[Yuan Zhifeng Column] Mainland Bank Stocks See Significant Pullback

Stock Pick Today - Kuaishou (1024, $45.52), Target Price $50.0, Stop-Loss Price $43.5

1) Market Outlook

Hong Kong markets diverged on Tuesday, with the Hang Seng Index down 0.6% and the Hang Seng Tech Index up 0.2%. Trading volume remained stable, and southbound funds continued net buying. After briefly surpassing 26,000 points, the Hang Seng Index faced profit-taking pressure, suggesting near-term consolidation. August marks the peak season for quarterly earnings announcements, a critical factor for individual stock performance.

2) Summary of Monday's China and Hong Kong Markets

On Tuesday, the Hang Seng Index opened 82 points higher, reaching an intraday high of 26,188 points—an increase of 178 points and the highest level since June—before reversing sharply to drop over 200 points. It traded weakly in the afternoon, hitting a low of 241 points down, and closed at 25,852 points, down 156 points or 0.6%. Daily turnover increased 1% to HK$257.8 billion, compared to July's average daily turnover of HK$307.2 billion.

Southbound funds via Stock Connect recorded net inflows of approximately HK$2.6 billion. Alibaba (9988), Hua Hong Hong Li (1347), and SMIC (981) saw net inflows of HK$1.55 billion, HK$1.18 billion, and HK$1.06 billion respectively. Meituan (3690) and Tencent (700) experienced net outflows of HK$1.23 billion and HK$720 million. Cumulative net inflows since August began total around HK$13.6 billion, compared to HK$62.9 billion in July.

The Hang Seng Index fell 0.6%, with 28 constituents rising, 63 falling, and 2 unchanged. WuXi AppTec (2359) surged over 11%, the biggest gainer among blue chips. WuXi Biologics (2269) and SMIC (981) rose over 4%. Contemporary Amperex (3750) and J&T Express (1519) gained over 3%. China Hongqiao (1378) rose over 2%. CK Hutchison (1) and BeiGene (6160) advanced over 1%. Construction Bank (939) and ICBC (1398) dropped over 3%, the worst performers among blue chips. Bank of China (3988), China Merchants Bank (3968), Anta Sports (2020), Nongfu Spring (9633), Chow Tai Fook (1929), Geely Auto (175), and WH Group (288) all declined over 2%. HSBC (5), China Mobile (941), BOCHK (2388), Ping An (2318), China Life (2628), CITIC Limited (267), and PetroChina (857) fell over 1%.

The Hang Seng Tech Index rose 0.2%, closing at 4,875 points, with 13 components up, 16 down, and 1 flat. Large tech stocks were mixed: Kuaishou (1024) rose over 1%, while NetEase (9999) fell over 1%. Zhipu (2513) surged over 7%, the biggest gainer. Hua Hong Hong Li (1347) and SMIC (981) rose over 6% and 4% respectively. Sunny Optical (2382) gained over 2%. SenseTime (20), Lenovo (992), and Tencent Music (1698) rose over 1%. Minimax (100) and XPeng (9868) dropped over 6% and 4%, the biggest losers. Li Auto (2015) fell over 2%. BYD (1211), NIO (9866), JD Health (6618), and Trip.com (780) declined over 1%.

By sector, chipmakers, lithium battery, and paper product stocks led gains. Hua Hong Hong Li (1347) and SMIC (981) rose over 6% and 4%. Contemporary Amperex (3750), Ganfeng Lithium (1772), and Tianqi Lithium (9696) gained over 3%. Nine Dragons Paper (2689) and Lee & Man Paper (2314) rose over 4% and 3%.

Electric vehicle and mainland bank stocks declined the most. XPeng (9868) dropped over 4%, while Li Auto (2015) and Geely Auto (175) fell over 2%. Construction Bank (939), ICBC (1398), and Agricultural Bank (1288) dropped over 3%. Bank of China (3988), China Merchants Bank (3968), and Bank of Communications (3328) fell over 2%.

On Tuesday, the Shanghai Composite Index opened up 0.2%, dipped 0.3% intraday, then recovered to close up 0.6% in the afternoon. It ended at 3,822.28 points, up 0.3%. The Shenzhen Component Index rose 3.3%. The STAR 50 Index jumped 4.1%. Total turnover across Shanghai and Shenzhen reached approximately RMB 2.21 trillion, up RMB 220 billion from the previous day. July's average daily turnover was about RMB 2.68 trillion.

3) Macro / Industry News

Hong Kong retail sales rose for the 14th consecutive month. According to the Census and Statistics Department, the provisional value of total retail sales in June was HK$31.5 billion, up 4.6% year-on-year. After adjusting for price changes, the provisional volume of retail sales rose 2.3% year-on-year. (Economic Times)

4) Stock-Specific News

HSBC Holdings (5) announced its interim results for the period ending June 30. Under stated basis, pre-tax profit was USD 19.522 billion, up 23.5% year-on-year. For Q2 alone, pre-tax profit was USD 10.146 billion, up 60.4% year-on-year, exceeding market expectations. It declared a second dividend of USD 0.10 per share and intends to launch a share buyback program of up to USD 1 billion, expected to be completed before the Q3 2026 results announcement. (Economic Times)

Techtronic Industries (669) reported interim attributable profit of USD 738 million (hereinafter same), up 17.5% year-on-year. Basic EPS was 40.5 cents. Interim dividend is 19.31 cents. Revenue during the period was USD 8.292 billion, up 5.8% year-on-year. Gross margin improved by 2.6 percentage points to a record high of 42.9%. (Economic Times)

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