Hong Kong Stock Market Closing (01.19) | Hang Seng Index fell by 0.54%, technology, pharmaceutical, and automotive stocks under pressure, gaming stocks performed actively

Zhitong App learned that the three major stock indexes in Hong Kong fluctuated and rose in the morning session, but collectively fell near the midday session, and the decline further widened in the afternoon. At the close, the Hang Seng Index fell 0.54% or 83.1 points to 15,308.69 points, with a cumulative decline of 5.76% this week and a total turnover of HKD 96.872 billion. The Hang Seng China Enterprises Index fell 0.87% to 5,127.24 points, and the Hang Seng Tech Index fell 1.45% to 3,129.92 points.

Ping An Securities (Hong Kong) stated that the Central Economic Conference has set the tone for steady and progressive economic development this year, and the Hong Kong stock market is currently at an absolute bottom area. The bank pointed out that the current price-earnings ratio (TTM) of the Hang Seng Index is only 7.54 times, which is at an extremely low valuation level of 0.38% percentile in the past ten years. The downward space is extremely limited, and it is currently an investment stage for maintaining a bottom-line mindset and actively deploying.

Performance of blue-chip stocks

JD HEALTH (06618) led the gains in blue-chip stocks. At the close, it rose 2.51% to HKD 28.55, with a turnover of HKD 226 million, contributing 1.24 points to the Hang Seng Index. HSBC Research released a report stating that there has been a recent outbreak of respiratory infections in mainland China, which has sustained demand, coupled with strong growth in the health supplement category. The bank raised its revenue forecasts for the company for last year, this year, and next year by 2% each. Due to better-than-expected revenue prospects, it will maintain last year's profit forecast. It also raised this year's and next year's non-international financial reporting standards net profit by 14% and 3% respectively.

In other blue-chip stocks, NONGFU SPRING (09633) rose 2.32% to HKD 39.75, contributing 2.85 points to the Hang Seng Index; AIA (01299) rose 2.03% to HKD 60.45, contributing 21.72 points to the Hang Seng Index; CSG HOLDING (00868) fell 3.83% to HKD 7.04, dragging down the Hang Seng Index by 0.94 points; SINO BIOPHARM (01177) fell 3.62% to HKD 2.93, dragging down the Hang Seng Index by 1.95 points.

Hot sectors

On the market, most large technology stocks fell, while biomedicine, heavy machinery, building materials and cement stocks, power stocks, real estate stocks, and auto stocks all declined. On the other hand, gaming stocks were active today, with slight gains in gambling stocks and insurance stocks.

1. Active performance of gaming stocks. At the close, FRIEND TIMES (06820) rose 10.53% to HKD 1.26; FUTURE LAND (09890) rose 3.13% to HKD 57.75; NETEASE-S (09999) rose 1.31% to HKD 138.9.

According to the "2023 China Game Industry Report" released by the Game Committee of the China Audio-Video and Digital Publishing Association, China's self-developed products' overseas sales revenue in 2023 reached USD 16.366 billion, with a scale exceeding CNY 100 billion for four consecutive years. 1. Outlook for the gaming industry under the new regulations

Guangda Securities pointed out that with the official release of the "Regulations on the Administration of Online Games," it is expected that the regulatory authorities will further clarify the standardization of monetization in the domestic gaming market and actively encourage game companies to expand overseas. Under the policy support, the overseas market will continue to be an important direction for the development and expansion of the gaming industry. As penetration into various overseas sub-markets continues, there is still great potential for overseas expansion. Considering the deep adjustment of the gaming sector and the already reflected pessimistic expectations, the overall valuation is relatively low. It is recommended to pay attention to gaming companies with a high proportion of overseas revenue, continuous research and development of new products, and strong overseas product distribution capabilities.

2. Decline in the automotive sector today

At the close of trading, Xpeng Motors-W (09868) fell by 4% to HKD 37.2; Li Auto-W (02015) fell by 2.65% to HKD 110.2; Great Wall Motors (02333) fell by 0.33% to HKD 9.15.

The China Association of Automobile Manufacturers (CAAM) preliminarily estimated that the retail sales of narrow passenger vehicles this month will be approximately 2.2 million units, a MoM decrease of 6.5%; the retail sales of new energy vehicles are expected to be around 800,000 units, a MoM decrease of 15.3%, and the penetration rate will fall to 36.4%. CAAM stated that the cold winter weather makes consumers more aware of the range anxiety, which is not conducive to the accumulation of potential customers in the new energy vehicle market. The new round of price cuts by leading new energy vehicle manufacturers, triggered by the underperformance of terminal sales, is already underway, and the price competition in the mainstream sub-markets of new energy vehicles is about to intensify.

