Hong Kong stocks fell sharply in the morning session, failing to extend last Friday's strong performance. By the close, the Hang Seng Index fell by 1.65%. On the trading board, large technology stocks, which serve as market bellwethers, weakened across the board, with JD.com and NetEase falling nearly 2%, and Alibaba, Kuaishou, Xiaomi, Baidu, and Tencent all exceeding 1%. Stocks of large infrastructure companies with Chinese names fell significantly, with China Railway Construction Corporation falling nearly 7% after its earnings announcement, and China Railway Group, China State Construction Engineering, and China Metallurgical Group all following suit.

Dida Chuxing (2559.HK) surged sharply today, once surging more than 50% intraday, and is now quoted at HK$2.14, with a total market capitalization of HK$2.127 billion. The company announced after the close last Friday that its total revenue for the first half of the year was RMB 404 million, an increase of 2% year-on-year; adjusted net profit reached RMB 130 million, an increase of 51.3% year-on-year. The announcement stated that thanks to the support of the asset-light model, the company believes it can continue to maintain strong and sustained profitability.

In addition, Dida Chuxing's gross profit and gross profit margin for the first half of the year reached RMB 296 million and 73.3%, respectively, continuously maintaining a high gross profit margin above the industry average. As of June 30, 2024, Dida Chuxing had registered 368 million users and provided ride-sharing services in 366 cities nationwide, with a cumulative 17.7 million certified private car owners, an increase of 17% year-on-year.

Helen's closed down 7.26%. Helen's, the first chain pub company, announced its interim results for the six months ended June 30, 2024. The financial report showed that Helen's generated revenue of RMB 441 million in the first half of this year, a decrease of 37.85% year-on-year; profit attributable to owners of the company for the period was RMB 69.677 million, a decrease of 55.76% year-on-year; and adjusted net profit was RMB 90.278 million, a decrease of 51.89% year-on-year. Notably, Helen's total number of stores decreased from 653 in the same period last year to 537, with a net decrease of 124 stores, particularly in directly operated stores, which decreased from 515 in the same period last year to 187.

COSCO SHIPPING Ports closed down 1.29%. HSBC Research issued a report stating that COSCO SHIPPING Ports' (01199.HK) recurring earnings for the first half of the year fell by 7% year-on-year due to the impact of disruptions in the Red Sea on its overseas portfolio. Due to trade improvements, total throughput and consolidated throughput for the first half of the year increased by 8% year-on-year. Affected by the Middle East and Mediterranean portfolios, the profits of the group's overseas terminals fell by 43% year-on-year.

In addition, after adjusting the preferential measures enjoyed by certain terminals, taxes also increased. HSBC Research upgraded its forecast for throughput growth at COSCO SHIPPING Ports from 2024 to 2026, and downgraded its net profit forecast for 2024 to 2026 by 10% to 11%. For the second half of this year, the bank expects the group's recurring profits to grow by only 1% year-on-year, so EBIT weakness and increased taxes offset growth in associate and joint venture profits. The bank also downgraded the group's rating from Buy to Hold, and lowered its target price from HK$5.8 to HK$5.2.

CNOOC closed down 1.86%. DBS issued a research report stating that CNOOC's (00883.HK) interim results are rock solid, confirming its position as a leading oil and gas company. Its main cost per barrel was below US$30 in the first half of the year, which is highly competitive. Coupled with its robust growth strategy and excellent execution capabilities, CNOOC achieved a record-high net profit of RMB 79.7 billion in the first half of the year, 5% higher than market expectations.

However, the bank noted that CNOOC's business and share price are highly correlated with oil prices. Since OPEC+ may cut production starting in October, this could dampen market sentiment and weaken the outlook for oil prices next year, creating resistance for CNOOC's share price upside. The bank maintained its Hold rating and raised its target price from HK$19.5 to HK$23.

ICBC closed down 2.67%. Merrill Lynch issued a research report stating that ICBC's (01398.HK) interim results were mixed. Specifically, net profit for the first half of the year fell by 1.9% year-on-year, higher than the bank's forecast of a 0.7% decline; core earnings fell by 8.3%, worse than the expected 2.3% decline. The bank downgraded its earnings forecasts for ICBC from 2024 to 2026 by 0% to 5%, and lowered its H-share target price by about 1% to HK$5.15 from HK$5.22. Due to its strong balance sheet and attractive dividends, the bank maintained its Buy rating on ICBC.

