Hong Kong stocks extended yesterday's rebound in the morning session, with the Hang Seng Index closing up 0.68%. On the trading floor, large-cap tech stocks generally rose but not significantly, with Xiaomi up 1.69%, Meituan up 1.06%, and slight gains for Baidu, Tencent, JD.com, and Alibaba; spot gold once reached US$2,570 per ounce, setting a new record high, boosting gold stocks, as well as non-ferrous metal stocks such as aluminum and copper, with Shandong Gold up 5.56%, Zijin Mining, Zhaojin Mining, and China Gold International all up nearly 5%;

Local governments have successively announced details of trade-in subsidies, boosting home appliance stocks; the National Medical Products Administration has accelerated the review and approval of clinically urgent products, driving up biomedical stocks across the board, as well as medical equipment stocks; another round of real estate rumors emerged, driving up mainland property and property management stocks, while most shipping, pork, oil, gas, and coal stocks also rose. On the other hand, multiple factors weighed on beer sales, with beer stocks continuing to decline, as Budweiser Asia Pacific hit a new low since its listing, while airline and casino stocks fell across the board, with the three major airlines (Air China, China Eastern Airlines, and China Southern Airlines) all weakening.

French beauty brand L'Occitane announced its official delisting on September 13, ending its 14-year listing on the Hong Kong Stock Exchange. The group's chairman, Reinold Geiger, proposed to acquire the outstanding L'Occitane shares at HK$34 per share, valuing the transaction at approximately €6 billion. Blackstone and Goldman Sachs Alternative Investments provided a committed funding of €1.551 billion, equivalent to approximately RMB 12.2 billion, to support L'Occitane's privatization. Prior to its delisting, L'Occitane had a total market value of approximately HK$49.7 billion, equivalent to RMB 45 billion. In a previous statement, L'Occitane said that the delisting would provide the group with flexibility to make long-term business decisions.

Tencent Holdings closed up 0.75%, while Alibaba Group Holding closed down 0.3%. Both Tencent and Alibaba have entered the competition to capture overseas markets. In anticipation of the upcoming traditional Mid-Autumn Festival and National Day, Tencent and Alibaba's international versions have increased their focus on the overseas travel market, with WeChat HK and Alipay HK mini-programs now integrated with the international travel platform HopeGoo of Tongcheng Travel, meeting the needs of overseas and Hong Kong, Macao, and Taiwan tourists to book flights, hotels, and purchase tickets to attractions.

The integration of WeChat and AlipayHK mini-programs with Tongcheng Travel's HopeGoo platform is based on the latter's coverage of flights, hotels, train tickets, attraction tickets, ferry tickets, and local entertainment, as well as its support for 16 global currencies and multiple operating languages, giving it an edge in tapping into the overseas market. According to Tongcheng Travel's second-quarter 2024 financial report, its average daily international flight bookings hit a new high, up over 160% year-on-year, while international hotel room nights increased by nearly 140% year-on-year.

Responsible persons from Tongcheng Travel's HopeGoo introduced that overseas tourists can click on the options for flights, train tickets, and hotels in the WeChat HK mini-program service, and make reservations and purchases through the HopeGoo mini-program. In addition to flights, hotels, and train tickets, the Alipay HK mini-program has also added attraction ticket reservations and purchases, greatly enhancing the convenience of overseas tourists traveling in China.

Zijin Mining closed up 3.87%. Goldman Sachs issued a report stating that Zijin Mining's management attended an investor conference hosted by the bank on Wednesday (September 11). The company has achieved positive results in cost reduction measures, with an estimated unit production cost of copper concentrate at RMB 18,500 per ton and unit production cost of mined copper at RMB 22,400 per ton for 2024, down 7% and 4% year-on-year, respectively. Zijin's copper concentrate unit production cost for the first half of this year decreased by 8.8% on a semi-annual basis, mainly due to overseas projects. In terms of dividend policy, Zijin has set a minimum dividend payout ratio of 30% and will balance capital expenditures to increase the dividend rate.

Goldman Sachs believes that as one of the world's largest copper miners and gold producers, Zijin Mining produced 1.007 million tons of copper and 68 tons of gold in 2023. The company's mined copper production is expected to increase from 1 million tons in 2023 to 1.1 million tons in 2024 and 1.2 million tons in 2025. The bank expects Zijin Mining's gold and copper production to reach 91 tons and 1.5 million tons, respectively, by 2026, ranking it among the top five global gold producers and top three copper producers. The bank believes that Zijin Mining is one of the few mining companies that can benefit from production growth and commodity price increases.

Amid rising copper prices, the bank expects Zijin's recurring net profit to increase from RMB 22.4 billion in 2023 to RMB 41.4 billion in 2026, with a compound annual growth rate of 23%. The bank maintains a "Buy" rating (Conviction Buy List) and a target price of HK$21.5 for Zijin's H shares, believing that its current valuation is attractive. The bank believes that the continued execution of new project expansions and rising copper prices will serve as catalysts.

