Hong Kong stocks fluctuated in the morning session, with the Hang Seng Tech Index halting its two-day decline, while the Hang Seng Index edged up 0.06%. On the board, large technology stocks, as market bellwethers, rallied, helping the overall market recover. Xiaomi and JD.com gained more than 2%, while Kuaishou, Alibaba, NetEase, Baidu, and Meituan all rose. Tencent, however, fell more than 1%.

With the Federal Reserve's interest rate cut approaching and favorable policies emerging frequently, CRO concept stocks performed actively, and internet medical stocks were strong. Sales of commercial housing narrowed significantly on a year-over-year basis, leading to gains in both mainland property stocks and property management stocks. Most sporting goods stocks, beer stocks, airline stocks, and Chinese-funded securities stocks also rose.

On the other hand, spot gold surged but retreated shortly thereafter, with most gold stocks opening high but closing low. China Gold International fell 6%, having risen nearly 4% earlier in the session. International oil prices continued to decline, with the "three oil majors" all suffering setbacks. Apple concept stocks, which had been strong yesterday, saw a full-line correction.

According to Bloomberg, former U.S. President Donald Trump sat down for a 90-minute interview with Bloomberg Businessweek at his Mar-a-Lago estate in Palm Beach, discussing the U.S. economy, business conditions, and his potential plan for a second White House term. Trump stated that he boils down his economic agenda to low interest rates and low taxes, expressing a strong drive to get things done and bring businesses back to the U.S. Additionally, he will allow Federal Reserve Chair Jerome Powell to complete his term, which ends in May 2026, rather than dismissing him early. Trump hopes to reduce the corporate tax rate to 15% and no longer plans to ban TikTok.

Michael Metcalf, head of global macro strategy at State Street Global Markets, said, "If Trump is elected to a second term, the risk of inflation caused by his policies will be greater than during his first term. Inflation has been low in 2016, and inflation expectations were also low... 2024 and 2025 will be very different. Inflation levels and expectations are higher, and we are still in this inflationary mindset." This will not only affect price increases domestically in the U.S. but also in Asia and Europe.

Gareth Nicholson, an analyst at Nomura Securities, said that rising inflation could also spread to Asia, and Trump's election as president would mark an overall "negative risk factor" for Asian stock markets. "Macroscopically, this would lead to inflation (or even stagflation) in the global economy and accelerate more supply chain shifts within Asia," he said.

361 Degrees (01361.HK) closed up 1.07%. CICC released a report stating that 361 Degrees announced its second-quarter operating results, with offline retail sales of its main brand increasing by approximately 10% year-on-year. Offline retail sales of 361 Degrees' children's wear increased by 10% to the mid-20% range year-on-year, while retail sales on e-commerce platforms increased by 30% to 35% year-on-year. The bank maintained its 2024 and 2025 earnings per share forecasts for the company at RMB 0.52 and RMB 0.6, respectively. The current share price corresponds to 7 and 6 times the 2024 and 2025 P/E ratios, respectively, and the bank maintained its "outperform" rating. Considering a decline in the central valuation of the industry, the target price was lowered by 13% to HKD 5.27, corresponding to forecast 2024 and 2025 P/E ratios of 9 and 7 times, respectively.

Sunny Optical Technology (02382.HK) closed down 3.35%. CITIC CLSA issued a research report giving Sunny Optical Technology an "outperform" rating. The report noted that the stock price rose 7% intraday yesterday, and although the bank has not yet seen any fundamental changes, it believes the price increase may be due to market expectations of an upcoming earnings preview from the group. The bank released a preview of Sunny Optical's first-half 2024 results on July 12, which projected net profit for the first half of 2024 at RMB 1.03 billion.

Goldman Sachs issued a research report stating that the mobile phone models launched by vendors in June and so far in July have mainly been mid-range models, but the bank believes that the launch of foldable phone models may support current price levels. The recent new models have a price difference of approximately ±7% compared to previous generations, and it is expected that mid-to-high-end new models will be launched mainly in late July and August, with more foldable phones, and AIGC functionality and periscope lenses becoming major highlights. The bank said it gives a "buy" rating to AAC Technologies, Luxshare Precision, BYD Electronics, BOE Technology, ZTE Microelectronics, Will Semiconductor, Saintic Microelectronics, TSMC, and ASMPT, while giving a "neutral" rating to Sunny Optical.

Renowned analyst Ming-Chi Kuo pointed out that Sunny Optical is expected to become Apple's new CCM supplier in 2025 and mass-produce and ship CCMs for the new M5 series MacBook models in Vietnam. In 2023, due to production issues, Sunny Optical lost iPhone lens orders to competitors, resulting in a significant reduction in its supply ratio. Kuo's latest survey shows that starting in the second half of this year, iPhone orders will gradually return to Sunny Optical. Sunny Optical aims to restore its 2023 lens supply ratio by 2025. Among Apple's optical supply chain, only Sunny Optical can simultaneously ship CCMs and lenses.

