"Market Review" Hang Seng Index rises for three consecutive days, Tencent system dances, Northbound funds net outflow exceeds 8.2 billion

The market anticipates a rate cut by the U.S. next month, and Hong Kong stocks continued to rise today. The U.S. inflation rate for July remained at 2.7%, lower than the market forecast of 2.8%, while the core inflation rate rose to 3.1%. The Dow Jones and Nasdaq both rose 1.1% and 1.4% respectively overnight, with the Nasdaq and S&P 500 Index (up 1.1%) both reaching new closing highs. According to the FedWatch rate futures tool from the Chicago Mercantile Exchange (CME), the chance of a rate cut in September is 96.2% (up from 93.9% the day before). At the time of writing, the yield on U.S. 2-year bonds fell to 3.712%, and the yield on U.S. 10-year bonds fell to 4.258%. The U.S. dollar index dropped to 97.72, and Dow futures rose 94 points or 0.2%, while Nasdaq futures rose 53 points or 0.2%. The Shanghai Composite Index rose 17 points or 0.5% to close at 3,683 points, the Shenzhen Component Index rose 1.8%, and the total transaction volume in the Shanghai and Shenzhen markets reached 2.15 trillion yuan.

The Hong Kong dollar triggered the weak-side Convertibility Undertaking, prompting the Monetary Authority to buy over 7 billion Hong Kong dollars. The Hang Seng Index opened 206 points higher and expanded its gains, closing at a daily high of 25,613 points, up 643 points or 2.6%, marking three consecutive days of gains (a total increase of 754 points or 3%); the Hang Seng China Enterprises Index rose 233 points or 2.6%, closing at 9,150 points; the Hang Seng Tech Index rose 191 points or 3.5%, closing at 5,630 points. The total market turnover increased nearly 32% day-on-day to 284.041 billion yuan. The total turnover of northbound trading was 153.781 billion yuan, while southbound funds recorded a net outflow of 8.277 billion yuan today (compared to a net inflow of 9.45 billion yuan the previous day), marking another net outflow since last Monday (the 4th) when there was a net outflow of 18.092 billion yuan.

【Hang Seng Index Rises for Three Consecutive Days, Tencent Stocks in Demand】

China Literature (00772.HK) reported a 68.5% increase in interim net profit and received positive ratings from major institutions, with its stock price rising 19.6% for the day, with a turnover of 1.34 billion yuan. Tencent Music (01698.HK) reported a 37% increase in non-IFRS net profit for the second quarter, exceeding market expectations, with its stock price rising 15.6% for the day. Tencent (00700.HK) will announce its second-quarter results after the market closes today, with its stock price rising 4.7% to 586 yuan. Other tech stocks also performed well, with Alibaba (09988.HK) rising 6.1%, JD.com (09618.HK), Meituan (03690.HK), Baidu (09888.HK), and Kuaishou (01024.HK) rising between 3.8% and 4.7%, while Bilibili (09626.HK) and NetEase (09999.HK) saw their stock prices rise by 7.4% and 5.4% respectively.

Tencent announced its second-quarter results after the market closed, with a net profit of 55.628 billion yuan, a year-on-year increase of 16.8%, reaching the upper limit of the forecast range from six brokerages, which was between 49.769 billion and 55.614 billion yuan; earnings per share were 6.115 yuan. Under Non-IFRS, the net profit for the second quarter increased by 10% year-on-year to 63.052 billion yuan, close to the upper limit of the forecast range from eleven brokerages, which was between 58.312 billion and 65.373 billion yuan; Non-IFRS earnings per share were RMB 6.931. Revenue for the second quarter recorded RMB 184.504 billion, an increase of 14.5% year-on-year. By business segment, value-added services revenue was RMB 91.368 billion, growing by 15.9%. International market game revenue and domestic market game revenue reached approximately RMB 18.8 billion and RMB 40.4 billion, respectively, growing by 35% and 17% year-on-year. Social network revenue grew by 6% to approximately RMB 32.2 billion, mainly benefiting from the sales of virtual items in mobile games, revenue from video account live streaming services, and growth in music paid membership revenue.

Tencent indicated that the gross profit margin for the second quarter this year increased from 53% in the same period last year to 57%, and the gross profit margin for value-added services increased from 57% in the same period last year to 60%, mainly driven by domestic market games, including increased contributions from several self-developed games such as "Delta Force." As of the end of June this year, the company repurchased a total of 81.87 million shares on the Hong Kong Stock Exchange at a total cost of approximately HKD 36.5 billion (the company stated in March this year that the repurchase would not be less than HKD 80 billion). As of the end of June this year, Tencent's net cash was RMB 74.6 billion (compared to RMB 90.229 billion at the end of March this year), a quarterly decline mainly due to the payment of a final dividend of RMB 37.5 billion for the fiscal year 2024. According to Tencent's mid-term performance for 2024, its net cash as of the end of June 2024 was RMB 71.757 billion.

【Over 1,300 stocks rose, pharmaceutical stocks soared】

Hong Kong stocks continued to perform well today, with a rise-to-fall ratio of 33 to 17 for main board stocks (compared to 26 to 23 yesterday), with 1,371 rising stocks (an increase of 3.6%). Among the Hang Seng Index constituent stocks, 79 rose and 5 fell, with a rise-to-fall ratio of 93 to 6 (compared to 65 to 33 yesterday). The market recorded short selling of HKD 36.205 billion today, accounting for 14.16% of the total turnover of shortable stocks of HKD 255.682 billion.

On Monday (11th), Zhonghui Biotech-B (02627.HK) was listed, and its stock price continued to strengthen today, soaring 19.5% to close at HKD 52.2, with a turnover of HKD 270 million. Its IPO price was HKD 12.9 (it closed at HKD 33.28 on Monday, 158% higher than the listing price).

Pharmaceutical stocks soared, with Innovent Biologics (01801.HK) and Kanglong Chemical (03759.HK) rising 8.8% and 7.8%, respectively. CSPC Pharmaceutical (01093.HK), Kingsoft (01548.HK), and WuXi AppTec (02359.HK) rose over 6%, while Hansoh Pharmaceutical (03692.HK), BeiGene (06160.HK), Heng Rui (01276.HK), and CanSino (06185.HK) rose between 4.4% and 5.4%.

The Hong Kong Stock Exchange (00388.HK) revised its initial public offering (IPO) market pricing and public market regulations at the beginning of this month, optimizing the new share allocation mechanism. The first new share to be offered under the new system, Yinnuo Pharmaceutical (02591.HK), closed its subscription yesterday (12th). According to market news, the public offering portion of Yinnuo Pharmaceutical was oversubscribed by approximately 5, 364 times, with approximately 260,000 people subscribing, involving about 370 billion yuan, becoming the second most oversubscribed new stock this year, second only to the nearly 6,000 times oversubscription of Brilliance (00325.HK)