A-shares turned positive! Chinese assets exploded, and institutions said that there will be a more favorable liquidity environment in August and September
2024-08-07
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On August 6, local time, after a sharp drop in the previous trading day, most European and American stock markets rose, and the UK FTSE 100 index rose slightly. The three major indexes in the US stock market rose across the board, with the Nasdaq Index and the S&P 500 Index both rising by more than 1%. Many technology stocks such as Microsoft, Nvidia, Amazon, and Meta all rose, while Apple and Google-A fell. Lumen Technologies rose by more than 90% due to a $5 billion order for AI-related products. After the release of financial reports, Super Micro Computer and Airbnb both fell after the market.
Most of the popular Chinese stocks rose. The Nasdaq China Golden Dragon Index rose by more than 3.6% during the session and closed up 3.03%. In terms of specific stocks, New Oriental rose by more than 13%, Tencent Music and Pinduoduo rose by more than 5%, Ctrip and Futu Holdings rose by more than 4%, iQiyi, Huya, and JD.com rose by more than 2%, Tiger Securities, Kingsoft Cloud, and Alibaba rose by more than 1%. Baidu and Li Auto rose slightly. Weilai fell by more than 3%, Bilibili fell by 2%, Xpeng Motors and NetEase fell by more than 1%, and Vipshop fell slightly.
On the news front, on August 6, New Oriental announced that it would expand its share repurchase plan from US$400 million to US$700 million, with the validity period extended to May 31, 2025. Since the repurchase plan was launched in July 2022, New Oriental has repurchased approximately 7.3 million American depositary shares with a total value of approximately US$296.1 million. As of the announcement date, the total repurchase amount has reached US$330.3 million. In addition, New Oriental plans to hold a meeting on August 19 to consider the proposal to declare a special dividend.
Yum China rose 11.98%. Its total revenue in the second fiscal quarter increased 4% year-on-year to US$2.68 billion, and its core operating profit increased 12% year-on-year to US$275 million.
Tencent Music rose more than 5%. Morgan Stanley published a technical research report, predicting that Tencent Music's stock price will rise in the next 60 days, with a target price of $19 and an "overweight" rating. The report said that Tencent Music's recent stock price has adjusted with the market, making its short-term valuation more attractive. The stock valuation is equivalent to a forecast price-to-earnings ratio of less than 15 times in 2025. It is believed that driven by subscribers, advertising, other music revenue and profit margins, the stock still has room to rise. At the same time, it is expected that Tencent Music's second-quarter results and third-quarter guidance to be announced will be slightly higher than market expectations.
Regarding Chinese assets, Industrial Securities said that under the impact of multiple macro factors, the previously overly consistent expectations and overcrowded transactions in the peripheral markets have experienced a phased reversal and "high-low cuts", and with the sharp fluctuations in the global capital market, similar to April and May, Chinese assets may gradually receive increased allocations from overseas funds. From a medium-term perspective, Chinese assets will face a more favorable liquidity environment in August and September.
CICC believes that domestically, the policy of stabilizing growth has been implemented, and investors' expectations for the implementation of reform dividends and the increase in the policy of stabilizing growth have increased. The next few months will be an important observation period for the effectiveness of the policy and reform implementation. Overseas, although the Federal Reserve hinted at a rate cut in September, the lower-than-expected economic and employment data triggered market concerns about a US recession. The VIX index climbed, US stocks continued to pull back, US bond interest rates fell sharply, and the RMB exchange rate strengthened to a nearly 6-month high. Against the backdrop of increasing disturbances in the external market, the probability of global funds flowing back to Chinese assets has increased.
On the morning of August 7, Beijing time, the three major A-share indices collectively turned positive during the session, with smart grid, CPO concept, education and other sectors leading the gains. (He Yang)
(Note: This article does not constitute any investment advice)
China Business News is compiled from Securities Times, China Fund News, China Securities Journal
