technology Innovation Board, this is a bullish sign, but there is nothing substantive for the Main Board, so the A-share market is not excited at all. The People's Bank of China: In the future, it may consider making one of the People's Bank's short-term operational interest rates as the main policy rate. Simply put, to narrow the range of interest rates and make the MLF rate more accurately docking with the LPR rate to ensure banks have enough flexibility to serve the real economy. Bank stocks generally rebounded well today, with shares of banks such as China Merchants Bank (03968), Postal Savings Bank of China (01658), and Bank of Communications (03328) all rising more than 4 percentage points. The China Banking and Insurance Regulatory Commission is studying the development of guidelines for promoting the high-quality development of the insurance industry. This is beneficial for banks and insurance, but there is no new news for securities.

There are three main reasons why the Hong Kong stock market has a strong response: 1) Fang Xinghai, Vice Chairman of the China Securities Regulatory Commission, said at the forum that it will support more companies to list in Hong Kong, accelerate filing of overseas listed companies, especially those with large financing amounts and strong strength. Regarding overseas listings, the attitude of the China Securities Regulatory Commission is to cultivate rapidly and a large number of Chinese companies will not 'lie flat', instead prefer to grow stronger. This is a policy tilt, sending more high-quality enterprises to the Hong Kong stock market, which will naturally bring in supporting funds. 2) On June 19th, China State-owned Assets Supervision and Administration Commission-controlled China National Investment announced on its official website that its subsidiary, Guoxin Investment, subscribed the first batch of China Securities Index-backed Hong Kong-listed ETFs issued by GF Fund, Southern Fund, Invesco Great Wall Fund and other companies. This is the second time that Guoxin has invested in State-owned enterprise-related ETF products after increasing its holdings of China Securities Index-backed State-owned enterprise technology ETF funds last December 1st. According to the issuance schedule, China Securities Index-backed Hong Kong-listed ETF products are planned to be issued in the domestic market from June 11th to 21st. At present, the first three China Securities Index-backed Hong Kong-listed ETF products issued by GF Fund, Southern Fund and Invesco Great Wall Fund. The Hong Kong market products are scheduled to be issued in early July and listed on both the Shanghai and Hong Kong stock exchanges in mid-July. With the support of incremental funds, relevant varieties are naturally going to rise. Both CNOOC (00883) and Sinopec (00857) rose more than 4 and 6 percentage points, respectively. 3) Dah Sing Bank released the results of its '2024 Survey of Business Opportunities for Small and Medium Enterprises'. The survey found that Hong Kong's small and medium-sized enterprises generally have confidence in the future. The survey found that 76% of small and medium-sized enterprises surveyed believed that business can grow by 4% or more in the next 12 months, and 48% of them believed that business can grow by 7% or more in the next 12 months. In terms of macro-market development, e-commerce, finance, and leading technology industries will become Hong Kong's growth drivers in the next 12 months. As for the Greater Bay Area (excluding Hong Kong), the three major growth industries are leading technology, consumption, and finance. In addition, 58% of the surveyed small and medium-sized enterprises intend to expand their business in the Greater Bay Area, and 58% of them believe that their business growth in the next 12 months can reach 7% or more.

On June 19th, China State-owned Assets Supervision and Administration Commission-controlled China National Investment announced on its official website that its subsidiary, Guoxin Investment, subscribed the first batch of China Securities Index-backed Hong Kong-listed ETFs issued by GF Fund, Southern Fund, Invesco Great Wall Fund and other companies. This is the second time that Guoxin has invested in State-owned enterprise-related ETF products after increasing its holdings of China Securities Index-backed State-owned enterprise technology ETF funds last December 1st. According to the issuance schedule, China Securities Index-backed Hong Kong-listed ETF products are planned to be issued in the domestic market from June 11th to 21st. At present, the first three China Securities Index-backed Hong Kong-listed ETF products issued by GF Fund, Southern Fund and Invesco Great Wall Fund. The Hong Kong market products are scheduled to be issued in early July and listed on both the Shanghai and Hong Kong stock exchanges in mid-July. With the support of incremental funds, relevant varieties are naturally going to rise. Both CNOOC (00883) and Sinopec (00857) rose more than 4 and 6 percentage points, respectively.

Nvidia rose 3.51% to close at $135.58 last night, with a total market capitalization of $3.34 trillion, surpassing Microsoft and Apple, becoming the highest market cap stock in the world. The soaring of Nvidia actually points to a direction for the future, that is, the future world must be a world dominated by AI high technology. Behind the great power competition is the race for technological superiority, and the more constraint there is, the more we must vigorously develop. Currently, the A-share market is fully devoted to the STAR Market for the same reason. Technology is the bottom layer of the industry chain, which has been mentioned many times before.

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In addition, Canalys predicts that the global penetration rate of AI PC, the intermediate carrier, will increase to 19%, 43%, and 55% by 2024, 2025, and 2026, respectively. At present, the leading Lenovo Group (00992) already has more than 40 AI applications, and the number is expected to reach 1,000 by the end of the year. Today, it rose more than 9 points, and ZTE (00763) business is similar, just relatively weak in terms of internationalization under restriction. However, it is expected to gradually improve with the acceleration of domestic substitution process. Today, it also rose more than 3 points. In terms of application, yesterday's AI + vertical large model direction was mentioned, and today the market continues to explore, such as Yidu Tech (02158) with AI + medical rose by 13.64%, and Meitu Inc. (01357) with AI graphic processing, which the founder Wu Zeyuan added 1 million shares yesterday, rose nearly 9 points today. Sensetime (00020) with general large model also rose by 6.72%.

