Zhitong Hong Kong Stock Analysis | Two Major Events Stabilize Hong Kong Stocks, Unique Stocks Gain Momentum Again

[Anatomy of the Market]

Today's Hong Kong stocks are quite interesting. A-shares are down across the board, and U.S. stocks are also collectively weak, but the Hang Seng Index remained relatively stable throughout the day, only slightly weakening towards the end, closing down 0.05%. It continues to stabilize near the 60-day moving average.

Recently, A-shares have been performing quite poorly, with some small articles suggesting that institutions are reporting retail investors, believing that retail investors have harmed the ecosystem. Coupled with strict regulations, retail investors are hesitant to act and are all retreating. The claim of reporting is certainly unfounded; everyone is interconnected. At this point, it is normal for institutions to have less influence, as the stocks held by institutions are indeed not rising. Fundamentally speaking, which Chinese company can attract a large amount of attention like NVIDIA? Before Jiangxiang Technology establishes an upward channel, it is difficult for institutions to take the lead. It is fundamentally an issue of the overall environment. If institutional stocks are underperforming, then funds will speculate on themes and concepts. This is where retail investors excel, but if retail investors are also restricted from speculation, then it becomes unclear what to play with. This leads to a rather bleak market.

As for U.S. stocks, the Federal Reserve is hawkish again. Powell stated in a written speech in Dallas on Thursday that "the economy has not conveyed any signals that necessitate a rush to lower interest rates, and the better economic conditions allow us to act cautiously in our decision-making." Since the Federal Reserve has made such a statement, signaling that there may not be a rate cut in December, the market understands this, and it is quite normal for U.S. stocks to decline. In fact, even if the Federal Reserve does not speak, U.S. stocks may not be able to hold up at high levels.

I have repeatedly emphasized that if U.S. stocks are strong, Hong Kong stocks will not have an easy time. Overnight, U.S. stocks fell, but Hong Kong stocks were not as panicked. Is this the reasoning? Of course, there is some logic to maintaining stability. Several major economic indicators in the mainland rebounded last month. The National Bureau of Statistics released data on November 15, showing that the industrial added value of enterprises above designated size nationwide increased by 5.3% year-on-year in October; the national service production index increased by 6.3% year-on-year, accelerating by 1.2 percentage points from the previous month; and the total retail sales of consumer goods increased by 4.8% year-on-year, accelerating by 1.6 percentage points from the previous month. Among them, the output of new energy vehicles, industrial robots, integrated circuits, and photovoltaic products increased by 48.6%, 33.4%, 11.8%, and 13.2% year-on-year, respectively. At the very least, this data has provided significant confidence to the market.

More importantly, two points should be noted: 1. The Ministry of Finance of China issued U.S. dollar sovereign bonds in Saudi Arabia on the 11th of this month, with a scale not exceeding $2 billion. Many may not take this news seriously, but it actually hides a mystery. Simply put, China is cashing out the U.S. bonds purchased in the U.S. to obtain U.S. dollar cash from Saudi Arabia, and then lending the U.S. dollar cash to developing countries that need to repay U.S. debt, allowing us to recover renminbi. If they cannot repay, they can use resources as collateral, achieving multiple benefits. On one hand, U.S. dollars flow back to the U.S., increasing cash availability, making it less favorable for the U.S. to print more money, otherwise inflation will rise. On the other hand, the strong U.S. dollar will be curbed. Look, the U.S. dollar index fell today. At the same time, the renminbi is also moving towards internationalization. Dali Pu Holdings (01921), due to its cooperation with Saudi Arabia on several projects, rose over 7% again today 2. On November 14th local time, President Xi Jinping attended the opening ceremony of the Port of Chancay in Peru via video link with President Boluarte. Currently, most cargo shipments from Peru to Asia and Oceania need to be transshipped through the United States or North America, and the throughput cannot meet the demands of foreign trade upgrades. The first phase of the Chancay Port project can shorten the shipping time from Peru to China to 23 days, saving 10 days and reducing logistics costs by over 20%, bringing $4.5 billion in annual revenue to Peru, creating more than 8,000 direct jobs, and providing tangible benefits to the local people. More critically, all Asian products entering Latin America and South American countries will first pass through Chancay Port into Peru, and then be transported or distributed to other countries, establishing it as the "Singapore of Latin America." Expanding into the Latin American market is also a way to break through economic barriers. For this project, China COSCO Shipping Ports Limited (01199) has acquired a 60% stake in Chancay Terminal, becoming the controlling shareholder, and is expected to benefit from the trade development in the entire South American region.

