Intelligent Hong Kong Stock Analysis | Maotai's decline brings about changes in consumption, what is the intention behind the securities anomaly

[Market Analysis]

The A-share Shanghai Composite Index continues to hold at 3000 points, while the Hong Kong stock market has once again fallen without suspense, closing down by 0.94%. The influence of the European Cup is indeed significant.

Looking at the curse of the European Cup on A-shares: during the European Cups in 2000, 2004, 2008, 2012, 2016, and 2021, A-shares have experienced adjustments. Among them, the 2008 European Cup saw the most severe decline, with the Shanghai Composite Index falling by a cumulative 17.46%; in the other three European Cups, the decline exceeded 2%, and the Hong Kong stock market did not fare much better.

According to reports on the 13th, the leaders of the G7 countries reached a political agreement that day to use frozen Russian assets as collateral to provide Ukraine with approximately $500 billion in loans. This approach carries significant risks, as freezing a sovereign asset may violate international law. If, in the future, Russian assets are unfrozen (for example, in the event of the war ending), or if the frozen asset's earnings are insufficient to repay the loan, there will be a problem of shared responsibility.

Russian Foreign Ministry spokesperson Zakharova warned on the 13th: "We have a series of political and economic measures that can be used against anyone trying to seize Russian assets." It seems that in the end, it will be Europe that faces retaliation, which will dampen investors' confidence in the euro. The beneficiary will be the US dollar, as the logic behind the strength of the US stock market is constantly driving European capital back to the United States. With this trend, the situation between Russia and Ukraine will only become more tense, and the global situation will become more turbulent.

Recent events such as Russian submarines visiting Cuba, Houthi attacks on a US aircraft carrier, and continuous airstrikes on US troops in the Middle East are all chain reactions. The tense situation in the shipping industry is expected to continue. A person from the investor relations department of COSCO Shipping Holdings (01919) stated: "Yesterday, Maersk announced its price hike plan for July, and top units in the industry such as CMA CGM and Hapag-Lloyd also have plans to raise freight rates subsequently. From this perspective, the market (freight rates) still looks promising."

The Indian stock market has been performing exceptionally well this year, sparking an IPO frenzy. Data from FactSet shows that as of 2024, India has seen 130 companies go public, raising a total of INR 313 billion (approximately $37.4 billion). If the pace continues in the second half of the year, the number of IPOs in India is expected to surpass that of 2023, setting a new record. In 2023, India had 238 IPO companies, the highest in 9 years, raising a total of INR 614 billion (approximately $73.5 billion). Additionally, India led the world in the number of IPOs last year.

This week, the news of Hyundai Motor India's IPO raising $2.5 to $3 billion has attracted widespread media attention. If successful, this will be one of the largest IPOs in India's history, matching the record set by India Life Insurance Company, which raised INR 206 billion (approximately $2.5 billion) in 2022. India has also attracted listings from companies like Unilever (India), Siemens (India), and ABB (India). To successfully attract foreign investment into the Hong Kong stock market, on the one hand, the index must be able to maintain a continuous upward trend; On the other hand, domestic funds need to increase their efforts. Although this year's Hong Kong IPO market is much better than last year, there is still a significant gap compared to India.

The current issue is that the domestic stock market is also facing some challenges. The biggest hit is the continuous decline of Maotai. The latest reference price disclosed in the morning shows that the wholesale reference price of Feitian Maotai has dropped from 2420 yuan the previous day to 2230 yuan, a decrease of nearly two hundred yuan in a single day. The continuous decline in prices has also spread to the Maotai collectibles market. It is rumored that at the Poly Maotai auction held on June 13th, the Maotai liquor had a high auction failure rate of 91.67%. Guizhou Maotai (600519) once again hit a 30-month low during trading, reaching a minimum of 1520.46 yuan per share, compared to the previous low of 133.33 yuan per share set on October 31, 2022.

The weakening trend of Maotai from a consumer product to a financial collectible has had a significant impact on the overall consumption outlook. Luxury goods are clearly struggling, such as China Duty Free Group (01880), which has been falling for a long time and has not stabilized yet, still hitting new lows. Similarly, companies like Lao Feng Xiang Group (00590) and Chow Tai Fook Jewellery (01929) have seen a decline in prices despite the rise in gold prices, with other jewelry such as diamonds plummeting. The decline can be attributed to factors such as the impact of lab-grown diamonds, ultimately stemming from a decrease in purchasing power. Naturally, stock prices continue to plummet. Only when these varieties stabilize can the overall consumption sector see improvement.

When it comes to consumption, it cannot be generalized. For example, consumer electronics, a type of durable consumption, where smartphones are indispensable. The emergence of smartphones with AI capabilities will bring about a wave of upgrades. Therefore, companies like Q Technology Group (01478), Sunny Optical Technology (02382), Fortune Ship (02038), and GoerTek (01415) have been rising one after another. This has also led to a more than 9-point increase in the upstream PCB manufacturer, Build & Grow Integrated Circuit Board (01888). The mass consumer sector mentioned yesterday, such as film and entertainment, also performed well, with Maoyan Entertainment (01896) and Alibaba Pictures (01060) both seeing increases.

Another unique sector is electronic cigarettes, with rapid growth in overseas markets. Various new types of electronic cigarettes, such as those with screens, have gained consumer acceptance. Leading the pack, Smoore International (06969) announced on June 12, 2024, that the trustee had purchased a total of 1.868 million shares in the market under the share incentive plan, with an average cost of approximately 8.6594 Hong Kong dollars per share, totaling approximately 161.758 million Hong Kong dollars. Implementing share incentives is conducive to continuous performance improvement, with the stock rising by nearly 11 points. In the tobacco sector, China Tobacco Hong Kong (06055), which has a monopoly advantage, is expected to increase profits by 30% in the first half of the year, and today it surged by over 7 points. Addictive consumption tends to perform better in tough economic times.

