【Yuan Zhifeng Column】Southbound Funds Record Sixth Consecutive Day of Net Selling in Hong Kong Stocks

Today's Pick - China Resources Land (1109, $34.0), Target Price $37.5, Stop-Loss Price $32.5

1) Market Outlook

Hong Kong stocks traded mixed on Thursday, with the Hang Seng Index rising 0.2% and the Hang Seng Tech Index falling 1.3%. Southbound funds recorded net selling for the sixth consecutive day. The market rebound appears to be nearing its end, and a wait-and-see approach is recommended.

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

On Thursday, the Hang Seng Index opened 68 points higher, then fluctuated lower. It rose as much as 164 points to 25,972, a monthly high, but later reversed to fall 151 points in the afternoon. It recovered slightly at the close, ending at 25,858, up 51 points or 0.2%. Turnover declined 2% from the previous day to HK$304.9 billion. The June daily average turnover was HK$319 billion.

Southbound funds via Stock Connect recorded net selling of approximately HK$8.6 billion. Tencent (700), Zhaoyi Innovation (3986), and CNOOC (883) saw net buying of HK$1.02 billion, HK$380 million, and HK$330 million respectively. E Fund Hang Seng ETF (2800), SMIC (981), and Alibaba (9988) saw net selling of HK$1.97 billion, HK$1.27 billion, and HK$1.12 billion respectively. Cumulative net buying since July is around HK$63.4 billion, compared to HK$27.1 billion in June.

The Hang Seng Index rose 0.2%, with 39 out of 50 constituent stocks rising, 4 falling, and 7 unchanged. New Oriental (9901) and JD Logistics (2618) surged over 18% and 3%, leading gains among blue chips. CNOOC (883), PetroChina (857), ICBC (1398), China Life (2628), Lao Pu Gold (6181), and Hengan International (1044) rose over 2%. AIA (1299), Ping An (2318), China Construction Bank (939), Bank of China (3988), China Merchants Bank (3968), CITIC Limited (267), China Hongqiao (1378), and Nongfu Spring (9633) rose over 1%. SMIC (981) and Sunny Optical (2382) fell over 7% and 6%, leading losses. WuXi Biologics (2269) dropped over 4%. Hansoh Pharma (3692) and Sino Biopharm (1177) fell over 3%. CSPC Pharmaceutical (1093) and Longfor Group (960) fell over 2%. BeiGene (6160), Innovent Biologics (1801), and Pop Mart (9992) fell over 1%.

The Hang Seng Tech Index fell 1.3%, closing at 4,803, with 10 constituents rising, 19 falling, and 1 unchanged. Large tech stocks were mixed: Alibaba (9988) and Xiaomi (1810) fell over 1% and 2%, while Tencent (700) and NetEase (9999) rose over 1%. JD.com (9618) rose nearly 2%, the biggest gainer. Tencent Music (1698), BYD (1211), and Bilibili (9626) rose over 1%. Zhipu (2513) plunged over 15%, the biggest loser. Hua Hong Semiconductor (1347) and SMIC (981) fell over 8% and 7%. Sunny Optical (2382) and Lenovo (992) fell over 6% and 5%. Leapmotor (9863) and Minimax (100) fell over 4%. XPeng (9868), NIO (9866), and BYD Electronics (285) fell over 2%.

By sector, oil, mainland banks, and insurers led gains. CNOOC (883) and PetroChina (857) rose over 2%. Agricultural Bank of China (1288) and ICBC (1398) rose over 3% and 2%. China Life (2628) rose over 2%.

AI, chips, smartphone components, biotech, and pharmaceuticals led losses. Zhipu (2513) and Minimax (100) fell over 16% and 4%. Hua Hong Semiconductor (1347) and SMIC (981) fell over 8% and 7%. Sunny Optical (2382) and AAC Technologies (2018) fell over 6% and 3%. WuXi Biologics (2269) and Sino Biopharm (1177) fell over 4% and 3%. Hansoh Pharma (3692) and CSPC Pharmaceutical (1093) fell over 3% and 2%.

On Thursday, the Shanghai Composite Index opened 0.4% lower, briefly turned positive by 0.3%, then declined, falling as much as 1.6% in the afternoon. It closed at 3,804.69, down 0.6%. The Shenzhen Component Index fell 2.7%. The STAR 50 Index dropped 5.4%. Total turnover in Shanghai and Shenzhen markets was about RMB 2.34 trillion, up RMB 50 billion from the previous day. The June daily average turnover was about RMB 3.11 trillion.

3) Macro / Industry News

US Q2 GDP growth (preliminary) was 1.5% annualized, below the expected 2.1%. The GDP deflator rose 6.3%, above the expected 3.9%. (Hong Kong Economic Journal)

4) Stock-Specific News

Wheelock Properties (1997) announced the sale of Wheelock Place on Orchard Road, Singapore, for SGD 1.111 billion (approx. HK$6.733 billion), expecting an unaudited profit of about HK$1.007 billion. (Hong Kong Economic Journal)

Yum China (9987) reported second-quarter net profit of USD 244 million, up 14% year-on-year, with diluted EPS of USD 0.70 and a dividend of USD 0.29. Total revenue was USD 3.138 billion, up 13% year-on-year. (Hong Kong Economic Journal)

PCCW (8) reported a 38% narrower interim loss of HK$276 million for the six months ended June 2024, due to lower financing costs and improved contributions from associates and investments. EPS loss was 3.57 cents, with an interim dividend of 9.77 cents. (Hong Kong Economic Journal)

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