On October 8, the Hong Kong stock market saw its first adjustment after the National Day holiday, with the Hang Seng Index plunging 7.37% and the Hang Seng Tech Index plunging 9.76%, ending the sustained surge since mid-September.

In terms of individual stocks, GOGOX attracted investors' attention with a 110% surge in seven days, with its share price peaking at HK$0.89 per share on October 7. Subsequently, as market sentiment cooled, GOGOX's share price also fell, dropping 17% to HK$0.74 per share.

What are the reasons behind this round of adjustment in the Hong Kong stock market? What caused GOGOX's surge in this round?

Hong Kong stock market plunges, what happened?

The three major indexes of the Hong Kong stock market opened lower and closed lower today, with the Hang Seng Index falling nearly 10% at one point. Meanwhile, the three major indexes of the A-share market also opened higher and closed lower, with gains narrowing. At the same time, the FTSE China A50 Index futures also fell more than 8%.

In this regard, analysts believe that there are two main reasons:

First, the expectation of interest rate cuts by the Federal Reserve has weakened significantly. Recently, the US dollar index and Treasury yields have risen across the board, with the 10-year Treasury yield exceeding 4% yesterday. Today, non-US currencies rebounded across the board, especially the yen's rebound, leading to a sell-off across the Asia-Pacific market.

St. Louis Fed President James Bullard said he supported a 50 basis point rate cut at the September FOMC meeting. Over time, it would be appropriate to continue with incremental rate cuts. Both employment and inflation are in a "good place," and the risks to these two objectives are balanced. The FOMC's policy path is "slightly above" the median. Core PCE inflation is projected to converge toward 2 percent over the next few quarters. The costs of moving too fast or too aggressively are higher than the costs of moving too slowly.

Citigroup economists said in a report that they expect the Federal Reserve to cut interest rates by 25 basis points in November. After the U.S. released strong September jobs data on Friday, some Wall Street banks abandoned forecasts for a 50 basis point rate cut in November. "Fed officials will now be comfortable with a 25 basis point rate cut in November," Andrew Hollenhorst said in a report.

Recently, the US dollar index and Treasury yields have risen across the board, with the 10-year Treasury yield exceeding 4% yesterday. However, over the past week, Asia-Pacific stock markets have risen modestly, seemingly ignoring the risk of rising Treasury yields and the conflict in the Middle East. Today's repricing of stocks is perhaps understandable.

Second, Chinese assets have risen sharply recently. Whether it's the Hong Kong stock market, the FTSE China A50 Index futures, or ETFs of Chinese assets listed overseas, they have all generated high returns. Yesterday, A50 open interest hit a record high, often indicating increased volatility.

Yan Zhaojun, a strategist at Zhongtai Securities International, said that this adjustment is in line with the characteristic of "taking profits at high prices in a timely manner" because the violent rally in Hong Kong stocks with an extremely steep slope is difficult to sustain for a long time, and short-term valuation repair has been very sufficient. Therefore, before the market welcomes the verification of economic data and policy implementation, the market does not rule out the pressure of taking profits at high prices.

Ng Lai Yin, an international strategist at Everbright Securities, said that the sharp decline in Hong Kong stocks indicates that the market may focus more on A-shares. Although A-shares rose sharply in the morning as expected, the gains narrowed during the session, dragging down Hong Kong stocks, which had accumulated large gains during the holiday period. However, judging from the cumulative gains of Hong Kong stocks in the past few weeks, the current adjustment range is still relatively reasonable.

Can GOGOX, which has significantly reduced losses, continue this surge?

Although GOGOX's share price fell more than 15% in the October 8 correction, it is still up more than 100% from its lowest point in August. However, behind this surge, GOGOX's fundamentals have not kept pace with the rise in its share price.

According to public information, GOGOX is Asia's leading same-city logistics platform, established in 2014, with its predecessor being 58 Suyun and belonging to the Daojia Group. It serves individuals, small and medium-sized enterprises, and large enterprises with its two brands, "GOGOX" in Hong Kong and overseas markets and "GOGOX Chuxing" in mainland China. The company operates in more than 370 cities, covering mainland China, Hong Kong, Singapore, South Korea, India, and Vietnam. According to Frost & Sullivan data, the company is the third-largest same-city logistics platform in mainland China in terms of GMV in 2021, with a market share of 3.2%; it is the leader in same-city logistics in Hong Kong with a market share of 50.9%.