President Chain Store Corp. (00220.HK) closed up 4.58%. Macquarie issued a research report stating that recently, rumors circulated online that a rat's head was found in a package of President Chain Store's Old Pickled Cabbage and Beef Noodles, raising food safety concerns. However, the bank believes the impact will be controllable as the series accounts for only a few percentage points of the group's total sales, and it is expected to bring a negative impact of no more than 4.6% to full-year net profit. Macquarie estimates that the impact of this food safety incident on President Chain Store will be approximately RMB 82 million. The bank is optimistic that the beverage business will continue to drive sales, lowering its earnings forecasts for this year and next by 4.6% and 5%, respectively. The target price was lowered from HKD 8.4 to HKD 8, while the rating remained "outperform."

Baidu Group-SW (09888.HK) closed up 0.55%. Nomura issued a research report stating that despite rising cash reserves and declining valuations, Baidu's (BIDU.O) advertising business remained weak in the second quarter of this year. The bank lowered its U.S. stock target price by 10%, from USD 144 to USD 130, while maintaining a "buy" rating. The report noted that the market had originally expected a slight improvement in Baidu Group's core advertising business in the second quarter of 2024. However, Nomura's latest industry survey indicated otherwise. The bank predicts that core advertising revenue will decrease by 3% year-on-year to RMB 19 billion in the second quarter.

Additionally, cloud revenue may increase by 14% year-on-year to RMB 5.1 billion, higher than the 12% year-on-year growth in the first quarter of 2024. Baidu Cloud is trying to sell its AI-supported solutions to enterprise customers. However, China's entire AI industry lacks attractive commercial applications to incentivize corporate subscriptions. Therefore, Nomura believes that some Chinese AI companies have to resort to price wars to sell their solutions. Baidu Core's total revenue in the second quarter may remain flat year-on-year at RMB 26.4 billion.

Tencent (00700.HK) closed down 1.64%. Morgan Stanley issued a research report predicting that Tencent's revenue will increase by 7% year-on-year in the second quarter of this year, with non-GAAP operating profit growing by 25%. The report noted that the mobile game Dungeon & Fighter has performed well since its launch, boosting confidence in Tencent's domestic game business prospects. The bank predicts that the group's overall gross margin will increase by 6.7 percentage points year-on-year to 52.5%, with improved diversification of the business structure driving a 18% increase in quarterly gross profit expectations. Meanwhile, Morgan Stanley expects the advertising business to continue to improve, with second-quarter advertising revenue expected to increase by 19% year-on-year. Financial Technology and Enterprise Services (FBS) revenue is expected to grow by 5%, mainly dragged down by weak payment business growth. The bank maintained its "overweight" rating on Tencent, reiterating it as a preferred stock with a target price of HKD 450.

CLSA issued a report expecting Tencent to record solid results in the second quarter, with total revenue of RMB 161.6 billion, up 8% year-on-year, and adjusted EBIT of RMB 57.1 billion, up 24% year-on-year, mainly benefiting from the recovery of game revenue and strong advertising growth. The bank predicts that Tencent's second-quarter game revenue will increase by 7% year-on-year, driven by the recovery of major games and the strong debut of Dungeon & Fighter. Advertising growth will continue to be supported by video accounts and advertising technology upgrades. Its profit margin will maintain an upward trend. The bank believes that with a solid game pipeline and deferred revenue, game revenue growth will accelerate in the second half of the year. Tencent is the bank's top pick in the sector, with a rating of "outperform."

The Hang Seng Healthcare Index (HSHCI) rose strongly by 2.41% today, with constituent stocks such as Ali Health up 8.57%, Ping An Good Doctor up 8.46%, Tigermed up 6.22%, and stocks like CanoNox-B and GenScript Biotech following suit. The Hang Seng Healthcare ETF (513060) rose 2.04%, with the latest price reported at RMB 0.35. Intraday trading volume has reached RMB 408 million, temporarily ranking 1/3 among comparable ETFs, with a turnover rate of 3.81%.

In terms of size, the Hang Seng Healthcare ETF has seen a significant increase of RMB 355 million in assets under management over the past week, ranking 1/3 among comparable funds in terms of new asset growth. In terms of shares, the latest share count of the Hang Seng Healthcare ETF reached 30.843 billion, a new high in the past year, ranking 1/3 among comparable funds. In terms of capital inflows, the latest net capital inflow of the Hang Seng Healthcare ETF was RMB 1.7103 million. Over the past five trading days, there were four days of net capital inflows, totaling "gold suction" of RMB 78.8282 million, with an average daily net inflow of RMB 15.7656 million.

