【Column by Yuan Zhifeng】Hong Kong Stocks Lack Clear Direction

Stock Recommendation Today - CSPC Group (1093, $8.375), Target Price $9.2, Stop-Loss Price $8.0

1) Market Outlook

Hong Kong stocks rose on Wednesday with increased turnover. Short-selling ratio dropped to a low 13.1%. Half of the Hang Seng Index constituents gained while half lost, with mainland Chinese banks declining for two consecutive days and underperforming the broader market. Southbound funds turned net sellers, mainly reducing holdings in Tracker Fund of Hong Kong (2800). The Hang Seng Index faced profit-taking pressure after surpassing 26,000 points, suggesting short-term consolidation. August marks the peak of quarterly earnings announcements, a key factor influencing individual stock performance.

2) Summary of Wednesday's Mainland and Hong Kong Market

The Hang Seng Index opened 38 points higher on Wednesday, dropped 123 points early, then fluctuated upward. It rose as much as 121 points in the afternoon, closing at 25,915 points, up 62 points or 0.2%. Daily turnover increased 8% to HK$278 billion, compared to July's average daily turnover of HK$307.2 billion.

Southbound funds via Stock Connect turned into net sellers of approximately HK$1.4 billion. SMIC (981), Zhipu (2513), and Alibaba (9988) recorded net inflows of HK$620 million, HK$590 million, and HK$360 million respectively. Tracker Fund of Hong Kong (2800), Tencent (700), and Zowie Innovation (3986) saw net outflows of HK$4.06 billion, HK$140 million, and HK$130 million respectively. Cumulative net inflows since August amount to approximately HK$12.2 billion, compared to net inflows of about HK$62.9 billion in July.

The Hang Seng Index rose 0.2%, with 47 gainers, 44 decliners, and 2 unchanged among its constituents.洛阳钼业 (3993) and Techtronic Industries (669) surged over 8%, leading gains among blue chips. Lao Pu Huang Jin (6181) and Zijin Mining (2899) rose over 6%. Innovent Biologics (1801) and Aluminum Corporation of China (2600) gained over 4% and 3% respectively. China Life (2628), BeiGene (6160), CATL (3750), China Hongqiao (1378), and ENN Energy (2688) rose over 2%. HKEX (388), Geely Automobile (175), and Sands China (1928) gained over 1%. HSBC (5), CNOOC (883), and New Oriental (9901) fell over 2%, leading losses among blue chips. China Construction Bank (939), Bank of China (3988), China Merchants Bank (3968), PetroChina (857), Nongfu Spring (9633), China Resources Land (1109), Hong Kong & China Gas (3), and J&T Express (1519) declined over 1%.

The Hang Seng Tech Index rose 1.0%, closing at 4,933 points, with 24 gainers, 5 decliners, and 1 unchanged. Large tech stocks were mixed: Alibaba (9988) and Baidu (9888) rose over 1%. Xiaomi (1810) and NetEase (9999) fell over 1%, the biggest losers among constituents. Minimax (100) and Lenovo (992) surged over 10% and 5%, the biggest gainers. Hua Hong Semiconductor (1347) and SMIC (981) rose over 4%. Zhipu (2513) gained over 3%. Sunny Optical (2382) and GoerTek (2018) rose over 1%.

Sector-wise, AI, gold, mining, lithium, chips, smartphone components, and paper stocks outperformed the market, leading gains. Minimax (100) and Zhipu (2513) rose over 10% and 3%.

Zijin Mining (2899), Zhaojin Mining (1818), and Shandong Gold (1787) rose 6%-9%. MMG (1208),洛阳钼业 (3993), and Jiangxi Copper (358) rose 6%-9%. Ganfeng Lithium (1772) and Tianqi Lithium (9696) rose over 5% and 2%. Hua Hong Semiconductor (1347) and SMIC (981) rose over 4%. Sunny Optical (2382) and GoerTek (2018) rose over 2%. Nine Dragons Paper (2689) and Lee & Man Paper (2314) rose over 2%.

Oil, mainland banks, and beer stocks declined, leading losses. CNOOC (883) and PetroChina (857) fell over 2% and 1%. China Construction Bank (939), Bank of China (3988), and China Merchants Bank (3968) fell over 1%. Budweiser APAC (1876) and China Resources Beer (291) fell over 1%.

On Wednesday, the Shanghai Composite Index opened 0.2% lower, its intraday low, then gradually rose, peaking at a 1.6% gain in the afternoon. It closed at 3,878.43 points, up 1.5%. The Shenzhen Component Index rose 1.9%. The STAR 50 Index surged 4.8%. Total turnover in Shanghai and Shenzhen markets reached approximately RMB 2.66 trillion, up RMB 450 billion from the previous day. July's average daily turnover was around RMB 2.68 trillion.

3) Macro / Industry News

U.S. ADP employment data showed private sector jobs increased by 44,000 in July, below the expected 70,000 and down from the previous 98,000 increase. (Hong Kong Economic Journal)

4) Stock-Specific News

BeiGene (6160) announced a net profit of USD 464 million for the six months ended June 30 under U.S. GAAP, a year-on-year increase of 3.86 times, with earnings per share of USD 0.32. Revenue during the period was USD 3.219 billion, up 32.3% year-on-year. (Hong Kong Economic Journal)

CSPC Group (1093) announced it has signed a joint venture contract with AstraZeneca to build a next-generation biopharmaceutical production base in Shijiazhuang, China, further deepening strategic cooperation. (Hong Kong Economic Journal)

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