On August 29, GOGOX Holding Group Limited announced its interim results for the six months ended June 30, 2024. The announcement showed that in the first half of 2024, GOGOX generated revenue of RMB 324 million and gross profit of RMB 113 million. The loss narrowed to RMB 82.9 million, a significant reduction of 87.1%.

The main reason for the reduction in losses is the decrease in goodwill impairment and the reduction in revenue costs, sales and marketing expenses, general and administrative expenses, and R&D expenses. GOGOX said that by implementing cost optimization measures, improving operational efficiency, focusing on high-margin services, and reducing costs, the company has achieved revenue growth. In addition, the company has actively responded to the national call for green travel and sustainable development by promoting the use of new energy vehicles, reducing environmental pollution, and contributing to the construction of a green and environmentally friendly travel environment.

From a segment perspective, the company's business primarily includes three segments: platform services, enterprise services, and value-added services.

Among them, platform services are the core of the company's operations. By providing an advanced logistics platform, it changes the way consignments are traded, improving transaction transparency and efficiency, and providing users with real-time consignment tracking and clear pricing. In the first half of 2024, GOGOX introduced the GoGoX Reserve Membership Program in Hong Kong, which provides drivers with flexible commission fee options based on their membership level, increasing commissions while reducing advertising expenses. At the same time, the company launched an online driver learning platform in mainland China to improve drivers' familiarity with platform rules and service standards, further enhancing service quality.

Ultimately, platform services generated revenue of RMB 811 million in the first half of 2024, accounting for approximately 25.0% of the group's total revenue. Notably, revenue from Hong Kong and overseas markets grew significantly, reaching RMB 331 million, an increase of 21.5% year-on-year. Although the GTV generated by platform services was RMB 6.068 billion, and the number of consignment orders facilitated decreased by approximately 40% year-on-year, by focusing on high-margin services, long-term financial health is expected to be stronger.

Compared to the expansion of platform services targeting consumers, the company's enterprise services are relatively stable. It is understood that GOGOX's enterprise services business aims to meet the logistics needs of large enterprise customers by providing scalable same-city logistics solutions renowned for their ability to handle complex logistics needs, especially in urban hubs.

According to the half-year report, as of June 30, 2024, the company had served a total of 63,839 enterprise customers and signed important contracts with supermarket chains and logistics providers in major cities in China. In the first half of 2024, revenue was RMB 2.116 billion, accounting for 65.3% of total revenue, basically flat year-on-year. Revenue from Hong Kong and overseas markets was RMB 1.744 billion, also basically flat year-on-year. The stability of revenue in this business segment is attributed to long-term contracts and strategic partnerships with major enterprise customers, while some overseas markets such as Vietnam and South Korea continue to grow.

Finally, the company's value-added services primarily supplement its core logistics offerings by providing a range of additional services such as insurance and fuel cards.

In the first half of 2024, revenue from this segment was RMB 315 million, down 6.6% year-on-year, accounting for approximately 9.7% of total group revenue. However, in Hong Kong and overseas markets, value-added service revenue grew by 31.7% to RMB 270 million, primarily due to the successful integration of services with platform and enterprise solutions and improved cost structures. In the mainland China market, the company continued to expand its partnerships with dealers and fleets, particularly in the automotive sales sector, generating additional revenue for value-added services.

From this perspective, amidst the sharp fluctuations in the Hong Kong stock market, while GOGOX's share price has corrected, the company's achievements in reducing losses and its active business layout demonstrate its strong competitiveness in the same-city logistics sector. Although short-term market sentiment and macroeconomic factors may impact share prices, in the long run, the company's fundamentals and industry position will be the key factors supporting its share price. For GOGOX, as long as it continues to maintain its core values and growth in overseas markets, even in the face of short-term market volatility, it will be able to secure a place in the future logistics industry.