Data shows that leveraged funds continue to deploy. The net financing buy volume of the Hang Seng Healthcare ETF has reached RMB 1.3881 million since the beginning of this month, with the latest financing balance reaching RMB 809 million. From a valuation perspective, the latest P/E ratio (PE-TTM) of the Hang Seng Healthcare Index tracked by the Hang Seng Healthcare ETF is only 33.95 times, which is at the 3.9% percentile in the past year, indicating that the valuation is lower than 96.1% of the time in the past year, at a historical low.

Li Ning (02331.HK) rose by more than 6%. In terms of news, Yongxing Securities pointed out that with the Olympics approaching, consumption of sports shoes and apparel is expected to heat up. As the Paris Olympics, set to begin on July 26, draws near, major fashion and sports brands have started to warm up in advance. The bank believes that as a globally renowned event, the Olympic effect may bring sustained dividends to brands. Considering that 2024 is a major year for sports, the sports shoes and apparel sector is expected to see high-quality growth in performance.

Additionally, the company held its 2024 Technology Grand Show in May, reviewing Li Ning's technological innovation history over the years and launching new technology products such as the Longque and Jueying 3. CICC believes that the Li Ning brand has relatively leading capabilities in category expansion, product matrixing, and series iteration, with continuous iteration and matrixed operation of professional sports equipment also leading to good sales performance.

JD.com, Inc. - SW (09618.HK) closed up 2.11%. JD.com announced that it will launch the "JD Super 18" event on the 18th of every month, where customers can get big deals for just RMB 18. Products include the cute 5-bottle gift box of Flying Fairy Maotai, TCL TVs, Supor gas stoves, Xiaomi smart door locks, Beijing Tongrentang Cordyceps, Dyson mite-removing vacuum cleaners, Bulgari perfumes, Samsung ultra-thin hard drives, fresh king crabs, and other big-name products valued at over RMB 1,000, all for a flat price of just RMB 18!

Morgan Stanley issued a research report stating that industry sources indicated that some anode plate and crude copper producers have recently suspended production of extruded scrap copper, which could lead to a short-term decrease in refined copper production. Morgan Stanley believes that combined with the current tight supply of copper concentrate, this will continue to support copper prices in the short term. The industry expects positive reactions from Zijin Mining Group (02899.HK) and China Molybdenum (03993.HK).

The State Administration for Market Regulation recently issued new "Regulations on the Review of Fair Competition," which clearly stipulate that without legal or administrative regulatory basis or approval from the State Council, tax incentives, selective differentiated financial rewards or subsidies, and other content affecting production and operating costs may not be provided to specific operators. The new regulations will be implemented starting August 1, and it is expected to impact the supply of scrap copper in mainland China. Except for Jiangxi Province, all other provincial governments have provided preferential subsidies to copper product companies that use scrap copper as raw materials, but these subsidies will be canceled starting in August under the new policy.

Bilibili Inc. - W (09626.HK) closed down 1.34%. BOCOM International issued a report slightly adjusting its second-quarter revenue forecast for Bilibili by 1% to RMB 6.1 billion, an increase of 16% year-on-year, mainly due to better-than-expected performance of new games. Gross margin is expected to expand by 6 and 1 percentage points year-on-year and quarter-on-quarter, respectively, to 29%, mainly due to economies of scale and an increase in the proportion of advertising revenue. Considering increased investments in new games, the bank maintained its expectation of an adjusted net loss of RMB 330 million, continuing the narrowing trend compared to the same period last year and the previous quarter. The report noted that "Sanmou" performed well, leading to an upward revision of the full-year game revenue forecast.

"Sanmou" has maintained a top-10 ranking on the best-selling list since its launch, with a maximum daily revenue of USD 2.5 million and a minimum daily revenue of USD 500,000, according to Dian Dian Data. Based on a nine-month revenue amortization, the bank raised its 2024 and 2025 game revenue forecasts to RMB 5.4 billion and RMB 6.7 billion, respectively, corresponding to year-on-year growth rates of 34% and 23%. It is estimated that "Sanmou" will contribute 26% and 43% of game revenue in 2024 and 2025, respectively.

Based on the adjustment to game revenue, the bank raised its 2024 and 2025 total revenue forecasts by 5% and 8%, respectively. Considering that increased marketing investments partially offset revenue growth, the bank maintained its expectation of turning a profit in the third quarter and slightly raised its 2025 net profit forecast. The bank raised its target prices for Bilibili's U.S. and Hong Kong shares to USD 20 and HKD 155, respectively, from the previous USD 17 and HKD 132. The bank believes that with the start of the next season in August, daily revenue may return to high levels. Short-term investments in new games are mainly aimed at attracting and retaining users, laying the foundation for long-term operations. After marketing investments return to normal, new games will gradually release profit contributions.

Source: Hong Kong Stocks Research Society