Goldman Sachs issued a report stating that mainland China approved domestic online game publishing licenses in August, bringing the cumulative number of games approved so far this year to 941. Among the new batch of game licenses, Tencent and NetEase each received two game licenses, and Bilibili also received one. The bank maintained its Buy ratings on Tencent and NetEase. The bank mentioned that Tencent's "The Outcast" is a 3D adventure action game adapted from a well-known domestic manga IP and developed by Tencent's MoreFun Studio. Tencent has obtained approval for mobile and PC versions of the game.

In addition, "Matrix: Zero Day Crisis" is a PC shooting game with limited information disclosed so far. Developed by Wuduan Technology, it is likely to be published by Tencent. As for NetEase's "Boundary Break" PC game, scheduled for release in 2025, it has undergone multiple overseas beta tests, and domestic beta tests will soon commence. Another game, "After the Day", has also received a game license for its PC version.

Tsingtao Brewery closed down 4.31%. BOCI Research issued a report stating that Tsingtao Brewery's revenue for the first half of the year fell by 7.1% year-on-year, missing expectations; however, net profit rose by 6.3% year-on-year, broadly meeting expectations. Looking solely at the second quarter, revenue fell by 8.9% year-on-year or 2.3% quarter-on-quarter. Due to weak overall consumer demand and unfavorable weather conditions, sales in the on-premise channel were particularly under pressure, with Tsingtao beer sales falling by 8% year-on-year.

The price per ton fell slightly by 0.9% year-on-year, ending five consecutive quarters of year-on-year increases; however, the trend of structural improvement remained unchanged, with the proportion of sales above mid-to-high-end levels increasing by 1 percentage point year-on-year to 38.3%. In terms of profitability, the company continued to benefit from declining raw material and packaging costs, with gross and net profit margins improving in the second quarter to record highs, further accelerating expansion compared to the first quarter.

Looking ahead to the second half of the year, peak season sales are expected to be relatively flat. On a relatively low comparable base, sales volume is expected to achieve modest positive growth, while the price per ton is expected to remain largely unchanged. In the medium to long term, profitability optimization will still depend on the pace of premiumization and the results of cost reduction and efficiency enhancement. The company plans to continuously increase its dividend payout ratio on the existing basis to enhance shareholder returns. The bank believes that investors' outlook for China's beer industry is overly pessimistic, and Tsingtao's current valuation is quite attractive. The bank reiterated its Buy rating on Tsingtao, lowering its H-share target price to HK$57.

Morgan Stanley issued a research report stating that Macau's gaming revenue in August was MOP 19.8 billion (average daily gaming revenue of MOP 637 million), an increase of 15% year-on-year, better than market expectations of a 13% year-on-year increase. The gaming revenue performance has recovered to 81% of the 2019 level. The bank stated that Macau's gaming revenue performance in August was primarily driven by contributions from leisure travelers and mass market gamblers, partly due to the recovery of inbound tour groups to Macau.

According to Macau government data, the number of visitors in August may have approached the 2019 level, with the number of visitors in July close to 86% of the 2019 level. Morgan Stanley expects that if Macau's gaming revenue falls by 9% month-on-month in September, gaming revenue for the third quarter of this year will be flat quarter-on-quarter; if leisure travel remains strong, it could help boost Macau's gaming revenue. The bank expects Macau's gaming industry to have an EV/EBITDA multiple of 9x and free cash flow to equity (FCFE) of 11.6%.

According to a survey by TrendForce, a global market research firm, the arrival of China's 618 Mid-Year Shopping Festival in the second quarter, coupled with consumer electronics inventory returning to healthy levels, prompted customers to successively initiate stockpiling or replenishment of consumer components, driving foundry orders and significantly improving capacity utilization rates, with marked improvements over the previous quarter.

