Zhitong Hong Kong Stock Exchange Unravels | Fiscal stimulus is not enough to stimulate the market, and geopolitics are making waves again

[Anatomy Dashboard]

The Ministry of Finance's press conference over the weekend played a role in the market. A shares performed positively today. All three stock indexes rebounded, while Hong Kong stocks were further delayed by negative news. The Hang Seng Index closed down 0.75%. The amount of energy shrank to 277.1 billion.

Let's first take a look at the situation at this conference. Although there was no specific data at the Ministry of Finance press conference, it is impossible to have specific figures until the National People's Congress approves it, but overall it was better than expected. Minister of Finance Lan Foan said that it is planned to increase large-scale debt limits at one time, replace hidden debts existing by local governments, and step up support for local debt risk mitigation. This is the biggest measure to support debt conversion in recent years. Issuing special treasury bonds supports large state-owned commercial banks to supplement their core Tier 1 capital. Tools such as local government special bonds, special funds, and tax policies are used in combination to support and promote the stabilization of the real estate market. Furthermore, it was emphasized that the central financial administration still has plenty of room to borrow money and increase the deficit. As for the size of chemical debt, judging from data from previous years, the replacement scale last year exceeded 2.2 trillion yuan. This indicates that the scale of the new measures will definitely be over 2.2 trillion yuan. In early trading on Monday, the average yield of AAA-rated urban investment bonds in China declined by about 10 basis points.

Undoubtedly, this wave of policies favoring individual AMC stocks was forwardly mentioned in the release of trading last Friday. For example, various types of CITI stocks in the A-share market, such as Yunnan City Investment (600239.SH), rose and stopped again today, and the lead was the central enterprise Everbright Jiabao (600622.SH). On the side of the Hong Kong stock market, China's Cinda (01359) rose more than 4% today. Since Hong Kong stocks rose quite a bit earlier, this time it was considered a favorable landing, so the increase was relatively small. At the same time, the concentrated industry of chemical bonds has many arrears in ecological and environmental protection PPP, etc., so Everbright Environment (00257) will benefit.

The general outlook is good, and it is also up 2.83% today. Second, real estate is a key area, which allows housing enterprises to finance land acquisition and local governments to buy inventory. Today, there are also reports of active transactions in Shenzhen and other places where volume is being exchanged. Real estate sentiment has improved marginally, but there is still a long way to go before the industry as a whole warms up. This will have to wait until the next National People's Congress can approve the scale. Related products such as China Resources Land (01109) and Yuexiu Real Estate (00123) increased by more than 5%.

Today, however, the trend is relatively strong for banks, because when it comes to issuing special treasury bonds to support large state-owned commercial banks to supplement their core tier 1 capital. The growth of bank capital is conducive to business improvement. At the same time, debt conversion essentially gave a big boost to bank stock balance sheets, so the Agricultural Bank (01288) and ICBC (01398) all increased by more than 3.4%. And the stronger ones are local banks. In response to the development of the great western region in Chongqing, Sichuan, various platforms said that 215 million yuan was transferred to Sichuan. Today, many A-shares in Sichuan infrastructure categories have risen or stopped, such as Sichuan Jinding (600678.SH). The Bank of Sichuan's Chongqing Rural Commercial Bank (03618) surged more than 9%, while the Bank of Chongqing (01963) rose 3.27%.

UAE Global Aluminum announced that exports of GAC bauxite from its subsidiary's alumina plant in Guinea are currently suspended by customs. After the National Day, alumina futures continued their strong rebound trend and repeatedly hit new highs since listing. On October 14, alumina's main futures contract rose 5.06% intraday to 4,731 yuan. China Aluminum (02600) and China Hongqiao (01378) both increased by 4%.

The favorable policy did not seem to stimulate the capital market much, while standard-bearer securities weakened. The main reason for the decline in securities stocks was that the two major players, Haitong Securities (06837) and Cathay Pacific Junan (02611), fell about 8%. We didn't get to the right time, and we didn't get the big market premium; they just made up for the increase and it went out of business. There are so many expectations for the restructuring; the future only depends on whether the performance level can bring new incentives. For the time being, if trading volume is declining, securities will have to wait for an opportunity.

Currently, the Hong Kong stock market is paying more attention to geopolitics. Apart from the tense situation in the Middle East, the Korean peninsula is not very peaceful. The General Staff of the Korean People's Army issued combat preparation instructions yesterday, and military tension is imminent.

