20180703-广发证券_香港_-Weekly_HK_Market_and_Sector_Views_6页_412kb

Weekly HK Market and Sector Summary

Core Content

This report provides a comprehensive analysis of the Hong Kong market and key sectors, including macroeconomic outlook, investment strategies, and specific stock recommendations. The main themes revolve around liquidity conditions, currency depreciation, and sector-specific performance.

Macroeconomic Outlook

• Liquidity Conditions: The People's Bank of China (PBoC) is expected to implement a 0.5% reduction in the reserve requirement ratio (RRR), releasing approximately Rmb700bn. This, combined with recent open market operations, indicates a loosening of monetary policy.
• Renminbi Depreciation: The renminbi has fallen below the 6.60 mark against the US dollar, with a 3.4% monthly decline in June, the largest since 1994. The depreciation is attributed to the US-China trade war, fears of economic slowdown, and the Fed's interest rate hikes.
• Central Bank Tone Shift: The PBoC has changed its liquidity regulation description from "reasonably stable" to "reasonably sufficient," signaling a more accommodative stance.
• Market Sentiment: The VIX and HVIX indices rose to 16 and 20, respectively, reflecting fragile market sentiment. Foreign capital has started to flow out of China, and there are concerns about the impact of tighter credit policies and the US dollar's strength on Hong Kong stocks.

Investment Strategy

• Short-Term Outlook: The Hong Kong stock market has seen a decline, but the pace has slowed. The HSI and HSCEI indices fell by 1.31% and 2.35%, respectively.
• Sector Performance: Energy and telecommunications sectors showed positive performance, while property construction and consumer services sectors were among the biggest losers.
• Rebound Potential: The third quarter may see a short-term rebound in the Hong Kong stock market due to reduced concerns about "tight credit" and a potential slowdown in renminbi depreciation.
• Sector Focus: Cyclical stocks that benefit from China's economic recovery are recommended. Exposure to property and industrial cyclical products (heavy trucks, construction machinery, building materials) is suggested to increase gradually.
• Consumer Goods: The consumer goods sector is expected to maintain stable growth, with a focus on expanding domestic demand.

Key Stock Recommendations

F&B Sector

• Yihai Int'l (1579 HK): Expected to benefit from the accelerated opening of Haidilao stores. The company is shifting focus to offline sales of self-heating hotpots, which should boost earnings.
• Mengniu Dairy (2319 HK): Revenue and net profit growth are expected to improve, with the company's valuation likely to rise amid macroeconomic uncertainty and increased risk aversion.

Gaming Sector

• SJM Holdings (880 HK): The gaming sector in Macau remains resilient despite recent crackdowns on money laundering and illegal exchanges. However, further renminbi depreciation could weigh on tourism arrivals and gaming spending.
• Melco International (200 HK): Similar to SJM, the company is expected to benefit from the current market conditions, though it faces similar risks from currency depreciation.

Auto Sector Analysis

• Industry Trends: Passenger vehicle wholesale volume declined slightly YoY in June, but the manufacturing PMI remained above 50%, indicating strong sector conditions.
• Tariff Changes: The State Council announced an additional 25% tariff on US-imported cars, which may prompt international automakers to accelerate localization. Tariff cuts on auto parts (from 10% to 6%) are expected to provide long-term margin benefits.
• Stock Highlights:
  • Geely Auto (175 HK): Maintains a strong position with a 60.8% YoY sales increase in May. The company's new product lineup and platform sharing strategy with Volvo and Lynk & Co are seen as key growth drivers.
  • BAIC Motor (1958 HK): Showed a robust sales rebound in May and is expected to benefit from the introduction of new electric vehicle models and lower procurement costs.
  • Zhongsheng Holding (881 HK): Less affected by US-China trade tensions due to its lower reliance on US-made models. Expected to be a key beneficiary of tariff cuts.

TMT Sector Overview

• Internet: User-base dividends are declining, and time spent online is becoming a key competitive factor. Companies with strong ecosystems, such as Tencent, are better positioned.
• Games: Approval channels for domestic games are temporarily closed, slowing the launch of new games.
• Advertising: Growth is driven by information flow and AI advancements in traffic distribution.
• Video: Subscription and advertising models are pushing income growth higher than cost growth. Content differentiation will be crucial for long-term success.
• Digital Reading: The user pay rate is still below that of the video industry, offering growth potential. IP management improvements are driving income growth.
• Live Streaming: The market is becoming more consolidated, with platforms securing their positions through strategic changes.

Key Stocks in TMT Sector

• Tencent (700 HK): Strong growth in WeChat mini-programs and a competitive ecosystem position it well.
• Kingsoft (3888 HK): Likely to benefit from the growth in the gaming and internet sectors.
• China Literature (772 HK): Shows potential for growth in digital reading, with a focus on improving user pay rates.
• IGG (799 HK): Expected to benefit from the expansion of the gaming industry and improved market conditions.

Rating Definitions

Sector Ratings:

• Positive: Expected to outperform benchmark by more than 10%
• Neutral: Expected relative performance ranges between -10% and 10%
• Cautious: Expected to underperform benchmark by more than 10%

Analyst Certification and Disclosure

• Analysts certify that the views expressed reflect their personal opinions.
• No direct financial interest in the securities mentioned.
• GF Securities (Hong Kong) and its affiliates do not hold any shares or have investment banking relationships with the mentioned companies.
• The report is for informational purposes only and does not constitute an investment recommendation.

Disclaimer

• The report is prepared by GF Securities (Hong Kong) and is not an offer to buy or sell securities.
• Information may be subject to change without notice.
• No liability is accepted for any loss arising from the use of this report.
• Investments involve risks, and past performance does not guarantee future results.