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09:00 AM, Friday, Jul 30, 2021
HSI Rose 841 Points on Thursday

Media reported that CSRC met a number of investment bank management to soothe market sentiment. Hang Seng Index rose 841 points to 26,315. H-share Index rose 344 points to 9,415. Tech Index rose 515 points to 6,958. Market turnover was HK$254.1billion. Tech sector rebounded. Tencent(700) and Meituan(3690) surged 9.5-10.0%. Heavyweight blue-chip performed well. AIA(1299) and HKEX(388) gained 3.9-5.8%.

US Stock Rose on Thursday

US second quarter GDP increased 6.5%. Although it missed the market expectation of 8.5% growth, it is mainly due to drop in inventories. In fact, consumption spending and business investment rose at a strong pace of 11.8% and 8% respectively. US stock rose on Thursday, of which, economic sensitive cyclical stocks including energy, materials and financials performed the best. The three major US stock index rose 0.1-0.4% respectively on Thursday, of which, both the Dow and the S&P 500 index hit record high. Besides, the weaker than expected US second quarter GDP growth triggered weakness of US dollar index, which fell 0.4% on Thursday. Commodity price performed well with gold price rose 1.7% to US$1,836 per ounce.

Tracker Fund Restriction to US investors will hurt sentiment; Test Support at 26,000

China’s state media provides vocal support for the stock market, media news saying China remained supportive of domestic companies seeking to list overseas. Also, PBOC injected market liquidity on Thursday. These supported Hong Kong stock rebound yesterday. However, investors confidence might not be restored in short term due to the impact of tightened regulation. Besides, Tracker Fund (2800) will not be offered to US investors, although the actual impact is small as US investors hold only small amount of Tracker fund, it will hurt investor sentiment. Hong Kong stock is expected to retreat today, Hang Seng Index will test the support at 26,000. Hong Kong stock connect net outflow reduced to HK$4.6bn on Thursday, of which, Meituan (3690) still suffered a net sell of HK$4.7bn while Tencent (0700) net outflow narrowed to HK$690mn. On the other hand, EV stocks, BYD (1211) and Geely (0175) recorded HK$0.9-1.0bn net inflow each on Thursday. China Telecom (0728) A share listing got the CSRC approval, while A share will conduct preliminary price consultations, its share price performance will remain firm in the near term.

Recommended Stocks
Stock Recommendation
CHINA RES POWER
(00836)
Under the backdrop of China’s carbon neutral goal, CR Power (0836) aims to achieve carbon emission peak by 2025, and targets to increase its installed capacity of renewable energy by 40GW in the 14th 5-year Plan. We thus believe CR Power to be one of the key beneficiaries of carbon neutral policy. The National carbon trading market has launched in mid-July, and the company could profit from trading its emission quota, given its carbon intensity below the national emission benchmark. Trading at 5.7x 12M forward PE, its valuation its much below other renewable players. It’s also a decent defensive play with its 5.2% dividend yield. We thus suggest to accumulate with a target price of HK$14 and a stop-loss price at HK$10.5.


Source: KGI Research

Chan Lok Yee is a SFC licensed person accredited to KGI Group to carry on regulated activities (for details, please refer to: https://www.sfc.hk/publicregWeb/indi/BNJ943/details). She and/or her associate do not have any financial interest in the recommended issuer or new listing applicant.

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