China's social financing scale in the first five months increased by 14.8 trillion yuan, below the market expectation of 15.08 trillion yuan, once again falling short of expectations, with the sluggish real estate sector being a significant factor. Recently, the central bank held a meeting in Jinan to promote the progress of re-lending for affordable housing, researching and promoting the pilot experience of pre-leasing housing loan support plans, and deploying the advancement of re-lending for affordable housing From the data, in Shanghai: From May 28th to June 10th, the daily average transaction volume of second-hand housing in Shanghai reached 700 units, an increase of 38% compared to the daily average transaction volume from May 1st to 27th. In Shenzhen: In May, Shenzhen's second-hand residential property transfers reached 3,963 units, the second highest in nearly 37 months. Among them, old houses, even "old shabby small houses," account for the majority, as they have low transaction taxes and fees, high cost performance, and are attracting attention from home buyers. Overall, there is some improvement, but the overall situation has not changed significantly. Real estate stocks moved slightly today, such as Shimao Group (00813), Country Garden (03383), Sunac China (00884), China Overseas Land & Investment (03377), and Vanke (02202). Relative bank stocks also saw a slight rebound, and the sustainability will depend on any positive catalysts in the future.

Brokerage stocks also showed some movement, with market rumors of Guotai Junan Securities and Haitong Securities planning to merge. Both of the above companies are headquartered in Shanghai, with Haitong Securities having no controlling shareholder and Guotai Junan having Shanghai State-owned Assets Operation Co., Ltd. as its controlling shareholder. Haitong Securities (06837) and Guotai Junan Securities (02611) both rose by over 4 points. If this is just for market stabilization, the sustainability is limited unless there is indeed news of a merger.

Huawei Developer Conference will be held from June 21st to 23rd at Songshan Lake in Dongguan, where HarmonyOS NEXT will be unveiled. In addition, Huawei recently announced the latest upgrade progress of HarmonyOS 4.2 system, with 180 devices set to receive the HarmonyOS 4.2 upgrade. Pactera Edge Technologies (00354) is gearing up in advance, with the company increasing its holdings in the past 3 days and rising by nearly 6 points today.

[Sector Focus]

On June 18-19, 2024, the first CPHI Biomanufacturing Innovation Development Conference of 2024 will be held at Hilton Yilin Hotel in Dongjinjiang, Shanghai. The event will focus on "Synthetic Biology Empowering Industry Upgrading," held concurrently with the "22nd World Pharmaceutical Raw Materials China Exhibition and the 17th World Pharmaceutical Machinery, Packaging Equipment, and Materials China Exhibition (CPHI & PMEC China 2024)" and the "25th Health Natural Raw Materials, Food Ingredients China Exhibition (Hi & Fi Asia-China 2024)." With an exhibition area of over 210,000 square meters, nearly 3,500 well-known domestic and foreign exhibitors will showcase new products, innovative equipment, and cutting-edge technologies, attracting an estimated 90,000 professional buyers from home and abroad.

In the first quarter of 2024, China's pharmaceutical product import and export trade volume reached $46.944 billion. This grand event will further promote innovative pharmaceutical companies and medical device companies to the international stage.

Related stocks: Sundia MediTech (01801), Xintai Medical (02291), Haohai Technology (06826), Rongchang Biotech (09995) 【Stock Exploration】

Rongchang Biology (09995): Steady Progress in Core Clinical Trials with Strong Independent R&D Capabilities

The company announced that the product Vedolizumab for injection, under the trade name Aidixi, achieved positive results in a randomized, open-label, parallel-controlled, multicenter Phase III clinical trial for the treatment of HER2-positive advanced breast cancer patients with liver metastases, meeting the primary research endpoints of the clinical trial. The group plans to submit a marketing application to the National Medical Products Administration's Drug Evaluation Center in the near future.

Comments: Vedolizumab has already obtained breakthrough therapy designations for three major indications in China and the United States. The company's core product sales continue to increase significantly, achieving good growth year-on-year and quarter-on-quarter. The company has established and improved three major innovative core technology platforms, demonstrating strong independent R&D capabilities; the indications for Taituxi and Vedolizumab are expected to continue expanding, with Taituxi already covering 2,300 hospitals nationwide. Vedolizumab has been approved for the treatment of gastric cancer and urothelial carcinoma, both of which are covered by medical insurance.

Business Progress: 1) In January 2024, RC88 received FDA fast track designation for the treatment of ovarian cancer. At this year's ASCO conference, Rongchang Biology showcased 16 major achievements collectively. Among them, the MSLN (mesothelin) ADC drug RC88 made a stunning appearance.

1. Rongchang Biology's Taituxi has already been successfully launched in China and is undergoing global Phase III clinical trials for indications, with a high success rate in this part of research and development. In March 2024, Taituxi received FDA fast track designation for the treatment of dry syndrome. Looking at the global clinical layout of Taituxi, the drug has progressed to Phase III or key clinical stages in the United States for four major indications: systemic lupus erythematosus, myasthenia gravis, dry syndrome, and IgA nephropathy. Among them, the Phase III clinical progress of systemic lupus erythematosus is the fastest, with the first patient enrolled in June 2022. The company's internationalization has begun, with cooperation between SEAGEN and the overseas rights of RC48, showing the potential for the company to grow from a biotech company to a biopharmaceutical company.

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