There is also the serious situation in the Taiwan Strait. Navy Colonel Li Xi, a press spokesman for the Eastern War Zone, said that on October 14, the Chinese People's Liberation Army Eastern War Zone organized forces such as the Army, Navy, Air Force, and Rocket Force in the war zone to carry out the “Unilever Sword 2024B” exercise in the Taiwan Strait, northern Taiwan Island, and east of Taiwan Island. On October 14, the Fujian Maritime Police organized a fleet of ships to carry out comprehensive law enforcement inspections in the waters off Dongyin Island and Matsu Island, focusing on subjects such as verification and identification, boarding and inspection, and control of evictions to test rapid response and emergency response capabilities. The background of this sudden military exercise is that Taiwan leaders first made provocative remarks, and also against the situation in North Korea. The US State Department said it was seriously concerned about China's military exercises and observed whether related actions would stir up conflict. Today, the A-share military industry came up, and China Shipbuilding (00317) on the Hong Kong stock side rose slightly. The biggest influence is gold. Spot gold rose more than 1% last Friday and is currently rising 0.3% back above $2,650 per ounce. China Gold International (02099) rose more than 7%.

According to media reports, on Sunday (13th) local time, US Republican presidential candidate Trump explained his trade policy in detail on the “Sunday Morning Looking to the Future” program. The report said that the former president proposed a new “United States-Mexico-Canada Agreement” (USMCA) as part of his larger move to boost domestic employment and revitalize the automobile industry. Trump claims that the US has been “deceived by Mexico, China, Canada, and the European Union” in the past. He doesn't care if a new agreement can be reached, but the US must get rid of the North American Free Trade Agreement (NAFTA). Auto stocks are once again under fire and are making collective adjustments today.

Nobel laureate economist Stiglitz: America is too shortsighted; sanctions will only encourage China to become self-reliant. This is true. Facts have proven that in the end, a series of small courtyard high wall actions carried out by the US and the West all failed. Autonomy and control must continue steadfastly. For example, SMIC (00981) is up 4.51% today. A-share Hongmeng is also quite strong.

Ministry of Commerce: It is proposed to select 3 companies including Elvis as the sampled companies in the dairy countervailing case; specifically, Elvir (France) Ltd. (ELVIR) and its affiliates; Fitzland Netherlands Ltd., Fitzland Belgium Ltd., and their associated companies; involving France, the Netherlands, and Belgium. Car tariffs are still being discussed, and the West can only be counteracted; otherwise, if you talk carefully, you think it's just weakness. Starting from a position of strength, this is probably the rule followed by the US and the West. The recent trend of flying cranes in China (06186) is strong, or related to this. Others include Mengniu Dairy (02319), Excellent Animal Husbandry (09858), and Zhuangyuan Ranch (002910.SZ).

In summary, it is not that the policy is not effective; rather, the external environment is too complicated; any kind of hype will affect the Hong Kong stock market. Foreign investors are also very sensitive, watching how events unfold.

[Section Focus]

A copy of the “Notice on Holding a Symposium on Preventing Vicious Competition in the Industry” came out of the market in the morning, saying that the prices of photovoltaic products have continued to drop in recent times. Currently, prices of mainstream products are significantly lower than production costs, and the industry has fallen into a vicious situation of competition below cost prices. In order to prevent vicious internal competition, clear exit channels for backward and inefficient production capacity, maintain a fair competition order in the photovoltaic market, and guide the healthy development of the industry, the China Photovoltaic Industry Association organized a symposium on preventing vicious competition within the industry in Shanghai on October 14 to discuss measures to resolve the imbalance between supply and demand in an orderly manner and eliminate excess production capacity.

The photovoltaic industry has reached a critical moment, and the industry really needs the government to take effective measures to change the status quo. There have been several symposiums before, but no concrete actions have been implemented. This time, combined with the Ministry of Finance's financial debt, we see if something substantial can be introduced. Main varieties: Follett Glass (06865), Xinyi Solar (00968), GCL Technology (03800).

[Individual Stock Mining]

Lenovo Group (00992): Launching the strongest AMD platform, server shipments continue to be strong

On October 15, the Lenovo Innovation and Technology Conference is about to open. Recently, Lenovo Group announced the launch of an industry-leading ThinkSystem infrastructure solution powered by AMD EPYC 9005 series processors and the AMD Instinct MI325X accelerator.

Comment: Lenovo is leading the way in testing world record performance benchmarks for AMD processor systems, 5 times that of industry competitors. According to research firm Canalys, Lenovo led global PC market shipments in the third quarter of 2024. In the third quarter of 2024, Lenovo was at the top of the list, with global shipments reaching 16.5 million units, an increase of 3% year over year. This is due to the continued strong volume of Lenovo shipments after the third quarter of 2023. Shipments in Q1 and Q2 in 2024 were 59.8 million and 64.9 million units, respectively, changing from negative to positive year-on-year. The global PC market will continue to grow strongly over the next 12 months, as a large portion of the Windows PC installation base will still need to be updated before Windows 10 expires in October 2025. As the first manufacturer in the world to launch AIPC, Lenovo has successively launched AIPC versions of a series of products. At the same time, “Lenovo Xiaotian”, which is driven by large local models, meets B-side customization needs, and is expected to open up the next cycle of the PC market in the future. According to the 2024 Q1 global folding screen phone market report, Lenovo Motorola achieved rapid growth with its clamshell RAZR series products, reaching an astonishing 1260% year-on-year increase, and surpassed Samsung to become the number one sales volume in the US folding screen market.

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