At the same time, strong demand for AI servers boosted the global top ten foundry revenue by 9.6% quarter-on-quarter to US$32 billion in the second quarter. In terms of rankings, the top five foundries remained unchanged in the second quarter, with TSMC, Samsung, SMIC, UMC, and GlobalFoundries in that order.

Thanks to rising alumina prices and strong demand from the solar and power grid sectors, aluminum has outperformed copper. Morgan Stanley analysts believe this situation is about to change. In a report, the analysts stated that aluminum's strong performance has driven the copper-to-aluminum ratio down to the bottom of its 2024 range, while copper, which has been grappling with global growth concerns and adverse factors arising from investors' "excessive" positions, should soon start to recover some ground. The analysts said, "Given recent underperformance and improved fundamentals, we believe there are stronger arguments for a rise in copper prices. In particular, we had previously expected copper positions to decline to more normal levels, which has now happened, while aluminum currently has the highest net long position on the LME."

Liang Zhanjia, a real estate analyst at UBS Investment Bank in Hong Kong, said that the market currently expects the United States to cut interest rates by 200 basis points within the next 12 months, and Hong Kong banks may not follow suit with cuts to their prime lending rates until the end of this year or early next year. Liang Zhanjia believes that the biggest hidden worry for the property market would be rising unemployment in Hong Kong, but rent is a true reflection of market demand for residential properties. As long as residential rents continue to rise, it represents a healthy Hong Kong property market.

He is also bearish on the retail and office sectors, believing that the former faces structural challenges, namely that Hong Kong residents are traveling abroad more after the pandemic, and mainland visitors to Hong Kong and per capita spending are both lower than expected; while the latter will have about 10% new office supply over the next few years, and the vacancy rate of Grade A offices in Central may reach a high double-digit level of up to 20%. It is expected that only when new office supply in West Kowloon becomes available will office rents in Central decline further, potentially reducing the vacancy rate.

Guosen Securities recently stated in a research report that Hong Kong stocks are expected to continue their steady upward trend, but at a slower pace. Investors are advised to position at low levels, with the Hang Seng Index at 17,700 being an optimal entry point. At the meso level, the report maintains a recommendation for Hang Seng Utilities, Hang Seng Hong Kong 35, Hang Seng Financials, and Hang Seng Internet.

After a brief contraction in July, China's manufacturing sentiment rebounded in August, with both supply and demand expanding simultaneously but to a limited extent. The Caixin China Manufacturing Purchasing Managers' Index (PMI) for August, released on September 2, recorded 50.4, up 0.6 percentage points from July and back above the expansion/contraction threshold of 50. The National Bureau of Statistics previously announced that China's manufacturing PMI for August fell by 0.3 percentage points to 49.1, tying with February 2024 as the lowest level of the year and remaining below the expansion/contraction threshold for the fourth consecutive month. (Caixin)

Strategy analysts at JPMorgan Chase, including Mislav Matejka, said that sentiment and positioning indicators in the stock market look far from attractive. Although the Federal Reserve will implement monetary easing policies in response to slowing growth, it may not be enough to further boost stock prices to record levels. In addition, political and geopolitical uncertainties are rising, and seasonal factors in September are once again more challenging.

Swissquote Bank analyst Ipek Ozkardeskaya said in a report that if U.S. nonfarm payrolls data released on Friday are stronger than expected, the dollar could rise as this would weaken expectations for at least a 50 basis point interest rate cut by the Federal Reserve this year. She said this could support the Fed's decision to cut interest rates by no more than 25 basis points at each of its remaining three meetings this year. "Strong enough data could even raise expectations that the Fed will only cut interest rates twice this year, for a total of 50 basis points," she said. She said that bets on interest rate cuts are more likely to shrink rather than grow.

Michael Brown, Senior Research Strategist at Pepperstone, said in a report that the steepening of the U.S. Treasury yield curve has been a notable feature recently, with the spread between two-year and 10-year Treasury yields close to returning to positive territory by the end of last week. However, he said that given that market bets on recent Fed rate cuts seem somewhat excessive, short-term Treasuries should soon give back recent gains. This could lead to a rise in short-term bond yields. A 25 basis point rate cut at the Fed's September meeting remains Brown's base case scenario.