Anatomy of the large cap market.

Hong Kong stocks are quite sensitive to US inflation data, and they rose steadily today, with a 2.59% increase at the close. The trading volume increased to 119.4 billion, with nearly 20 billion of new capital inflows.

Looking at the US inflation data, the seasonally adjusted CPI annual rate was 3.0% in June, which was lower than the market's expectation of 3.1% and fell to the lowest level since last June. The core CPI rose 0.1% month-on-month in June, the lowest level since August 2021. Yesterday's forecast: 'It is likely that the core CPI will fall, but the estimated range will not deviate too much.' In addition, regarding the impact on the US stock market: 'If the month-on-month increase in the core CPI is between 0.15% and 0.20%, it will further push up US stocks, but it may be a short-term high point after the acceleration.' The results and analysis are consistent.

The US stock market closed on Thursday, with the Nasdaq index plunging 1.95%, the S&P 500 index fell 0.88%, and only the Dow Jones index rose 0.08%. The Dow Jones index had a small increase because it had been stagnant, and the market was forming a high-low switch. It is worth noting that large technology stocks collectively fell, and the market value of seven of the largest US technology giants evaporated by the largest amount in nearly a year, which totaled US$598.8 billion (about RMB 4.3 trillion). Good news coming out is routine speculation, and there is nothing wrong with it. Only those who are unaware will go to stand on guard at a high level.

With this data, there is no doubt that interest rate cuts will be very likely to begin in September this year. The relatively consistent opinion is that the United States will start to cut interest rates in September this year and will cut interest rates twice this year, each time by 0.25 basis points. The Chief Market Strategist for Morgan Asset Management's Asia-Pacific region believes that the United States will cut interest rates 4 to 5 times in the next 12 months. To be honest, the situation behind is difficult to judge, because there are still variables in the new president's area.

On Thursday, Eastern Time, US President Biden had another mishap at a press conference in Washington. In the opening question, he once again made a slip of the tongue and mistakenly referred to 'Vice President Kamala Harris' as 'Vice President Trump'. Earlier, Biden had made a gaffe at a NATO event in which he accidentally called Ukrainian President Zelensky 'President Putin', which is quite worrying because calls for a replacement are growing louder and even Pelosi implicitly expressed the hope that he would voluntarily withdraw from the race. If there is a replacement, time is tight, but the world is unpredictable, and it is not entirely impossible to come up with a dark horse. Because neither Biden nor Trump can be called an ideal candidate.

In this situation, investors dare not bet easily, and can only grasp the biggest expectation of the moment, which is that the Fed will start its first interest rate cut in September.

Large-scale capital has a reason to enter the market, and Tencent Holdings (00700) and Meituan (03690) are beginning to exert their strength. Tencent announced the repurchase of 2.61 million shares on July 11, costing about HK$1 billion. Another catalyst: yesterday, the fourth-largest game developer in South Korea, Shift Up, went public, with a high increase of up to 49% and a final increase of 18.33%. Tencent's Singapore investment entity Aceville holds a 35% stake in Shift Up. Today, it rose 3.17%.

Meituan (03690) also has many favorable factors. Meituan's data shows that the scale of domestic cultural tourism consumption has increased by more than 20% in the past two weeks, with Beijing, Shanghai, Chengdu, Xi'an, Guangzhou, Chongqing, Shenzhen, Hangzhou, Changsha, and Wuhan being the top ten destinations. During this period, the scale of cultural tourism consumption in third- and fourth-tier cities and rural areas in mainland China has grown rapidly, and the growth rate of popular destinations such as Shengsi, Anji, Tonglu, and Yanji has exceeded 60% compared to the previous two weeks. As for notes and guides related to small-town tourism, the growth rate of the relevant data on Dianping's notes channel exceeded 1.1 times.

In addition, the company's strategic cooperation with Kuaishou (01024) has recently expired and been renewed, and the cooperation between the two parties will be upgraded comprehensively. According to the agreement, the space for cooperation between Kuaishou and Meituan in the next three years will be expanded to 'hundreds of cities and thousands of stores' nationwide. Kuaishou's relevant data shows that in June, the GMV of Meituan merchants on the Kuaishou platform increased more than 38 times year-on-year, and the order volume increased more than 10 times year-on-year. At the same time, Meituan joined hands with Focus Media to enter the elevator media market. Today rose by 4.91%.

Yesterday, when talking about the major sectors that benefited from the interest rate cut, they all rose today. The first one was the real estate sector. According to the Guangzhou Daily, inquiries from multiple banks have shown that the first-home mortgage rates of many banks continue to decline, and the first-home mortgage rates of some foreign banks have dropped to as low as 3%. Seazen Development (01030), a real estate stock mentioned yesterday, surged by more than 9 points, and China Resources Land (01109) also rose by more than 4 points. The company with the largest increase today was Shimao Group (00813), which increased by more than 14 points.

The local property market in Hong Kong is also improving, with a 50% monthly decrease in first-hand residential sales to 986 units and a 55% drop in sales to $12.6 billion Hong Kong dollars in June. However, sales in the first half of the year were 1.41 times higher than in the second half of last year, with sales of HKD 112 billion, and a year-on-year growth of 33%, the highest half-year sales since 2021. The dividend yields of Hong Kong property stocks have risen significantly, and their valuations are very attractive. SHK PPT (00016), CKH Holdings (00001), and CK Asset Holdings (01113) all rose by 6 percentage points. The market has some views on Li Ka-shing's Dongguan project's price reduction of 10,000 Hong Kong dollars, but this is a commercial action of the company. The project was bought at a low price, and a price reduction is also making money. CK Asset Holdings (01113) stated that as long as the price is right, it will continue to acquire land in Hong Kong. Everything depends on whether the environment is improving.

