Intelligent Hong Kong Stock Analysis | Emerging market funds flow into China, fiscal increment determines market height

[Market Analysis]

Despite the significant increase, the Hong Kong stock market remains strong, with the Hang Seng Index rising by another 1.6%, breaking through the 23,000-point mark directly. The trading volume is also close to 300 billion.

As the Chinese stock market surges, suddenly, the data on the U.S. side has "improved." On October 4th local time, the U.S. announced a sharp increase of 254,000 in non-farm payrolls in September, the largest increase since March 2024, surpassing the revised 159,000 in August and far exceeding the market's general expectation of 150,000. In addition, the unemployment rate dropped to 4.1%, a decrease of 0.1 percentage points, reaching a new low since June 2024. Whether the data is reliable is unknown, but it will boost confidence in the economy. The U.S. CPI data for September will be released this week. With strong employment data, how inflation will affect the magnitude of the next rate cut is significant, with the current expectation at 25 basis points.

Information is spreading too fast now. A-share stimulated a wave before the holiday, and the Hong Kong stock market strengthened again during the National Day, leading to a full fermentation during the holiday. The number of new accounts opened by major A-share securities firms hit a historical high during the holiday. Online account opening inquiries are overwhelming, while offline investment consultants are bustling with margin trading. Some securities firms even urgently deployed support from other provinces. Industry insiders estimate that the cumulative demand for new account openings in recent days is around tens of millions. According to frontline feedback, nearly 70% of new accounts opened in the past week are from post-90s and post-00s, with post-95s accounting for about 30% and post-00s nearly 25%. The new generation of investors pursues efficiency and dares to take risks. The Hong Kong stock market is similar, with normal trading during the National Day holiday, and the hot market has led to a surge in account openings in the Hong Kong market in the past week. Securities continued to rise, with Shenwan Hongyuan (06806) up nearly 41%, China Merchants Securities (06030), and CITIC Securities (03908) up over 23%.

In terms of futures, the China Futures Market Monitoring Center announced that on October 7th, the last day of the National Day holiday, the futures internet account opening system will be temporarily opened. Opening futures accounts during the holiday is a first in history. It is also understood that the online reservation volume for futures account openings recently far exceeds the same period in previous years. In October, JinStock Hongye Futures (03678) surged by over 58%.

Stocks dealing with non-performing assets are performing even better, as the assets in hand are likely to become more valuable, leading to a revaluation of their worth. These assets indeed have considerable elasticity. China Everbright (01359) and CITIC Financial Assets (02799) both saw gains of over 35%.

Semiconductor stocks, which showed strength last Friday, continued to surge, with autonomous controllability coupled with enhanced consumer expectations driving incremental demand for chips in AI, consumer electronics, automobiles, etc. Small-cap semiconductor stocks saw sharp increases, with BrainChip Technology (02203) surging nearly 6 times at one point, closing up nearly 276%, and Junma Semiconductor (08490) rising by nearly 160%. Huahong Semiconductor (01347), SMIC (00981), and Shanghai Fudan (01385) all rose by over 16%.

In the automobile sector, with the policy of replacing old vehicles with new ones, combined with factors such as preferential policies from car companies and the new car effect, the new energy vehicle market was booming during the National Day holiday, with many car companies reporting good news. On October 1st, several new energy vehicle companies released their delivery performance for September, with multiple brands setting new delivery records. Auto stocks rose across the board, but the best performer was the bottomed-out GAC Group (02238), up over 19%; Tesla will hold a "Robotaxi" event on October 10th local time. The direct stimulation of autonomous driving led to a surge of over 44% in Zhejiang Shibao (01057) today.

According to the official website of the Nobel Prize Committee, the results of the 2024 Nobel Prize selection will be announced from October 7th to 14th. There is relatively high anticipation for pharmaceuticals. Innovative drugs, as core assets, naturally attract funds, with the October star stock Zhaoyan New Drug (06127) surging over 24%. Others include Kanglong Huacheng (03759). Last Friday, the stock that struck gold, Sihuan Pharmaceutical (00460), surged over 30%.

According to the schedule disclosed by Huawei, on October 8th, HarmonyOS NEXT, known as the "pure-blood Hongmeng," will start public testing. Since its birth in 2019, the Hongmeng system has been exploring for five years, and 2024 is a crucial year. After the 100% self-developed system is tested publicly, it will attempt to completely break away from the Android operating system. China Software International (00354), as a core partner of Huawei Cloud, deeply benefits from the development of Huawei's AI Cloud; the company has the capability of integrating software and hardware for Hongmeng, helping Hongmeng to be implemented in various industries, surging nearly 30% today.

Today, market hotspots are beginning to diverge, such as the military industry sector represented by AVIC Aircraft (02357); as well as large central enterprises, such as China Railway Construction (01186), China Railway (00390), China Eastern Airlines (00670), where breaking net worth and market value management are important catalysts.