Shandong Gold closed up 5.84%. Morgan Stanley issued a report stating that amid soaring gold prices, Shandong Gold continues to enjoy strong profitability trends. The company's production growth stems from the further resumption of operations at the Linglong mine, the expected fourth-quarter commissioning of the Cardinal project in Ghana, and contributions from its 28.89%-owned subsidiary Yintai Gold (now known as Shandong Gold International). The bank noted that Shandong Gold's Dongfeng Linglong Gold Mine resumed partial production in December last year, and local government safety permits are expected to be obtained in the second half of this year.

Facing a record-high production of 3.8 tons, the Linglong project is currently producing an annual operating volume of 2 tons. The company's management expects the mine to produce 3 tons of gold annually after full resumption of operations. The company also noted that it had not received any notification regarding enhanced safety inspections during the National Day holiday in October. In terms of medium-term production outlook, Shandong Gold Group's parent company aims to reach 80 tons of gold production within five years. Shandong Gold's management expects the listed company to contribute approximately 90% of this production. The bank maintains a "Market Weight" rating for Shandong Gold with a target price of HK$20.2.

Sunny Optical Technology closed down 0.68%. Sunny Optical Technology announced that the group's revenue for the first half of the year was approximately RMB 18.86 billion, an increase of approximately 32.1% from the same period last year. The increase in revenue was primarily driven by the recovery of the smartphone market, leading to increased sales of mobile phone lenses and camera modules. Additionally, revenue from automotive lenses and modules increased due to industry growth and business expansion. Furthermore, revenue from VR-related products increased significantly as demand for VR pancake modules rose compared to the same period last year. The group's profit attributable to shareholders for the first half of the year was approximately RMB 1.079 billion, an increase of approximately 147.1% from the same period last year. In the mobile phone lens business, benefiting from the recovery of global smartphone shipments, the group's mobile phone lens shipments increased by approximately 23.7% year-on-year to 634 million pieces.

Accord Therapeutics (9926.HK) surged over 9%, extending its gains for the month to over 25% and reaching a new high since October 2021. Following the publication of the company's groundbreaking HARMONi-2 research results at WCLC, major institutions have upgraded their outlooks. Morgan Stanley increased its sales forecast by over 40%, raised its target price to HK$68, and reiterated its "Overweight" rating, citing Accord Therapeutics as its top pick in China's biotech sector.

Separately, CCB International raised its target price for Accord Therapeutics to HK$59 and maintained its "Outperform" rating; BoCom International increased its target price to HK$77 and continued to recommend the stock as a top pick in the industry; CLSA raised its target price to HK$72.1, increasing its sales and net profit forecasts; and BOCI raised its target price to HK$72, reiterating its "Buy" rating.

AAC Technologies (02018) surged over 1.89%. Goldman Sachs issued a research report expressing optimism about AAC Technologies and expecting its continued recovery. Based on a 2025 P/E ratio of 21.4x, the bank set a target price of HK$42.1 and maintained a "Buy" rating. The report noted that AAC Technologies currently supplies hinges for Honor's foldable phones and expects to penetrate more brand customers in 2025 as more new models are launched. In terms of thermal solutions, AAC Technologies has supplied copper and stainless steel vapor chambers (VCs) for Xiaomi Ultra 13 and OnePlus Ace 2, and has also penetrated overseas customers.

Additionally, benefiting from the upgraded specifications of mid-to-high-end smartphone cameras, hinges, and haptics, management remains positive about revenue growth and margin improvement in the second half of 2024. For 2025, management expects the trend of smartphone content upgrades to continue, and the acquisition of PSS to bring synergies to the automotive acoustic business.

Q-Tech (01478) surged over 4%. The company disclosed its August sales data for main products, with camera module sales totaling 32.636 million units, down 2.4% month-on-month but up 1.2% year-on-year. Among them, mobile phone camera module sales were 31.706 million units, down 2.9% month-on-month but up 1.2% year-on-year. In the same month, fingerprint recognition module sales totaled 16.113 million units, up 14.8% month-on-month and 58.5% year-on-year.

Guosheng Securities noted that the company's continued pursuit of a high-end strategy is likely to benefit from the industry's resurgence and upgrading. The high growth rate in non-mobile phone areas is promising for automotive growth. In terms of shipments, the company initially guided that shipments of CCMs for automotive and IoT applications would grow at an annual rate of no less than 50% in 2024, and the growth rate reached 100% as of the first half of the year. Among them, automotive CCM shipments increased by over 15 times year-on-year to reach 2 million units.

Citigroup issued a research report downgrading China Eastern Airlines (00670) from "Buy" to "Sell" with a target price reduced from HK$2.53 to HK$1.7. It also downgraded China Southern Airlines (01055) from "Buy" to "Neutral" with a target price cut from HK$3.8 to HK$2.8. While maintaining a "Buy" rating and preferred status for Air China (00753), the bank lowered its target price from HK$5.35 to HK$3.8.

