Hong Kong Stock Market Closing (09.27) | Hong Kong stocks surged again with heavy volume, Heng Science Index soared 20% in a single week, leading in pharmaceuticals, consumer goods, and brokerage stocks

According to the Wise Finance APP, the central bank's reserve requirement ratio cut and interest rate cut have officially landed, with the market's bullish sentiment remaining high. The Hong Kong stock market continued to rise today, with the three major indexes hitting new highs for the year. The Hang Seng Index successfully surpassed the 20,000-point mark, while the Hang Seng Tech Index rose over 7% intraday. As of the close, the Hang Seng Index rose by 3.55% or 707.72 points to 20632.3 points, with a total daily turnover of HKD 445.748 billion, reaching a historical high; the Hang Seng China Enterprises Index rose by 3.01% to 7299.9 points; and the Hang Seng Tech Index rose by 5.78% to 4453.24 points. Looking at the whole week, the Hang Seng Index rose by 13%, the China Enterprises Index rose by 14.39%, and the Hang Seng Tech Index rose by 20.23%.

CITIC Securities pointed out that the new round of interest rate cuts initiated by the Federal Reserve and the policy package introduced domestically on September 24 significantly boosted investor confidence in the Hong Kong stock market. On the one hand, Hong Kong stocks are more sensitive to real estate and consumption policies than A-shares, and on the other hand, it also helps attract foreign and local funds back to Hong Kong stocks. The bottoming characteristics of the current Hong Kong stock market are once again evident. The bank believes that the valuation recovery trend in the Hong Kong stock market since early August is expected to continue until early November, with growth styles expected to continue to outperform dividend strategies.

Performance of Blue-chip Stocks

WuXi AppTec (02359) led the blue-chip stocks. As of the close, it rose by 23.86% to HKD 51.4, with a turnover of HKD 1.644 billion, contributing 5.7 points to the Hang Seng Index. Lyon released a research report stating that WuXi AppTec held its 2024 Investor Day yesterday (26th), and despite facing geopolitical challenges, the management still aims for future growth above industry levels. The bank maintained its net profit forecast for WuXi AppTec for 2024 to 2026 unchanged. The H-share target price was raised from HKD 44.2 to HKD 46.1, maintaining an "outperform" rating.

In other blue-chip stocks, New World Development (00017) rose by 21.61% to HKD 9.96, contributing 3.88 points to the Hang Seng Index; Longfor Group (00960) rose by 16.47% to HKD 13.72, contributing 6.56 points to the Hang Seng Index; China Construction Bank (00939) fell by 3.39% to HKD 5.99, dragging down the Hang Seng Index by 37.12 points; Wharf Real Estate (00288) fell by 2.69% to HKD 6.15, dragging down the Hang Seng Index by 2.3 points.

Hot Sectors

On the market, large-cap tech stocks rose across the board, with JD.com and Alibaba achieving mutual gains, with their stock prices rising by 9.75% and 4.86% respectively; consumer stocks, securities firms, and insurance stocks rose again. Seven departments promote the stable production of beef and dairy cows, with dairy products strong throughout the day; the real estate sector is set to stabilize after the drop, with property stocks continuing to rise; the National Day Golden Week is approaching, with the momentum of tourism concept stocks continuing; Macau's five-star hotels are basically fully booked during the Golden Week, and casino stocks are collectively rising; on the other hand, the market is concerned about the pressure on banks' net interest margins, leading to a decline in domestic bank stocks.

1. Pharmaceutical stocks lead the gains. As of the close, WuXi AppTec (02359) rose by 23.86% to HKD 51.4; Rongchang Biology (09995) rose by 16.77% to HKD 15.46; WuXi Biologics (02269) rose by 15.3% to HKD 15.98; and Tigermed (03347) rose by 12.56% to HKD 34.95 Minsheng Securities stated that starting from the third quarter, the fundamentals of the pharmaceutical sector have been continuously improving, with continuous innovation driving catalysts and ongoing policy support, showing optimism for the sector's market. CICC believes that the U.S. Biosecurity Act was not included in the NDAA, indicating a further delay in the legislation of the Biosecurity Act, reducing the possibility of standalone legislation within the year. At the same time, the latest version of the S.3558 bill did not include WuXi Biologics. According to the U.S. legislative process, the bank believes that other companies mentioned may also have the possibility of being excluded. Considering the Federal Reserve's official start of interest rate cuts and marginal improvement in industry orders, it is expected that the investment sentiment of top CXOs will gradually improve.

2. Dairy stocks collectively strengthened. As of the close, China Mengniu Dairy (02319) rose by 14.94% to HKD 18.46; Modern Dairy (01117) rose by 13.75% to HKD 0.91; A2 Milk (01717) rose by 7% to HKD 2.14; Feihe International (06186) rose by 6.46% to HKD 5.27.

The Ministry of Agriculture and Rural Affairs and six other departments jointly issued a notice to stabilize beef and dairy cattle production, emphasizing the need to stabilize the basic production capacity of beef and dairy cattle. Localities are required to accelerate the implementation of projects to expand and improve the quality of basic breeding cows, cultivate new types of operating entities such as dairy family farms and dairy farmer cooperatives. Effectively reduce the feed costs of breeding households, make good use of grain-to-feed support policies, accelerate the progress of high-quality forage collection and storage; promote beef and dairy consumption, scientifically promote the quality and nutritional value of fresh beef and milk, promote "student milk consumption," and encourage places with conditions to stimulate milk consumption through the distribution of consumption vouchers. Daiwa believes that these measures will accelerate the normalization of supply and demand in the Chinese dairy industry.