According to public data, the US May retail sales increased by 0.1% month on month, lower than expected, which is seen as boosting the possibility of a faster US interest rate cut, bullish for gold. The front-month Comex gold for June delivery rose 0.8% yesterday to $2,330.40 per ounce; the front-month Comex silver for June delivery (XAGUSD:CUR) rose 0.6% to $29.505 per ounce. Goldman Sachs analysts Daan Struyven and Lina Thomas also pushed in the research report: gold long positions can hedge the inflation risk brought by geopolitical factors (including tariff and debt concerns). Gold provides the best protection against the extreme inflation caused by central bank credit losses and geopolitical supply shocks. Gold is recommended as a tool to resist inflation during the US election. Foreign capital went up, and Zhaojin Mining (01818), China Gold International (02099), Shandong Gold (01787), and Zijin Mining Group (02899) all performed well. Note that it is not only gold, but also commodities in general that are moving, such as MMG (01208), Cmoc Group Limited (03993), and others, which are up by more than 5 points.

In the automotive sector, the low-end variety Great Wall Motor (02333) and Geely (00175) mentioned yesterday performed well, with both rising by about 4 points, and Xiaomi (01810) mentioned also rose by more than 6 points today. This should also be due to good sales data for June 18 mobile phones.

The strong performance of consumer stocks is mainly based on data. According to Tmall + Douyin data as of June 16th, cosmetics retail sales in May increased by 18.7% year on year; from May 1st to June 16th, the combined year-on-year increase in Douyin's skincare and makeup products was 21%. In terms of structure, the leading domestic goods significantly outperformed the broader market. JuZi Bio (02367): KFM & Colly 5.1-6.16 cumulative year-on-year increase of 123%; Shangmei Shares (02145): Hanshuo 5.1-6.16 cumulative year-on-year increase of 136%.

The overall Lujiazui Forum can reflect policy tilting towards Hong Kong stocks, comprehensively enhancing various supports, and the subsequent focus is on the performance of stocks with large index weights.

Sector Focus

According to the information released by China Securities Index Co., Ltd. at the end of May, the sample stock number of the CSI Guoxin Hong Kong Stock Connect Central State-owned Enterprises Dividend Index (Index Code 931722) is a total of 48 stocks. The top ten weighted stocks of this index are listed below:

CNOOC (00883) accounts for 12.32%; PetroChina (00857) accounts for 11.8%; Shenhua (01088) accounts for 11.24%; Sinopec (00386) accounts for 9.42%; China Mobile (00941) accounts for 9.06%; China Telecom (00728) accounts for 6.31%; Unicom (00762) accounts for 3.79%; China Coal (01898) accounts for 3.09%; CGN Power (01816) accounts for 2.23%; China Resources Power (00836) accounts for 2.15%. It is expected that most of the above-mentioned stocks will continue to receive continuous capital investment.

CRRC Corporation (01766): Inclusion in the FTSE China A50 Index, New signings maintain steady growth trend

Zijin Mining Group (02899): Foreign capital is expected to bring about a rebound. Participation in SolGold has increased the copper reserve.

Recently, the company intends to issue a $2 billion share swap bond with a 5% discount on rights issues. The company achieved operating income of RMB 74.777 billion in the first quarter, a year-on-year decrease of 0.22%; net profit attributable to shareholders of the parent company was RMB 6.261 billion, a year-on-year increase of 15.05%.

Comment: With the enhancement of the expectation of the US interest rate cut, the value of gold continues to rise. Foreign capital banks are also actively bullish on gold, and gold stocks are expected to rebound. The slight discount of the company’s rights issue plus the $2 billion financing will bring new stimulation to the future business. Zijin Mining Group continues to merge gold, copper, lithium and other resources to increase production capacity. The company plans to participate in SolGold's private placement with RMB 690 million to obtain 15% of its shares. After the subscription is completed, the company will become its second largest shareholder. SolGold's Warintza porphyry copper mine project in Ecuador, which holds 100% equity, is its flagship asset. This means that the company's reserves have been further increased. The production of the copper plate of Zijin Mining Group continues to increase on the existing high base. The production of the copper ore of the Julong copper smelter in the previous year was 154,000 tons. The company's Phase II of the Julong Project is expected to be completed and put into operation by the end of 2025. After reaching full production, the total annual concentration mining volume of the first and second phases will exceed 100 million tons, and the annual copper production capacity will reach 300,000 to 350,000 tons. Subsequently, the Julong copper mine will further plan and implement the third phase of the project, which is expected to achieve an annual mining ore selection scale of approximately 200 million tons, becoming the world's largest single copper mine in terms of mining scale. The third-phase dressing plant of the Kamoa copper mine was officially put into operation six months ahead of schedule. After reaching full production, the annual copper production capacity of the Kamoa copper mine will increase to more than 600,000 tons, making it the largest copper mine in Africa and the fourth largest in the world. Meanwhile, based on the fact that the first and second phase production and recovery rate both exceeded expectations, the project is planning an annual production capacity target of 800,000 tons of copper, which will further promote Kamoa to become one of the world's largest copper producers. Zijin Mining Group continues to acquire gold, copper, lithium and other resources, increasing its production capacity. The company plans to participate in SolGold's private placement with RMB 690 million to obtain 15% of its shares. After the subscription is completed, the company will become SolGold's second largest shareholder. SolGold's Warintza porphyry copper mine project in Ecuador, which holds 100% equity, is its flagship asset. This means that the company's reserves have been further increased.