Source: Gelonghui

On July 6, the Hang Seng Index opened low and went low, followed by two consecutive waves of sharp declines. By press time, the decline had rapidly widened to more than 3%, and the drop point was over 600 points at one point.

The Hang Seng Technology Index and the State-owned Enterprises Index also followed the weakening trend. As of press release, they both fell by more than 2%, while the Chinese Enterprise Index fell by nearly 4%.

Judging from the declining structure, the adjustment of Chinese bank stocks may have triggered some panic attacks. At first, the Chinese bank stock sector, which had a steady intraday trend, suddenly fell in a straight line; weighted stocks such as CMB, CCB, and ICBC all fell quite a bit.

According to the news, a “small essay” about Goldman Sachs downgrading the individual stock ratings of domestic banks was widely circulated in the market on July 5. However, regarding this, Goldman Sachs said in an interview with the media on the 6th that this is false information.

Overseas, on July 5, local time, the Federal Reserve announced the minutes of the June meeting. The minutes of the meeting show that almost all Fed officials said at the June meeting that policy may be further tightened, but the rate of tightening will be slower than the rapid rate hike in monetary policy since the beginning of 2022.

Meanwhile, affected by the Fed's weak news mentioned above, the major stock markets in the Asia-Pacific region fell across the board today. The Nikkei 225 Index and Taiwan Weighted fell nearly 2%; the Korea Composite Index fell nearly 1%; and the Australian Common Stock Index exceeded 1%

Board performance

The stocks of Chinese banks were collectively adjusted. Industrial and Commercial Bank, China Merchants Bank, Bank of China, and China Construction Bank fell by more than 2%, while Agricultural Bank, Everbright Bank, and Bank of Transportation fell by nearly 2%.

Yesterday, it was suddenly reported in the market that Goldman Sachs downgraded the ratings of several major domestic banks, such as ICBC and agriculture, to sell. This morning, Goldman Sachs responded that the agency's report entitled “Testing the “Impossible Trinity” analyzed views on current domestic bank stocks from three perspectives. There were 12 banks involved in ratings. The coverage was only 30% of the 42 current A-share listed banks, concentrated between major state-owned banks and some joint-stock banks. Of Goldman Sachs's ratings of the 12 banks mentioned above, 5 gave “sell,” 4 “buy,” and 3 had a neutral rating.The total number of purchases and neutrals is 7, not like the pessimism portrayed by “undersinging” bank stocks and “small essays.”

SciNet shares generally fell, with JD and Meituan falling more than 3%, Tencent falling more than 2%, and Alibaba and Baidu falling more than 1%.

Sporting goods stocks generally fell; Anta Sports, Bosideng, and Expex all fell more than 3%, while Li Ning and Taobo fell more than 2%.

According to the news, Citiffa Research Report said that given the normalization of Adidas's inventory in the second half of the year, the bank expects the gross margins of Chinese sports brands (including Fila) to be under pressure. It is expected that the stock prices of Chinese sports brands will fluctuate to a certain extent until market expectations are lowered from July to August after quarterly results.

The bank lowered Li Ning and Anta's profit forecasts and target prices for this year and next two years. After the cuts, Anta's profit forecasts for this year and next two years were 8% and 11% lower than market expectations, respectively, and Li Ning was also 8% and 10% lower than market expectations.

Domestic housing stocks had the highest decline, with China Resources Real Estate falling more than 4%, while Yuexiu Real Estate, Longhu Group, Vanke, China Overseas Development, and Hang Lung Real Estate weakened one after another.

Pharmaceutical stocks had the highest declines, with Ali Health and Jingdong Health falling more than 4%, followed by Kanglong Chemical, Gloria Ying, Rongchang Biology, Pharmaceutical Biology, and Kingsley Biotech.

On the other side, food and beverage stocks, beer stocks, etc. declined one after another; weighted stocks such as big finance stocks, Chinese leading stocks, energy stocks, and semiconductor stocks were sluggish across the board.

What is the next trend of Hong Kong stocks?

The Hong Kong stock market traded more than HK$86.9 billion yesterday, and the Hong Kong Stock Exchange recorded a net inflow of HK$9.241 billion. ActuallyEven with the average daily turnover of just over HK$84.2 billion in the market last week, the investment climate is weak. Hong Kong Stock Connect continues to look short and cut short. After a large net outflow, there is also a large net inflow. It is also dominated by speculative index ETFs, which shows that domestic capital lacks much confidence in the future market.

Since the Hong Kong Stock Connect is highly sensitive to China's policies and also has a great information advantage, in the past, when the Hong Kong Stock Connect had a series of large net inflows, the future market of Hong Kong stocks would also be better, but currently this situation is not visible for the time being.

Regarding the future market of Hong Kong stocks, some analysts pointed out the following four negative factors:

1. US inflation continues to be high and the job market is still performing relatively well. The US dollar interest rate will remain high even after the Federal Reserve has raised interest rates repeatedly.Interest rates will even be raised further, the opportunity cost of investing in the stock market will increase, and there will be downward pressure on Hong Kong stocks.

2. In view of the spread of interest between China and the US, the RMB exchange rate fell, and the stock prices of many companies with mainly RMB assets fell, lowering the Hang Seng Index.

3. The geopolitical risks of the world today should not be underestimated: the Russian-Ukrainian conflict continues; even though China and the US can manage certain differences, the US has not changed its policy to contain China's rise, and the risk of military conflict still exists.

4. The mainland economy is recovering, but the growth trend is not strong. This not only affects corporate profits, but also prolongs the period when the RMB is weak.

According to the Sino-Thai International Research Report, the Chinese economy is nearing the end of this round of active inventory removal, with the support of the global vaccine (inventory) cycle, policy effects, and the service industry. It is expected that the third quarter will gradually switch to a passive inventory removal cycle. HoweverHowever, with the lack of active support from real estate, the new round of PPI and the upward pace of the inventory cycle will be relatively moderate compared to the past.

Meanwhile, Caixin China's manufacturing PMI in June was 50.5, down 0.4 percentage points from the previous month, and has been in the expansion range for two consecutive months; Caixin China's service sector PMI fell 3.2 percentage points to 53.9, the lowest since February. The decline in prosperity in the two major industries dragged down Caixin China's composite PMI by 3.1 percentage points to 52.5 in that month.It shows that the production and operation of enterprises continue to expand, but momentum is slowing down. If the economy improves further and the RMB exchange rate rebounds, the Hang Seng Index will stop falling and pick up. That is more likely.

Editor/jayden