3. Chinese brokerage stocks show strength. As of the close, China Galaxy Securities (06881) rose by 17.91% to HKD 5.99; CITIC Securities (03908) rose by 17.89% to HKD 12.52; CITIC Securities (06030) rose by 14.59% to HKD 16.96; CITIC Construction Investment Securities (06066) rose by 11.37% to HKD 7.54.

On September 26, the Central Political Bureau clearly stated the need to increase the intensity of fiscal and monetary regulation to boost the capital market. Guojin Securities pointed out that the warming policy tone + improved liquidity drive, the low valuation of brokerage firms highlights strong beta advantages, the current valuation of brokerage firms and fund holdings are still at historically low levels, with great valuation elasticity, low base in 24H2 performance, and further increase in annual performance growth expectations under market recovery. The entry of medium and long-term funds into the market will significantly optimize the capital market ecosystem, solidify the long-term development foundation of brokerage firms, and brokerage firms are expected to benefit from the institutionalization trend in the long term.

4. Property stocks continue to rise. As of the close, Jinke Property Group (09993) rose by 32.51% to HKD 3.75; Sunac China (01030) rose by 22.16% to HKD 2.37; Longfor Group (00960) rose by 16.47% to HKD 13.72; Yuexiu Property (00123) rose by 16.42% to HKD 6.17.

The Central Political Bureau of the Communist Party of China held a meeting on September 26, emphasizing the need to promote the stabilization of the real estate market, strictly control the increment of commercial housing construction, optimize the stock, improve quality, increase the intensity of loans for "white-listed" projects, and support the revitalization of idle land stock To respond to public concerns, adjust the housing purchase restriction policy, reduce the interest rates on existing housing loans, and accelerate the improvement of land, fiscal, tax, financial, and other policies to promote the establishment of a new model for real estate development.

CICC stated that against the backdrop of weak real estate sales and investment, the positive expressions regarding the real estate sector in this meeting carry strong signaling significance, which helps boost market confidence. It is expected that more detailed policies will be introduced in the future to promote the establishment of a new model for real estate development. Ke Rui believes that adjustments and cancellations of purchase restrictions in 6 cities, including first-tier cities, as well as the introduction of local new regulations to optimize existing stock and enhance quality, will be accelerated. Guangzhou is the city most likely among first-tier cities to completely lift purchase restrictions first.

5. Chinese banking stocks fell against the market trend. At the close, Agricultural Bank of China (01288) fell by 6% to HKD 3.76; China Construction Bank (00939) fell by 3.39% to HKD 5.99; Postal Savings Bank of China (01658) fell by 2.95% to HKD 4.6; Bank of China (03988) fell by 2.61% to HKD 3.73.

The central bank simultaneously implemented reserve requirement ratio cuts and interest rate cuts today, releasing 1 trillion yuan in liquidity. The central bank's official website released an announcement on open market operations, lowering the 7-day reverse repurchase operation rate by 0.2 percentage points from the previous 1.70% to 1.50%. At the same time, the official news shows that the People's Bank of China has decided to reduce the reserve requirement ratio for financial institutions by 0.5 percentage points (excluding financial institutions that have already implemented a 5% reserve requirement ratio) starting from September 27, 2024.

Caitong Securities pointed out that considering the impact on both sides of assets and liabilities, this policy will drag down banks' interest margins in 2025, but the overall impact is controllable. The bank believes that the adjustment of existing housing loan rates is basically in line with expectations and has already been partially reflected in the previous sector's correction. The intensity of reserve requirement ratio cuts and interest rate cuts exceeded expectations, supporting the fundamental outlook of banks. Meanwhile, with incremental funds and long-term funds entering the market, the banking sector, based on high dividend yields and stable fundamentals, is expected to continue to benefit.

Hot Stocks in Focus

1. New World Development (00017) surged upon resumption of trading. At the close, it rose by 21.61% to HKD 9.96.

New World Development released its annual results for the year ended June 30, 2024, with revenue from continuing operations amounting to HKD 35.782 billion; gross profit of HKD 12.849 billion; and core operating profit from continuing operations of HKD 6.898 billion. The management emphasized the stable financial performance and pledged not to conduct rights issues. New World also announced that Ma Shaoxiang will succeed as CEO, while Zheng Zhigang will be reassigned as a non-executive director and non-executive vice chairman.

Furthermore, New World Development announced that the group is in discussions with Chow Tai Fook Enterprises Limited regarding the potential sale of all shares held by the group in Kai Tak Sports Park Limited (KTSPL) to Chow Tai Fook Enterprises. The group and Chow Tai Fook Enterprises have not entered into a legally binding agreement, and the potential sale is subject to negotiations on key terms, including the consideration amount, and obtaining necessary government and regulatory approvals 2. At the end of the day, Liti Film (09958) experienced a sharp decline in trading volume. As of the close, it fell by 80.92%, to HKD 0.29.

Prior to this, Liti Film released its interim results, with the group generating revenue of RMB 10.058 million during the period, a decrease of 86.95% year-on-year; the net loss attributable to equity shareholders of the company was RMB 10.499 million, an increase of 53.29% year-on-year. The decrease in revenue was mainly due to a decrease of approximately RMB 57.40 million in income from the distribution and broadcasting rights of self-produced TV dramas, and a decrease of approximately RMB 11.80 million in income from the buyout of TV drama distribution and broadcasting rights. It is reported that Liti Film was established in 2013 as a TV drama distribution company, with its main business currently focusing on the production and acquisition of TV drama broadcasting rights