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