CKI Holdings (01038) announced that it will potentially list the company's shares on overseas stock exchanges (such as the London Stock Exchange) without any fundraising. Being able to finance overseas is, of course, a good thing, which can enhance the company's image and provide a broader market for trading its shares. As of the date of this announcement, the company has not made any final decisions on whether or not to proceed with the above listing. It jumped 6.37% today.

The overall strength of the property market is undoubtedly bullish for banks. Many A-share banks have reached record highs, and CM Bank (03968) rose 4.71% today.

Yesterday also mentioned innovative drugs that are sensitive to interest rate cuts. Among them, Innovent Bio (01801) has good continuity. The clinical trial application for small nucleic acid (siRNA) drug SGB-3908 injection to treat hypertension has been granted conditional approval by the National Medical Products Administration's Center for Drug Evaluation (CDE) clinical trial application (acceptance number: CXHL2400426), for the treatment of hypertension. It rose by more than 6 percentage points again today.

Another fermentation HUTCHMED (China) Limited (00013) because the management team shared the latest progress of some of the projects in its rich and innovative drug pipeline, including the Phase III study of ESLIM-01 using sulopenem for the treatment of immune thrombocytopenia and the Phase II/III study of ESLIM-02 for the treatment of warm antibody type autoimmune hemolytic anemia; the Phase II/III study of sulfatinib for the treatment of pancreatic duct adenocarcinoma; and the Phase III study of HMPL-306 for the treatment of acute myeloid leukemia. The market is relatively optimistic about this, and its stock rose by more than 7 percentage points.

Next week, the focus will be on the convening of the Third Plenary Session of the 19th Central Committee of the Communist Party of China. If unexpected policies are introduced, it will still stimulate the market. Otherwise, the market will continue to be affected by external fluctuations. Pay attention to the high and low switching of short-term funds, such as lithium batteries, photovoltaics, and so on, which are at the bottom.

Sector Focus

The Ministry of Commerce, the People's Bank of China, the China Banking and Insurance Regulatory Commission, and the State Administration of Foreign Exchange recently jointly issued the "Opinions on Strengthening Business and Financial Coordination and Supporting High-quality Development of Cross-border Trade and Investment with Greater Efforts". The "Opinions" proposed 11 policy measures in five aspects around key areas such as stabilizing foreign trade, stabilizing foreign investment, deepening economic and trade cooperation under the Belt and Road Initiative, and promoting cross-border trade and investment development. The company provides diverse investment and financing services. The five aspects are to promote the quality and quantity of foreign trade and optimize comprehensive financial services for foreign trade; promote the stability and quality improvement of foreign investment and strengthen financial services for foreign investment; deepen economic and trade cooperation under the Belt and Road Initiative and investment cooperation, improve diversified investment and financing services; facilitate cross-border trade and investment development and optimize payment and settlement environment; and prevent and control cross-border trade, investment and financial risks, and safeguard the bottom line of safety.

The logistics industry benefits the most from cross-border trade, with main varieties including JD Logistics (02618), ZTO Express-W (02057), YTO International Express (06123), and Sinotrans Limited (00598).

CRRC Corporation (01766): Inclusion in the FTSE China A50 Index, New signings maintain steady growth trend

Sunny Optical (02382): Overall improvement in June data is expected to continue to recover in the second half of the year.

Sunny Optical recently announced that the shipment volume of mobile phone lenses in June was approximately 0.109 billion pieces, an increase of 5.1% month-on-month and 19.6% year-on-year; the shipment volume of automotive lenses was 7.64 million pieces, a decrease of 8.4% month-on-month and an increase of 3.4% year-on-year. The shipment volume of mobile phone camera modules was 41.622 million pieces, a decrease of 8.5% month-on-month and 20.2% year-on-year.

Comment: Sunny Optical's shipments of mobile phone lenses, mobile phone camera modules, and automotive lenses in the first five months exceeded expectations, and data for June continued to improve overall year-on-year. It is bullish on future shipment growth and predicts that profits will continue to recover in the second half of the year. Many new mobile phones and AIPCs will be released in the second half of this year, and the third quarter is expected to usher in a peak season of demand.

Sunny Optical's automotive optical/XR opens up new growth space for the industry. The company has further deepened strategic cooperation with global VR customers and successfully achieved mass production of key projects. In addition, the company has become the preferred supplier of the next-generation perception and interaction class module for a global well-known VR customer. The continuous growth of the automotive lens reflects the trend of automotive intelligence, and the automotive business is gradually becoming an important source of performance contribution for the company.

As for automotive modules, the company's 8 million pixel automotive module has won a fixed-point project from the world's largest automobile OEM manufacturer, further consolidating its position as the global leader in the 8 million pixel automotive module market share. The revenue of automotive module business in 2024 is expected to increase by 20%-30% compared with that in the same period last year.

In the emerging field of vehicle-mounted optics, the company will add three lidar mass production projects in 2023, achieve mass production of the PGU module using digital light processing (DLP) technology, and secure several fixed-point projects for high-pixel headlight products, with the core product of million-pixel headlight already in mass production. The company will obtain orders for Huawei's P70 series, and module orders are expected to further improve. In other incremental areas, the gross margin of vehicle-mounted business lenses and modules remains high, and although the industry is not doing well in the VR direction, the income growth rate is expected to exceed 20% year-on-year, and the machine vision direction is also an important income growth point.