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China Fund News reporter Guo Wenjun

On July 31, the three major Hong Kong stock indexes rose sharply, and the market volume increased significantly. As of the close, the Hang Seng Index rose 2.01% to 17,344.6 points; the Hang Seng Technology Index rose 3.01% to 3,516.87 points; and the Hang Seng China Enterprises Index rose 2.01% to 6,107.16 points. The market turnover for the whole day was HK$118.867 billion, and southbound funds net bought HK$2.291 billion.

Medical, nonferrous metals, consumer, and technology sectors led the gains. WuXi Biologics rose 9.71%, WuXi AppTec rose 7.37%, and Xinyi Solar rose 6.00%, leading the gains in blue chips.

Big financial institutions strengthened. Hongye Futures surged 57.98%, Guotai Junan International rose 9.84%, China International Capital Corporation rose 8.60%, and China Galaxy Securities rose 8.11%.

In terms of industry performance, most Hang Seng industry indices rose. The healthcare industry index rose 4.23%, the raw materials industry index rose 3.72%, and the consumer staples index rose 3.37%. In terms of decline, the utilities index fell 0.09%.

Most of the Wind concept sectors rose. The online education index rose 7.27%, the CRO index rose 6.25%, and the Chinese brokerage index rose 5.79%. In terms of decline, the lottery index led the decline by 4.47%, the power index fell 1.85%, and the CGN index fell 1.79%.

Technology stocks led the gains

On July 31, Vice Minister of Finance Wang Dongwei made an important statement, releasing major positive news, reflecting that state ministries and commissions have efficiently implemented the spirit of the Central Political Bureau meeting, significantly boosting market confidence, and technology stocks led the gains.

Oriental Selection rose 11.61%, Kingdee International rose 10.78%, and SenseTime rose 6.14%, leading the Hang Seng Technology Index constituents.

Biotech led the gains among major sectors. The Wind Hong Kong Pharmaceutical and Biotech Industry Index rose 4.53%. WuXi United Pharmaceutical rose 16.38%, WuXi Biologics rose 9.71%, and Zhaoyan Pharmaceutical rose 9.41%, leading the gains of the index's constituent stocks.

also,Semiconductor stocks rose across the board, Contron rose 8.20%, CEC HuaDa Technology rose 5.61%, Hua Hong Semiconductor rose 4.76%, Shanghai Fudan rose 4.56%, and SMIC rose 4.17%.

Institutions are optimistic about the performance of Hong Kong stocks

Technology sector and high dividend strategies are favored

China Galaxy Securities released a research report saying that there are investment opportunities in the technology sector amid the expectation of interest rate cuts:

First, the market expects that the Federal Reserve will most likely start cutting interest rates in September, global liquidity will improve, and foreign capital is expected to flow into the Hong Kong stock market. As foreign capital prefers the technology sector, the technology sector is expected to usher in an upward trend. In addition, industrial capital is expected to support the funding side of the technology sector.

Second, in 2023, the operating income of the Hang Seng Technology Index increased by 3.44% year-on-year, which was an improvement compared with the first half of 2023. The net profit attributable to the parent company of the index increased by 15.91% year-on-year, and it has passed the turning point since 2022, showing signs of recovery overall. Judging from the first quarter report disclosed, the index also showed performance highlights.In terms of valuation, the P/E ratio of the Hang Seng Tech Index is at a low level since 2020, and there is a large room for subsequent valuation increases.

Third, focus on the two major directions of Internet leaders and consumer electronics. Among them, Internet leaders are expected to benefit from profit growth and low valuation advantages, and their repurchase and dividend efforts are also increasing. Driven by the recovery of the industry cycle and the expected growth of the AI ​​mobile phone market, the consumer electronics sector is expected to usher in an upward trend.

China Galaxy Securities also pointed out that the high dividend strategy allocation value of Hong Kong stocks is still:

First, since 2021, high dividend strategies have been favored by investors. The current crowding of the Hang Seng High Dividend Yield Index has fallen back to around the average level of the past decade. From a short-term perspective, there is no need to worry too much about the crowding risk of high dividend strategies.

Second, due to the existence of the AH share premium, the dividend yield of Hong Kong stocks has a significant advantage over A shares.

Third, at the industry level, in recent years, the dividend yields of most industries in Hong Kong stocks have shown an increasing trend. In most industries, stocks with high dividend yields have performed better, reflecting the current market's enthusiasm for investing in high-dividend assets. Combined with the high dividend yields, stable profitability and low valuation characteristics of central enterprises, the allocation value of central enterprises in the Hong Kong stock market is expected to rise in the context of a new round of central state-owned enterprise reforms.

Zhongtai International released a research report stating that the Hang Seng Index is currently supported by technical factors, valuations are also at a slightly low level, and the short selling ratio continues to rise. The central bank has recently lowered the interest rates of reverse repurchase, SLF, LPR and MLF, and has also issued policies such as raising the subsidy standard for scrapped cars and supporting the replacement of old home appliances, all of which have released signals of stabilizing growth. If there is any marginal positive policy or high-frequency data, Hong Kong stocks are more likely to rebound from forced short positions.

Editor: Joey

Review: Xu Wen

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