HK - Market Strategy 03 (Dec 17 - Dec 25)

[winston]

1H Earnings 2025

The earnings season is drawing to an end, with 78 out of the 85 members of the Hang Seng Index having disclosed interim results.

Profit growth for those 78 companies averaged 2.6 per cent year on year, compared with a 17 per cent increase for the preceding six-month period.

Source: SCMP

[winston]

<Research>DBS Reiterates Positive Outlook on HK Stocks, Favors Tech/ Non-bank Financial Sectors; Interim Results from ~38% of HK-/ CN-Listed Firms Beat

DBS has released a strategy report on the H- and A-share markets, noting that Hong Kong-listed companies have delivered mixed corporate results for 1H25.

Quarterly net profit growth slowed slightly, with analysts mildly lowering their earnings forecasts for Hong Kong stocks, but raising theirs for A-shares.

According to the broker, among the 187 HSI and CSI 300 constituent stocks under its coverage, 38% of them reported earnings that exceeded expectations (an immense increase of 12.5 ppts compared to the FY24 results period).

Meanwhile, the proportion of companies missing expectations also rose by 12.1 ppts to 40.6%, indicating a widening gap in earnings performance.

Overall, net profit growth for H- and A-shares in 2Q25 slowed slightly from 3.1% YoY in 1Q25 to 2.5%.

The mixed earnings also reflected macroeconomic challenges in 1H25, DBS stressed.

However, management remains confident, and there are early signs of economic recovery following the launch of anti-involution measures in mainland China, such as a rebound in factory gate prices and improved August PMI orders.

These factors are expected to help ease concerns over fundamentals and support market sentiment.

The broker upholds a positive view on H- and A-shares, reiterating its preference for the technology and non-bank financial sectors.

It also views the anti-involution campaign as creating trading opportunities for sectors like solar energy.

By sector, media & entertainment and household & personal products saw the highest proportion of earnings surprises, with all companies in these sectors beating market expectations.

TENCENT (00700.HK) saw its 2Q25 results far exceed expectations thanks to its AI initiatives, BIDU-SW (09888.HK) benefited from lower-than-expected operating expenses, and MIDEA GROUP (00300.HK) achieved strong profit growth due to improved efficiency and solid performance across markets.

In contrast, the semiconductor and utilities sectors had the highest proportion of earnings misses. SMIC (00981.HK) and HUA HONG SEMI (01347.HK) both faced gross margin pressure, while CHINA LONGYUAN (00916.HK) was affected by a decline in utilization hours.

In the internet sector, fierce competition in the food delivery industry weighed on the profits of MEITUAN-W (03690.HK), JD-SW (09618.HK) and BABA-W (09988.HK).

DBS expects this trend to continue in the short term, with MEITUAN-W being the most affected.

Source: AAStocks Financial News

http://www.aastocks.com/en/stocks/news/ ... -news/AAFN

[winston]

Stanchart Raises HSI Target to Max. 30,000, Urges Overweight in Gold & Global Equities

While the US government shutdown saga remains unresolved, Lloyd Chan, Standard Chartered Hong Kong's Head of Investment Strategy, said that the Fed has resumed rate cuts and American companies have announced a series of multi-year AI investment plans.

As market earnings forecasts remain too conservative, the bank has upgraded its view on US equities to Overweight.

The bank has also raised its outlook on gold to Overweight, expecting that the Fed's easing cycle, coupled with rising demand from China and India, will support gold prices. Gold is expected to remain strong and could challenge the USD4,100 per ounce level.

As for Hong Kong, Raymond Cheng, Chief Investment Officer for North Asia at Standard Chartered, noted that the HSI has broken through the bank's previous forecast range of 24,000-26,000 points and is now entering a consolidation phase.

The upcoming fourth plenum is estimated to shed light on the direction of the 15th Five-Year Plan. With policy support and easing domestic competition, the market may revise up its earnings growth forecasts.

Accordingly, the bank has raised its 12-month target for the HSI to between 28,000 and 30,000 and kept the Overweight position on global equities.

Source: AAStocks Financial News

http://www.aastocks.com/en/stocks/news/ ... -news/AAFN

[winston]

<Research>Haitong Int'l Predicts H-shrs to Rattle amid Intensified US-CN Tensions; ST Volatility Won't Alter Uptrend

Prior to the US-China talks in Spain, the current round of US-China trade tensions has already escalated, Haitong International's research report commented.

The US BIS has added 23 Chinese entities to its list, while China has announced an anti-dumping investigation into US-made analog chips, after which the US is pushing to expand sanctions on Russian energy.

The subsequent US-China talks in Spain showed overall progress, with ongoing negotiations regarding TikTok.

Haitong International noted that despite positive notes from both sides, no substantial breakthroughs were achieved on core issues, with key progress likely pending a meeting between the two countries' leaders.

Therefore, the next phase of market catalysts was expected to rely more on domestic policy developments.

Haitong International's expectations following the escalation of trade tensions aligned with those during the reciprocal tariffs in early April, suggesting limited systemic risk and continued negotiation space.

The escalation reflected Trump's dissatisfaction with the slow progress since the Spain talks and China's ongoing countermeasures, particularly the strong reaction to the rare earth technology export controls set to be implemented on December 1.

This measure may be a strategic move by China in response to US-Brazil rare earth cooperation.

Prior to this, both countries had communicated on key issues like TikTok, purchasing US soybeans, and rare earth exports.

Thus, the broker assessed that the current trade escalation is more likely Trump's negotiation pressure ahead of the leaders' meeting.

Once this round of tensions de-fuses, maintaining current tariff levels between the US and China remains highly probable.

H- and A-share technology sectors experienced considerable fluctuations last week after substantial gains earlier. SMIC (00981.HK) saw a sharp correction over two consecutive days. Haitong International assumed that the technology sector will enter a phase of differentiated fluctuations in the short term.

In a nutshell, if the Chinese stock market opens sharply lower and continues lower on Monday (13th), it could trigger a short-term uptick.

That said, due to the uncertainty surrounding the meeting between the Chinese and US presidents, the market is likely to remain shaky in October.

The market was expected to resume its uptrend after the Fourth Plenary Session of the 19th CPC Central Committee in late October further clarifies policy direction and Sino-US trade frictions gradually ease.

Source: AASTOCKS Financial News

http://www.aastocks.com/en/stocks/news/ ... -news/AAFN