The report noted that the Chinese aviation industry experienced good volume but weak pricing in the summer. According to CAAC statistics, passenger traffic increased by 12% year-on-year, exceeding 2019 levels by 18%. International capacity recovered to 77% of 2019 levels, but prices recovered faster than expected. The average economy class fare after tax fell by 11% from the previous year. Citigroup mentioned that the industry's yield within Asia is also facing challenges. The three major airlines deployed conservative capacity in July, but outbound capacity recovered strongly. Overall, the industry's summer performance was somewhat disappointing. Additionally, based on second-quarter results, business travel demand remained weak and may not be able to support prices during the off-season when capacity increases.

BYD Co., Ltd. closed up 0.42%. Li Yunfei, General Manager of BYD Group's Brand and Public Relations Department, stated on Weibo today that BYD's total workforce has exceeded 900,000, making it the company with the largest number of employees among the more than 5,300 A-share listed companies, surpassing the second-largest company by over 400,000 employees. Among BYD's 900,000 employees, nearly 110,000 are technical researchers, making it the automaker with the largest number of researchers globally. Over the past two years, the company has recruited nearly 50,000 outstanding college graduates to continuously support their employment.

According to the latest survey by TrendForce, the second quarter of 2024 saw a surge in demand for storage driven by NVIDIA's GPU platform and AI applications, coupled with increased demand from server brand vendors, leading to a significant increase in Enterprise SSD procurement capacity. AI is driving demand for high-capacity SSDs, but suppliers failed to adjust production capacity in time during the first half of the year, resulting in a supply shortage that pushed up the average price of Enterprise SSDs in the second quarter by over 25% quarter-on-quarter, with original equipment manufacturers' (OEMs) revenue increasing by over 50% quarter-on-quarter.

Looking ahead to the third quarter, North American cloud service providers' (CSPs) demand continues to grow, and server brand vendors' order momentum remains strong, which will continue to drive up Enterprise SSD procurement capacity. Due to the continued supply shortage into the third quarter, TrendForce estimates that contract prices will increase by 15% quarter-on-quarter in the third quarter, and OEMs' revenue will increase by nearly 20% quarter-on-quarter.

Market research firm TechInsights released a report stating that system-on-chip (SoC) revenue will grow by 17% in 2024 and continue to grow at a compound annual growth rate of 9% through 2029. TechInsights expects the SoC market to grow from US$291 billion in 2023 to US$478 billion in 2029, driven by rapid growth in the computing sector.

Zou Lan, Director of the Monetary Policy Department of the People's Bank of China, stated at a press conference held by the State Council Information Office on September 5 that policy adjustments such as reserve requirement ratio (RRR) cuts and interest rate reductions would depend on economic trends. "The effects of the RRR cut at the beginning of the year are still being felt, and the current average required reserve ratio for financial institutions is approximately 7%, leaving some room for adjustment." China Merchants Securities' fixed-income team believes that the economy still needs to recover, and RRR cuts can reduce banks' funding costs, thereby helping to lower the overall financing costs for the real economy. Therefore, there is a possibility of further RRR cuts in the future. Oriental Fortune believes that given the weak fundamentals and rising expectations for RRR cuts and interest rate reductions, the bond market will remain in a strong and volatile state. In the short term, the yield on 10-year government bonds is expected to fluctuate within a range of 2.0% to 2.2%.

The average price paid for air tickets during the Mid-Autumn Festival is 40% cheaper than that during the National Day holiday. Data shows that as of September 11, domestic air ticket bookings for the Mid-Autumn Festival exceeded 2.8 million, an increase of approximately 50% from a week ago. Internationally, bookings for inbound and outbound flights during the Mid-Autumn Festival exceeded 570,000, an increase of approximately 15% from a week ago. In terms of ticket prices, online travel booking platforms show that the average price paid for domestic air tickets during the Mid-Autumn Festival is a quarter lower than during the summer vacation and nearly 40% cheaper than during the National Day holiday.

The Federal Reserve will meet in the middle of this month to discuss interest rates. Hong Hao, Chief Economist at Sirui, said that the Fed is likely to cut interest rates, and the next focus will be on the magnitude of the cut (25 basis points or 50 basis points). After the Fed cuts interest rates, it remains to be seen how the People's Bank of China will respond and how exporters will settle their foreign exchange. He mentioned that for many exporters, capital is likely to start flowing back to China. He pointed out that the overall return expectations and capital flows are likely to change, and at least US$400-500 billion in overseas capital could flow back to the Chinese market, providing a significant boost to the appreciation of the Renminbi.

Hong Hao noted that the appreciation of the Renminbi is beneficial to Hong Kong stocks, which are denominated in US dollars but represent Renminbi assets. In this rally, Hong Kong stocks have performed slightly better than A-shares. Due to their low valuations and expectations for Renminbi appreciation, technology stocks have rebounded more strongly. The real estate sector has also been boosted by rumors of mortgage refinancing.

Source: Hong Kong Stock Research Society