Back to the market, the strongest direction recently is AI+. Kingsoft Cloud (03896) is the first to benefit from the resource demand increase brought by ecological customers' AI business layout. In the second half of 2023, Xiaomi returned as Kingsoft Cloud's largest customer after five years; in 1H24, Xiaomi and Kingsoft Group accounted for 19% of Kingsoft Cloud's total revenue, with Xiaomi contributing about 15%. It is expected that other major customers will also increase their AI investments, and Kingsoft Cloud (03896) will continue to perform well, rising over 10% again today.

The application of AI in the film and television industry is gradually becoming apparent. Companies like ByteDance, Conch, and Kuaishou are actively laying out in the AI-generated video field, with multiple products expected to be launched by the end of the year. Driven by AI, the film and television industry will undergo unprecedented changes, with the highest degree of benefit. Related stocks such as Xingkong Huawen (06698) surged over 23%, and Maoyan Entertainment (01896) rose over 5%.

In the gaming sector, NetEase (09999) reported a 17% drop in net profit for the third quarter, falling short of expectations, while the market is optimistic about the upcoming launch of the game "Yan Yun Shi Liu Sheng" next month, with shares rising over 13.4% today. The current market is quite strange, often punishing stocks with good performance while rewarding those with slightly poorer performance but bright spots. The key reason is that the risk appetite is too low; the position of the stock price is crucial, and when prices rise, the desire to cash out becomes strong.

According to media reports, Zdata Technologies Co. plans to go public in Hong Kong, with a valuation possibly exceeding $500 million (approximately HKD 3.9 billion). Zdata Technologies is an industry-leading digital infrastructure service provider, focused on the construction and operation services of new high-computing green data center clusters, and has already established a presence in key regions such as Beijing, Tianjin, Hebei, Inner Mongolia, Shanxi, Guangdong, and Hunan, as well as deploying large-scale computing data center clusters in key international nodes like Malaysia. Its main clients include Tencent (00700), Meituan (03690), Alibaba (09988), Huawei, Douyin, and others. Its listing is expected to stimulate telecom-related stocks, and there are also rumors that Tesla's FSD data has been given to China Unicom, which is estimated to be unreliable. In any case, telecom stocks have been strong today, with China Telecom (00728), China Unicom (00762), and China Mobile (00941) all showing movement in recent days It is estimated that there are also reasons related to the acceleration of AI computing power construction.

The concept of automobile dealers is relatively strong today. Yongda Automobile (03669) announced that the company spent HKD 1.8065 million to repurchase 963,000 shares on November 14, 2024, with a repurchase price of HKD 1.86-1.88 per share. Today, it surged over 8%, and Zhengtong Automobile (01728) also rose by 8.77%. The previously strong Zhongsheng Holdings (00881) also followed suit. It seems that the market's perception of these traditional dealers has changed, and selling new energy vehicles may become a new expectation.