On October 7th, according to statements from both parties, Rio Tinto has made an acquisition intention to lithium producer Arcadium Lithium, without disclosing any financial details. Media reports previously stated that the two companies have been in negotiations, and Arcadium's valuation may be between $4 billion and $6 billion, or even higher. Lithium producers have been stimulated, such as the October star stocks Tianqi Lithium (09696) and Ganfeng Lithium (01772), which surged over 11%.

Yisou Technology (02550), which delisted from the New Third Board and landed on the Hong Kong stock market on June 7th, surged 58.31% on October 4th, and surged another 67% today. The logic behind this is its Yisou AI recommendation engine: possessing a strong ability to accurately capture personalized user needs, it plays an important role in various fields such as digital reading recommendations, digital marketing, and online game distribution. When the overall environment improves, advertising fees will increase significantly.

Last week, global funds' net selling of Indian stocks reached a record high, with the Indian stock market facing the largest net selling by global funds since at least January 1, 1999. Data from the Securities and Exchange Board of India shows that on October 3rd, global funds net sold $101.7 million of Indian bonds; according to exchange data, on October 3rd, global funds net sold $1.85 billion of Indian stocks, reaching a record high level. The Indian stock market is the second most overweight market in emerging markets. More importantly, India ranks second in weight among all emerging markets. According to Nikhilesh Kasi, an Indian trader at Goldman Sachs, the most frequently asked question by clients in the past two weeks has been "Are we seeing funds flowing from India to China?" To this, Kasi has clearly answered, "Yes," and explained that based on the observed flow of funds, this trend is very clear The State Council Information Office will hold a press conference at 10:00 am on October 8, 2024 (Tuesday), with Director Zheng Zhajie and Deputy Directors Liu Sushe, Zhao Chenxin, Li Chunlin, and Zheng Bei to introduce the relevant situation of "systematically implementing a package of incremental policies to solidly promote the improvement of the economic structure and the continuous improvement of the development momentum," and answer questions from reporters. This indicates that the policy is moving towards the implementation stage. Next, observe the "real money" package of incremental policies, especially how large the national debt scale is. The follow-up fiscal increment is crucial, determining the height of the subsequent market trend.

[Sector Focus]

During the National Day holiday, the Macau tourism market remained hot, with major landmarks welcoming a peak in visitor flow. According to data released by the Macau Special Administrative Region Tourism Office, the Macau tourism market performed well during the National Day holiday. The data shows that during the first five days of the holiday from October 1 to 5, the number of inbound tourists to Macau exceeded 790,000, with an average of over 158,500 per day. Among them, the number of inbound tourists on the 2nd and 3rd reached 166,100 and 174,300 respectively, setting a new record for the highest daily inbound tourist volume during the National Day holiday in Macau for two consecutive days.

A report from Lyon predicts that casino revenue in October will increase by 6% year-on-year, reaching MOP 20.65 billion, in line with market expectations. The current valuation of the Macau casino industry is about 10.3 times the forecast enterprise value to EBITDA ratio for 2024, lower than the average level of 14.2 times. Considering the improved market sentiment, the target prices of six major gaming companies have been raised.

The main stocks in the Hong Kong casino market include: Sands China (00880), Galaxy Entertainment (00027), MGM China (02282), and Sands China (01928).

[Individual Stock Analysis]

Ping An Insurance (02318): Stable growth in core business, maintaining profitability 

According to the latest data from the Hong Kong Stock Exchange, on September 26, Morgan Stanley increased its holdings of Ping An Insurance by 39.861682 million shares, with a price of HKD 44.4327 per share, totaling approximately HKD 1.771 billion. The latest number of shares held after the increase is approximately 617 million shares, with a latest shareholding ratio of 8.28%. Following the rate cut policy by the Federal Reserve, China promptly followed suit and announced a "double cut." 

Commentary: Under the "rate cut cycle," the large financial sector will be determined as the main investment theme. Ping An Insurance has a strong fundamental performance and continues to drive stable growth in core business through the "comprehensive finance + medical care and elderly care" strategy. In the first half of this year, the company achieved revenue of RMB 554.097 billion, with the operating profit attributable to the parent company shareholders of life insurance, health insurance, property insurance, and banking totaling RMB 79.565 billion, demonstrating steady growth and profitability. The performance in Q3 shows a clear acceleration trend. From January to August, the company achieved original insurance contract premium income of RMB 620.706 billion, a year-on-year increase of 7.64%, an increase of 2.94 percentage points from the first half of the year. The growth rate of property insurance premiums increased by 1.2 percentage points, and the life insurance premium growth rate increased by 4 percentage points. Especially in August, under the high base of last year, both life insurance and property insurance achieved double-digit growth, with life insurance premium income growing by 38%. With a stable banking business and the impact of the double cut in Q4, it is expected that the company's full-year revenue and profit growth rate will be very optimistic Maintaining stock price stability and investor returns through strong performance, high-level dividends, and stock repurchase policies.

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