Pay attention to MEITUAN-WR and Alibaba! The Hong Kong stock market may experience a short-term resonance of domestic and foreign capital, presenting an opportunity for technical rebound and additional positions.

Overseas liquidity is marginally loose, coupled with the relatively high cost-effectiveness of Hong Kong stocks. According to Wang from Huatai Securities, in the short term, both domestic and foreign capital may resonate and increase their positions!

Furthermore, historically, the low points of the Hang Seng Index's price-to-earnings ratio and price-to-book ratio often correspond to a significant increase in the amount of stock repurchases in the Hong Kong stock market. This suggests that industrial capital repurchases at high levels may indicate a potential technical rebound based on short-term lows in the Hong Kong stock market.

When the rebound occurs, which sectors should we focus on?

Huatai Securities is optimistic about leading stocks that benefit from macroeconomic improvements and have strong competitive barriers to entry, as well as high-growth potential!

The main reason is that in the second half of the year, driven by policy support and further recovery in residents' consumption willingness, China's macroeconomic recovery trend will continue, improving the fundamentals and investor sentiment. Valuations and profits will jointly support the performance of these sectors.

More importantly, local lifestyle and e-commerce sectors are expected to benefit from the further recovery of consumer trends and residents' willingness to travel. It is also recommended to pay attention to the incremental contribution of new summer games to the gaming market and the recovery progress of advertisers' willingness to invest under the trend of economic recovery.

Among them, Huatai Securities is optimistic about MEITUAN-WR and Alibaba!

Local Lifestyle: Strong rebound in travel, MEITUAN-WR's profit level is expected to exceed expectations again

In the first half of 2023, local lifestyle consumption showed strong recovery. In terms of home delivery services, MEITUAN-WR's instant delivery grew by 15% YoY in the first quarter, while in-store and travel services benefited from the strong recovery of offline travel. During the "May Day" holiday, the total number of domestic tourists in China reached 274 million, which is 119.09% of the same period in 2019 on a comparable basis. During the Dragon Boat Festival, MEITUAN-WR and Dianping data showed that the national consumer spending on lifestyle services increased by 60% YoY.

Huatai believes that as a leading company in the local lifestyle market, MEITUAN-WR has a strong competitive barrier and its ability to maintain high-quality profitability has been verified in the first quarter. It is expected that the company will have sufficient room for resource adjustment during the rebound of the local lifestyle sector in the second half of the year, and its profitability may exceed expectations again.

E-commerce: Core targets benefit from the recovery of the e-commerce market

The e-commerce market is entering a recovery track. From February to May 2023, the volume of express delivery business increased by 32.78%, 22.76%, 36.51%, and 18.94% YoY, respectively. During the same period, the online retail sales of physical goods also showed a similar trend, with growth rates of 5.3% (January-February total), 16.6%, 22.3%, and 10.8% YoY.

As an industry-leading platform, Alibaba is expected to benefit from the wave of e-commerce recovery in the first quarter of the 2024 fiscal year, achieving high single-digit growth in GMV and a 7.5% YoY growth in CMR. It is expected that the e-commerce market will experience a stronger growth trend in the second half of the year, and the trend of simultaneous growth in CMR and GMV will continue. Combined with the positive impact of the implementation of Alibaba's financial business reform on stabilizing investor sentiment, both valuation and fundamentals are expected to boost Alibaba's stock price performance. **

Games & Advertising: Multiple new games landing and releasing to activate market vitality, focusing on macroeconomic recovery driving advertising market restoration

In the first half of 2023, the National Press and Publication Administration issued 548 game licenses, surpassing the number of licenses issued in 2022 (512). It is expected that the issuance of licenses will continue at a monthly pace in the second half of the year, and industry certainty is gradually increasing.

Currently, popular games such as "Longbridge Dolphin" and "Peak Speed" have been launched during the summer season. Major game companies have sufficient reserves for the third quarter. TENCENT and CLOUD MUSIC are expected to launch 6 and 3 games respectively, bringing about a significant increase in the game market. The recovery level of the online advertising industry in the second half of the year is more closely related to the macroeconomic cycle. It is recommended to focus on tracking real estate and automotive sectors as key advertising clients in the later stage of the cycle, which present opportunities for rapid volume consumption of large orders.