【Yuan Zhifeng Column】Short-Term Consolidation in Hong Kong Stocks

Recommended stock today: China Unicom (762, HK$6.59), target price HK$7.20, stop-loss price HK$6.30

1) Market Outlook

Hong Kong stocks showed a mixed performance on Tuesday. The Hang Seng Index was nearly flat, with blue-chip stocks split between gains and losses. Trading volume hit a one-month low, and short-selling ratio dropped to a low 15.4%. Southbound funds turned net buyers, mainly increasing positions in chip stocks. A short-term consolidation is expected in the Hong Kong market, with pullbacks seen as buying opportunities.

2) Summary of Previous Day's China-Hong Kong Market

The Hang Seng Index opened flat on Tuesday, rising as much as 111 points to 25,254, a monthly high, before reversing to fall 152 points. It traded in a narrow range in the afternoon, closing at 25,132, down 10 points or 0.04%. Turnover decreased by 5% to HK$289.9 billion, compared to a June daily average of HK$319 billion.

Southbound funds via Stock Connect turned net buyers of approximately HK$7.2 billion. Hua Hong Hong Kong (1347), SMIC (981), and Zhipu (2513) saw net inflows of HK$2.25 billion, HK$1.93 billion, and HK$1.14 billion respectively. Tencent (700) recorded HK$1.03 billion in net outflows. Cumulative net inflows since July are around HK$79.8 billion, compared to HK$27.1 billion in June.

The Hang Seng Index fell 0.04%, with 41 components up, 49 down, and 3 unchanged. Lenovo (992) and SMIC (981) rose over 8%, leading blue-chip gains. Zijin Mining (2899) gained over 4%. Luoyang Molybdenum (3993), Lao Pu Gold (6181), and J&T Express (1519) rose over 2%. AIA (1299), CK Hutchison (1), Sun Hung Kai Properties (16), and WuXi Biologics (2269) gained over 1%. China Resources Mixc Life (1209) and Master Kong (322) fell over 3%, the largest blue-chip declines. China Resources Land (1109) dropped over 2%. ICBC (1398), China Construction Bank (939), Bank of China (3988), China Merchants Bank (3968), PetroChina (857), CNOOC (883), Hansoh Pharma (3692), and CK Infrastructure (1038) fell over 1%.

The Hang Seng Tech Index rose 1.3%, closing at 4,814, with 18 components up and 12 down. Large tech stocks were mixed: JD.com (9618) rose nearly 1%, while Meituan (3690), Xiaomi (1810), NetEase (9999), and Baidu (9888) fell over 1%. Zhipu (2513) surged over 36%, the largest gain among components. Hua Hong Hong Kong (1347) and Minimax (100) rose 17% and 15%. SMIC (981) and Lenovo (992) gained over 8%. Sunny Optical (2382) and SenseTime (20) rose over 4% and 2%. JD Health (6618), Alibaba Health (241), Horizon Robotics (9660), and Leapmotor (9863) rose over 1%. XPeng (9868) fell over 2%, the largest decline. BYD Electronics (285) dropped over 1%.

By sector, AI, chips, gold, mining, paper products, aviation, and broker stocks rose the most. Zhipu (2513) and Minimax (100) surged 36% and 15%. Hua Hong Hong Kong (1347) and SMIC (981) rose 17% and 8%. Zhaojin Mining (1818) and Shandong Gold (1787) gained over 10% and 6%. Jiangxi Copper (358) and MMG (1208) rose over 7% and 4%. Lee & Man Paper (2314) and Nine Dragons Paper (2689) gained over 10% and 6%. China Eastern Airlines (670) and China Southern Airlines (1055) rose over 3% and 2%. CITIC Securities (6030) and Guotai Junan (2611) gained over 3% and 2%.

Coal, oil, mainland banks, and pharmaceutical stocks declined. China Coal Energy (1898) and China Shenhua (1088) fell over 2% and 1%. PetroChina (857) and CNOOC (883) dropped over 1%. Agricultural Bank of China (1288) and China Merchants Bank (3968) fell over 2% and 1%. Hansoh Pharma (3692) and CSPC Pharmaceutical (1093) declined over 1%.

On Tuesday, the Shanghai Composite Index opened 0.4% higher, briefly reversed to fall 1.4%, then steadily climbed to close near its intraday high, ending at 3,864.37, up 1.8%. The Shenzhen Component Index rose 4.8%. The STAR 50 Index surged 10.7%. Total turnover in Shanghai and Shenzhen markets was about RMB 2.96 trillion, up RMB 260 billion from the previous day. The June daily average was about RMB 3.11 trillion.

3) Macro / Industry News

The UK's Financial Times, citing sources involved in discussions, reported that Chinese regulators are considering tightening export controls on AI and semiconductor technologies. (Hong Kong Economic Journal)

News site Axios reported that the U.S. White House is quietly considering a ban on Chinese AI models to counter the threat from China's low-cost open-source models and protect dominant U.S. AI firms. (Hong Kong Economic Journal)

4) Stock-Specific News

Horizon Robotics (9660) announced it expects to turn profitable in the first half ending June, with a net profit of RMB 3.5–4.0 billion. The profit is mainly due to fair value changes in convertible loans issued to CARIAD caused by stock price fluctuations. Adjusted net loss is expected to be RMB 1.4–1.7 billion, compared to a loss of RMB 1.333 billion in the same period last year. (Hong Kong Economic Journal)

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