On August 14th, the three major stock indices in Hong Kong collectively opened higher, with the Hang Seng Index up 0.35%, the Hang Seng Tech Index up 0.52%, and the Hang Seng China Enterprises Index up 0.41%.

On the market, network technology stocks rose and fell, with Netease falling 1.58% and Baidu Group rising 1.57%; the new forces of car making performed strongly, with Xpeng up 3.26% and Nio Inc up 2%.

About the future of Hong Kong stocks

According to Securities Times, many believe that undervalued Hong Kong stocks are expected to attract more attention from investors.

"After more than two months of adjustment, Hong Kong stocks' risks have been fully released, and the configuration value has once again emerged. Currently, the proportion of short-selling transactions in Hong Kong stocks has risen from around 10% in May to a historical high on July 26, and the proportion of short-selling transactions has risen from 11.7% at the end of May to 21.8%, which is at the 97.3 percentile level since 2021. After experiencing two months of valuation adjustment, the valuation level of the Hong Kong stock market has once again returned to the lower range. The PE of the Hang Seng Index is currently at 8.73 times, and the PB of the Hang Seng Index has also fallen from its high point in May to the current 0.85 times." Zhang Yidong, the global chief strategy analyst of China Merchants Securities, said.

Zhao Zhaojun, a strategist at CITIC International, also believes that after global risk aversion subsides, Hong Kong stocks are expected to have upside space. In an interview, Zhao Zhaojun said that the risk premium of the Hang Seng Index has been at the 94.1st percentile over the past seven years, and the valuation is approaching an extremely cheap level. AH premium index has been at the 96th percentile since 2020. The earnings forecast of the Hang Seng Index has been raised recently, mainly contributed by the technology and industrial sectors. Policies are also being put into action. If the global risk aversion continues to decline, internet-related or Hang Seng Tech Index, which has persistent profitability growth, will rebound first.

As for the trend of the second phase of Hong Kong stock market, Zhang Yidong believes that in August, with the conversion of new and old kinetic energy and the improvement of competition patterns, the overall performance of Hong Kong stocks is expected to exceed market expectations.

"In the third quarter, Hong Kong stocks are expected to attract funds from newly emerging markets. Political uncertainty before the US election will continue to suppress trades that were previously overcrowded, strategies for long positions in major US tech stocks have been countered, and strategies for shorting Hong Kong stocks will also face reverse trades." Zhang Yidong said.

In addition, China International Capital Corporation stated that Hong Kong stocks have some favorable conditions. At the current level, the valuation and position provide more downside protection. More importantly, the increased expectation of Fed rate cut due to the peripheral market volatility and the appreciation of the Renminbi have opened up more room for domestic policies. If policies can continue to exert force in this situation, it will provide more support to subsequent capital inflows and market rebounds. In this case, the market will be supported in the short term, with a structural market trend that shows greater elasticity than the A shares market.

Focus on hotspots:

1. According to the data from the central bank, the preliminary statistics show that the accumulated increase in social financing scale for the first seven months of 2024 was 18.87 trillion yuan, which was 3.22 trillion yuan less than the same period last year. At the end of July, the broad money supply (M2) balance was 303.31 trillion yuan, a year-on-year increase of 6.3%. RMB loans increased by 13.53 trillion yuan in the first seven months, including an increase of 1.25 trillion yuan in household loans. RMB deposits increased by 10.66 trillion yuan in the first seven months.

2. The National Energy Administration issued the "Action Plan for High-Quality Development of Power Distribution Network (2024-2027)", which proposed to speed up the upgrading and transformation of power distribution networks in some regions with weak power supply; implement some disaster prevention and mitigation projects; build projects that meet the access of new subjects; and explore some distributed smart grid projects through innovation.

3. The Census and Statistics Department of the Hong Kong Special Administrative Region Government reported on the 13th that the overall export volume and import volume of goods in Hong Kong in the first half of 2024 increased by 7.6% and 3.7% year-on-year, respectively. The seasonally adjusted figures show that the overall export volume and import volume of goods in Hong Kong in the second quarter increased by 1.7% and 0.4% month-on-month, respectively. In addition, in June, the overall export volume and import volume of goods in Hong Kong increased by 6.8% and 5.6% year-on-year, respectively. During this period, the export volume to the United States, Vietnam, Taiwan, and the Chinese mainland recorded a year-on-year increase in overall export volume, among which the increase in the United States was the largest, reaching 32.9%; in addition, the export volume to India decreased by 21% year-on-year.

4. On August 13th, the "Inaugural Ceremony of Investment Promotion for Building the New Channel of Economic and Trade Cooperation among Guangdong, Hong Kong and Macao Bay Area, and Boosting the Coordinated Development of Guangdong, Hong Kong and Macao" was held at the AsiaWorld-Expo in Hong Kong. The conference was hosted by the People's Government of Zhuhai City, and was co-organized by the People's Government of Zhongshan City, Jiangmen City, Yangjiang City, Zhanjiang City, and Maoming City. Several cross-border e-commerce, logistics, technology innovation, and cultural tourism industry projects were signed on-site.

5. Cui Dongshu, Secretary-General of the China Passenger Car Association, wrote that in 2024, the high-end characteristics of China's automobile consumer structure will be further strengthened, and the retail sales of passenger vehicles in the Chinese market will experience a temporary downturn after the Spring Festival; domestic fuel vehicle retail sales fell sharply in June and July, restraining the growth of the automobile market, and the contribution of exports has also declined.

6. According to Mysteel New Energy, China’s lithium iron phosphate production in July 2024 was 0.198 million tons, an increase of 1% month-on-month. The production of lithium iron phosphate in August 2024 is expected to be 0.2078 million tons, with downstream demand picking up due to energy storage orders and increased purchases of iron lithium, and the production will increase by 4.9% month-on-month.

Company News:

China Energy Engineering (03996): Subsidiary signed an EPC contract for a Saudi photovoltaic project with an amount of about 0.972 billion US dollars.

China Metallurgical (01618): The new contract amount signed in the first seven months was 750.44 billion yuan, a year-on-year decrease of 6.4%.

WH Group (00288): The revenue in the first half of the year was 12.293 billion US dollars, a decrease of 6.27% year-on-year; the net profit was 0.784 billion US dollars, an increase of 86.67% year-on-year.

Sino Biopharm (01177): In the first half of the year, the revenue was 15.87 billion yuan, a year-on-year increase of 11.1%; net income was 3.02 billion yuan, a year-on-year increase of 139.7%.