[Editor's View]

After excluding special extreme conditions, the US and Asia-Pacific stock markets are both recovering, and the Hong Kong stock market also saw two consecutive weeks of positive trend.

According to the latest data, a 25 basis point rate cut by the US Federal Reserve in September is almost a consensus. This week, the market is focused on the Jackson Hole Global Central Bank Annual Meeting held from August 22nd to 24th, discussing the most urgent issues of global economy and monetary policy, including major central banks and top economists, including the Fed. The market will closely watch every sentence Powell speaks at the meeting. It will likely continue to release dovish remarks and guide the stock market to further rise. However, under the continued rebound of US stocks, attention needs to be paid to the rhythm.

The recent important domestic financial data is lower than expected, and objectively, policy stimulus needs to be increased. Combined with the upcoming rate cut by the US Federal Reserve, loose expectations are increasing, and the market atmosphere will be overall optimistic.

Last week, major giant financial reports were all powerful, and the market gave positive feedback. This week, pay attention to Baidu (09888), B station (09626), Xpeng (09868), Xiaomi Group (01810), and other financial data.

On the weekend, NDRC and other four ministries: Focusing on increasing the promotion of key projects in transportation, energy, water conservancy and other infrastructure. For national key private investment projects that meet the conditions, the government will increase investment support by arranging investment under the central budget and other means of investment. This brings opportunities for relevant industries and infrastructure.

On the 16th, the details of the second round of the auto replacement policy were officially released. Compared with the first round of implementation rules released in April, this new policy has changed greatly. In terms of scrap and renewal of automobiles, the subsidy standard for buying new energy passenger vehicles has been increased from 0.01 million yuan to 0.02 million yuan, and the subsidy for purchasing fuel passenger vehicles has been increased from 7,000 yuan to 15,000 yuan, more than doubling. The support of central funds has been further increased, and the subsidy funds for scrapped and updated automobiles are implemented in accordance with the principle of 9:1 sharing between the central and local governments, and the specific sharing ratio is determined by region. The new energy industry may bring new catalyst.

[This week's hot stocks]

Chinahongqiao (01378)

The electrolytic aluminum industry is currently in a state of supply peak, and capacity has almost reached its limit, with limited future incremental capacity. Guizhou Anshun Aluminum and Chalco's projects are expected to be put into operation next year, and Sichuan also has technological renovation projects to be resumed, but overall incremental capacity is not large. In terms of demand, it is currently in the off-season and the performance is relatively weak, and the price has fallen to the resistance level of cost support and cannot continue to fall. The alumina market is in short supply this year, mainly due to the tight supply of domestic ore and the reduction of overseas accidents, which has led to a decrease in imports. As a result, the price of alumina remains high, and the spot sale price exceeds $500.

Comment: Since 24 years ago, the prices of the company's two main products, electrolytic aluminum and alumina, have both risen significantly. The average prices of electrolytic aluminum in Q1 and Q2 of 24 were 19,047 yuan/ton and 20,584 yuan/ton, respectively, and the average prices of alumina were 3,325 yuan/ton and 3,564 yuan/ton, respectively. Meanwhile, the purchase prices of main raw materials such as coal and anodes have declined. The average pithead prices of Shanxi thermal coal in Q1 and Q2 of 24 were 749 yuan/ton and 700 yuan/ton, respectively, and the average prices of prebaked anodes were 4,534 yuan/ton and 4,597 yuan/ton (the average price in Q4 23 was 4,858 yuan/ton). According to Zhongtai Securities' calculation, the net profit per ton of electrolytic aluminum industry in Q1 and Q2 of 24 was 1,658 yuan/ton and 2,502 yuan/ton, respectively, and the net profit per ton of alumina industry in Q1 and Q2 of 24 was 356 yuan/ton and 558 yuan/ton, respectively. The profits of the two major businesses of the company have expanded significantly. The company leads in terms of the scale, cost and profitability of the aluminum industry worldwide, and its valuation has a potential to increase by 90-128% compared with overseas benchmarks.

[Industry Observations]

Mobile phone brands continue to launch new products, and foldable screens are widely used, which is expected to bring high growth to the industry chain.

On July 12th, Honor released the new foldable screen phones Magic V3 and Magic Vs3. On July 19th, Xiaomi launched two foldable screen phones, Xiaomi MIX Fold and Xiaomi MIX Flip. On the morning of July 29th, Huawei released the teaser video of its nova series small folding phones, Huawei nova Flip will be Huawei's cheapest folding screen product ever, with an expected price lower than that of Pocket 2. According to Digitimes, Apple is expected to launch its first foldable screen iPhone in 2026.

On July 29th, IDC released the 202402 market share of China's foldable screen phones, with a total shipment volume of 2.57 million units in Q2, a year-on-year increase of 104.6%. Counterpoint predicts that the global shipment volume of foldable screen phones will reach 55 million units in 2025, and the shipment volume will exceed 100 million units in 2027.

Foldable screen phones are a major change in the form of mobile phones, which is very conducive to viewing text and video content. Among them, hinges and screens are the largest incremental components. Hinges are mainly designed by brand host factories, and related structural parts are manufactured by enterprise, with a value of between 300-700 yuan. The screen is mainly provided by panel suppliers for soft AMOLED screens, including some film material manufacturers upstream.

In Hong Kong stocks, pay attention to BOE Varitronix (00710), Truly Int'l (00732), Ch Display Opt (00334), etc.

[Data Review]

According to data released by the Hong Kong Stock Exchange, the total number of open contracts for Hang Seng Index (August) futures was 117,744, with a net open interest of 39,610. The settlement date for Hang Seng Index futures is August 29, 2024.

Looking at the distribution of bearish and bullish contracts for Hang Seng Index, the bearish contracts are concentrated near the central axis near the 17,430 point level. Hong Kong stocks have the potential for long positions. This week, the Federal Reserve's Jackson Hole annual meeting will be held, and Powell is scheduled to speak on the morning of the 23rd. The Fed released the minutes of its July FOMC meeting. From the pricing of the U.S. interest rate futures market, traders believe that the probability of a 0.25% rate cut in September is 100%, and the probability of a 0.5% rate cut is 34%. Hang Seng Index is expected to rise this week.

Editor's Note:

Looking at capital flows, EPFR's data shows that foreign active funds continued to flow out of overseas Chinese stock markets by about USD 0.24 billion last week, marking the 66th consecutive week of outflows. About USD 0.65 billion of passive funds also continued to flow out overseas. Meanwhile, southbound funds maintained their inflow momentum, with a total inflow of HKD 16.59 billion last week, accelerating from HKD 15.24 billion the previous week.

Due to the low market and valuation nearing historical lows again, institutions were bullish over the weekend and seemed to be praying for "a turn for the better": Guosen Securities said that "the rebound pattern of Hong Kong stocks is expected to be established in the short term", CITIC Securities said that "multiple indicators show the characteristics of the bottom of Hong Kong stocks reappearing, and Hong Kong stocks may usher in a monthly level valuation repair", and CICC said that "the market will have support, and the elasticity reflected in the phase will be greater than that of A shares".

I hope that the market trend can be as expected by institutions, and that southbound bargain-hunting funds can win big.