[Yuan Zhifeng Column] China's July Economic Data Misses Expectations

Today's pick - China Unicom (762, $6.33), target price $7.0, stop-loss price $6.0

1) Stock Market Outlook

After four consecutive days of decline, Hong Kong stocks rebounded on Monday, though trading volume decreased and remained low. Southbound funds turned to net buying. The Hang Seng Index is expected to consolidate in a narrow range between 25,000 and 26,000 points in the short term.

2) Summary of Monday's Mainland and Hong Kong Market Conditions

On Monday, the Hang Seng Index opened 187 points higher, which was the day's low. It then gradually rose, peaking at 461 points higher in the afternoon. It softened toward the close, ending at 25,453 points, up 336 points or 1.3%. Trading volume declined 17% from the previous day to HK$210.8 billion. The average daily trading volume in July was HK$307.2 billion.

Southbound funds via the Stock Connect turned to net buying of approximately HK$3.1 billion. SMIC (981), Zhipu (2513), and Tencent (700) recorded net inflows of HK$1.77 billion, HK$1.67 billion, and HK$530 million, respectively. Hua Hong Hong Kong (1347), Kingboard Laminates (1888), and Yangtze Optical (6869) saw net outflows of HK$780 million, HK$440 million, and HK$420 million, respectively. Cumulative net inflows since August have reached approximately HK$13.1 billion. Net inflows in July totaled about HK$62.9 billion.

The Hang Seng Index rose 1.3%, with 68 components up, 24 down, and 1 unchanged. Orient Overseas (316), SMIC (981), and Laopu Gold (6181) surged over 7%, 6%, and 5%, respectively, leading the gains among blue chips. Geely Automobile (175), Aluminum Corporation of China (2600), China Life (2628), and AIA (1299) rose over 4%. Zijin Mining (2899),洛阳 Molybdenum (3993), New Oriental (9901), and WuXi AppTec (2359) gained over 3%. China Hongqiao (1378), Sands China (1928), WuXi Biologics (2269), CSG Holding (868), and Cheung Kong (1113) rose over 2%. HSBC (5), China Construction Bank (939), and Bank of China (3988) rose over 1%. Lenovo (992), Haidilao (6862), MTR (66), and JD Logistics (2618) fell over 1%, leading the declines among blue chips.

The Hang Seng Tech Index rose 1.6%, closing at 4,782 points, with 23 components up and 7 down. Large tech stocks generally rose, with Alibaba (9988), Tencent (700), and Xiaomi (1810) up over 1%, and JD.com (9618) up over 2%. SenseTime (20) surged over 8%, the biggest gainer among components. Hua Hong Hong Kong (1347) and SMIC (981) rose over 7% and 6%, respectively. Leapmotor (9863) rose over 4%. NIO (9866), XPeng (9868), Li Auto (2015), BYD (1211), Tencent Music (1698), and BYD Electronic (285) gained over 2%. Zhipu (2513) fell over 5%, the biggest loser. Lenovo (992) and Haier Smart Home (6690) declined over 1%.

By sector, chip, shipping, EV, mining, and gold stocks outperformed the broader market. Hua Hong Hong Kong (1347) and SMIC (981) rose over 7% and 6%. Orient Overseas (316) and COSCO Shipping (1919) rose over 7% and 6%. Geely Automobile (175) and Leapmotor (9863) rose over 4%. MMG (1208) and Chalco (2600) rose over 7% and 4%. Luoyang Molybdenum (3993) and Jiangxi Copper (358) rose over 3%. Zijin Mining (2899), Zhaojin Mining (1818), and Shandong Gold (1787) rose over 3%.

On Monday, the Shanghai Composite Index opened flat and steadily climbed to close near its intraday high, ending at 3,982.65 points, up 1.4%. The Shenzhen Component Index rose 2.4%. The STAR 50 Index gained 4.1%. Total turnover in the Shanghai and Shenzhen markets was approximately RMB 2.39 trillion, up about RMB 250 billion from the previous day. The average daily turnover in July was about RMB 2.68 trillion.

3) Macro/Industry News

China's July industrial output, retail sales, and fixed asset investment all missed expectations. According to the National Bureau of Statistics, in July, the year-on-year growth of industrial value-added of designated-size enterprises was 4.5%, below the market expectation of 5%. Retail sales of consumer goods totaled RMB 3.9 trillion, up 0.6% year-on-year, below the expected 1.5%. From January to July, national fixed asset investment was RMB 26.03 trillion, down 6.7% year-on-year, worse than the expected 6.2% decline. (Hong Kong Economic Journal)

The National Bureau of Statistics reported that in the first seven months of this year, new home sales amounted to RMB 4.27 trillion, down 13.1% year-on-year. During the same period, new home sales area was 450 million square meters, down 11.8% year-on-year. (Hong Kong Economic Journal)

4) Stock-Specific News

Geely Automobile (175) announced that its interim net profit attributable to shareholders for the six months ended June 30 was RMB 9.091 billion, down 1.8% year-on-year. Core profit was RMB 9.684 billion, up 46% year-on-year. Revenue during the period was RMB 173.6 billion, up 14.7% year-on-year. (Hong Kong Economic Journal)

Bloomberg, citing an internal memo, reported that Alibaba (9988) is selling its gaming business 'Lingxi Interactive' to Asia-based private equity firm Ascend Capital for at least USD 1.5 billion, further advancing its transformation toward artificial intelligence (AI). (Hong Kong Economic Journal)

For stock performance, please visit our Hong Kong stock simulated trading portfolio: www.anuesec.com/zh-HK/Page/dt-model

https://www.anuesec.com/zh-HK