I remember a few weeks ago, I mentioned two unique varieties, one being China Tobacco Hong Kong (06055), which surged 6.53% today. This variety has developed into a slow bull pattern, with the main logic being its unique monopoly backed by China Tobacco, having no competitors at all. The potential for future growth lies in the continuous increase in tobacco leaf prices, the expansion of new tobacco products such as HNB, vaping, and oral tobacco, as well as potential mergers and acquisitions, etc. The performance aspect still holds expectations. The other one is Pop Mart (09992), with the latest catalyst being its impressive performance, with third-quarter revenue increasing over 120% year-on-year, and revenue from China, Hong Kong, Macau, Taiwan, and overseas regions growing by 440%-445% year-on-year. These two varieties are interesting, as they seem to often show a correlation. I suspect it might be controlled by a few institutions.

【Sector Focus】

Xiaomi is planning to launch a new generation of AI glasses, having collaborated with Goertek months ago. This product is expected to be released in Q2 2025 (most likely during the April Mi Fan Festival). Regarding the shipment volume of this product, Lei Jun's expectation is "over 300,000 units." Insiders indicate that Xiaomi's AI glasses will "fully benchmark against Meta Ray-Ban," equipped with AI functions, audio headphone modules, and camera modules, and will be released under Xiaomi's own brand. Xiaomi has not yet responded to this.

With the application of multimodal AI large models, AI glasses will iterate the visual modality output method, with the optical display unit being the core breakthrough for smart terminal devices. AR glasses mainly include key modules such as optical display, sensors, cameras, computing processing centers, audio, and network connections. According to data from iResearch Consulting, the BOM proportion of the optical display unit in AR complete devices is the highest, about 43%; the computing unit is second, about 31%; followed by storage units (15%), perception units (9%), and batteries (2%).

As an important application scenario of AI, AI glasses are gradually entering the public's view. Currently, the volume is still very small, but if a breakthrough from 0 to 1 occurs, the growth rate will be astonishing. Related varieties in the Hong Kong stock market include Xiaomi Group (01810) and Sunny Optical (02382).

【Stock Picking】

Samsonite (01910): Spent approximately HKD 34.8573 million to repurchase 1.9323 million shares, with marginal improvement expected in Q4

The company announced that it spent approximately HKD 34.8573 million to repurchase 1.9323 million shares on November 14, 2024. The company's net sales for the first nine months were USD 2.646 billion, a year-on-year decrease of 3.2%; net profit was USD 236 million, a year-on-year decrease of 7.5% In the third quarter, the net sales amounted to USD 878 million, a year-on-year decrease of 8.3%; the net profit was USD 66.2 million, a year-on-year decrease of 39.1%.

Commentary: The company has resumed share buybacks, highlighting its recognition of valuation. Since August, Samsonite has frequently repurchased shares, spending approximately HKD 200 million in October alone. Due to weak global consumer demand, Samsonite's third-quarter performance fell short of expectations, but sales growth turned positive since October, with nearly double-digit year-on-year growth during the Double Eleven shopping festival in China. Marginal improvement is expected in the fourth quarter. The company operates several proprietary brands, including Samsonite, Tumi, and American Tourister, covering consumer segments across high, medium, and low-end markets. Through global expansion, the company's market share has steadily increased, with a market share of 3.8% in the global luggage market last year, second only to LV and Kering Group. It is expected that Samsonite will benefit from the synergistic development of multiple brands, with market share likely to steadily increase. Samsonite has successively acquired the French fashion luggage brand Lipault, the second-largest mobile phone case brand Speck in the United States, the outdoor and adventure backpack brand Gregory, the Italian luggage brand Chic Accent, the high-end business luggage brand Tumi, and the largest luggage shopping website in the United States and globally, eBags. By brand and channel, in the first half of 2024, Tumi's net sales increased by 0.3%, while American Tourister's net sales slightly decreased by 0.9%; the company's direct-to-consumer channel saw a net sales increase of 4.7%, accounting for 38.1% of total net sales in the first half of 2024, compared to 37.7% in the first half of 2023. In the first half of 2024, the company's gross profit margin rose to 60.2% from 58.8% in the same period last year, setting a record for the first half of the year, with improvements seen in all regions. Since August, Samsonite has frequently repurchased shares, spending approximately HKD 200 million in October alone.

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