In addition, a Daiwa research report pointed out that Tesla China recently announced price reductions, with certain versions of Model 3 and Model Y reduced by 2% to 6%. According to the bank's market survey, it is believed that Tesla has requested upstream component suppliers to reduce prices by up to 10%. The price reduction actions by Tesla are believed to have a negative impact on the overall atmosphere of the Chinese automotive industry. Due to the oversupply of new energy vehicles this year and increased competition, the bank expects short-term pressure on the profit margins of Tesla and other new energy vehicle supply chains.

3. Decline in the real estate sector

At the close of trading, Evergrande Group (02777) fell by 4.21% to HKD 0.91; Sunac China (01918) fell by 4.17% to HKD 1.15; China Overseas Land & Investment (03377) fell by 3.08% to HKD 0.315.

According to data from the Zhuge Research Center, as we enter 2024, various local policy tools continue to be implemented, with frequent positive measures such as optimizing and adjusting the housing provident fund policy, implementing home purchase subsidies, and relaxing purchase restrictions. In addition, the central government continues to inject positive factors into the real estate market, and two departments have established a coordination mechanism for urban real estate financing. This will help alleviate the weak investment confidence of real estate developers. It is expected that with the continuous output and fermentation of favorable policies, market confidence will gradually recover, and price expectations are expected to improve. It is predicted that in the first month of 2024, the prices of new and second-hand houses may continue to decline, but the rate of decline is likely to narrow. CITIC Securities believes that the real estate market is still in a downward trend. There is significant room for a decrease in mortgage interest rates, and there is also a trend of relaxing purchase restrictions. It is expected that policies will gradually stabilize the fundamentals of the real estate market in 2024, and the situation where the second-hand housing market performs significantly better than the primary housing market may change. 4. Bitcoin concept stocks fell across the board. At the close, BC Technology Group (00863) fell 13.68% to HKD 5.3; Meitu Inc. (01357) fell 3.57% to HKD 2.7; and Xinhuo Technology Holdings (01611) fell 3.73% to HKD 2.32.

The U.S. Securities and Exchange Commission (SEC) approved the first batch of spot Bitcoin ETFs for trading on Thursday, January 11th. On Thursday, Bitcoin briefly rose above $49,000. However, according to BlackRock's IBIT, the ETF has fallen every trading day since its listing. This Thursday, Bitcoin fell to around $40,800 during trading. It is worth noting that although the SEC approved the Bitcoin ETF, the chairman's statement indicates that approving the ETF does not mean endorsing Bitcoin. SEC Chairman Gary Gensler stated that while some Bitcoin spot ETFs have been approved for listing and trading, Bitcoin itself has not been approved or endorsed. Bitcoin is a speculative asset with high volatility. The approval of Bitcoin spot ETFs will bring more regulation.

Hot Stocks

1. Zhuguang Holdings (01176) rose throughout the day and closed up 11.52% at HKD 0.242.

The reconstruction of Building No. 34 in Lijiao Village, Nanzhou Street, Haizhu District, Guangzhou, has recently been officially capped. Currently, a total of 6 reconstructed buildings have been capped, and the progress of the transformation of Lijiao Urban Village has accelerated. Currently, the signing rate of private houses in Lijiao Village is close to 80%. 7 reconstruction sites and 4 financing sites have started construction in full swing, and the allocation of the first batch of reconstructed houses has been successfully completed.

2. Hengbo Pharmaceutical-B (02142) released positive earnings news and closed up 8.81% at HKD 1.73.

Hengbo Pharmaceutical announced at noon that it expects to achieve a profit of approximately $18 million for the year ending December 31, 2023, while it incurred a loss of approximately $137 million for the year ending December 31, 2022. This is the first time the company has achieved net profit in its annual financial statements since its listing in Hong Kong.

3. China National Aviation Information Network (00696) fell again and closed down 8.22% at HKD 8.15.

Bank of America Securities pointed out that the profit announcement of China National Aviation Information Network disappointed investors. The expected net profit for the full year is between RMB 1.25 billion and RMB 1.45 billion, which means that the net profit in the second half of last year fell by 90% compared to the first half. The bank expects the operating difficulties in the second half of last year to continue into this year. The bank downgraded its investment rating from "buy" to "neutral" and also lowered the target price from HKD 22.8 to HKD 10.8.