Zhitong Hong Kong Stock Analysis | High-position varieties adjusting and switching stocks trigger adjustments, expanding the strength of low-position consumer stocks with exemption from signing

[Market Dissection]

After a one-day pause, the US stock market launched a retaliatory rebound, while the Hong Kong stock market rebounded for a day yesterday and adjusted again today, closing down 0.53% as funds shifted positions and stocks.

A new term has emerged in the European market: the trading TACO logic—Trump Always Chickens Out, referring to Trump always backing down. It’s quite fitting; every time Trump makes a high-profile scare, he immediately changes his stance as soon as the stock market drops. For instance, Trump rarely praised the EU, expressing encouragement for accelerating trade negotiations. He stated that he just learned that the EU has proposed to quickly determine a meeting time, which is a positive signal. In reality, there are undercurrents at the negotiation table—German Chancellor Merz recently stated that the EU might take countermeasures against American tech companies. However, investors found it beneficial, and the US stock market continued to rise.

Additionally, Kevin Hassett, Director of the National Economic Council and Trump’s economic advisor, recently stated that India is close to reaching a landmark trade agreement with the United States. He also pointed out that the US government is aware of the impact of tariffs on major American companies and emphasized that the government will take a cautious approach to avoid harming the interests of key American companies like Apple. This talk of nearing an agreement is just for show, mainly to soothe the market. India has not yet recovered from the shadow of the India-Pakistan conflict, and if threatened and signs an unfavorable agreement, Modi will face considerable pressure.

At the end of each month, institutions have a demand for portfolio adjustments, and low-end consumer stocks are rising against the trend. Foreign Ministry spokesperson Mao Ning stated that to further facilitate exchanges between Chinese and foreign personnel, China has decided to expand the scope of visa-free countries. From June 9, 2025, to June 8, 2026, ordinary passport holders from Saudi Arabia, Oman, Kuwait, and Bahrain will be subject to a trial visa-free policy. Ordinary passport holders from these four countries can enter China for business, tourism, family visits, exchanges, and transit for up to 30 days without a visa. Coupled with the UAE and Qatar, which have fully mutual visa exemptions since 2018, China has achieved full visa exemption coverage for Gulf Cooperation Council countries.

Aviation stocks are the first to benefit; the potential of aviation stocks has been mentioned multiple times, as many factors catalyze performance. China Eastern Airlines (00670), China Southern Airlines (01055), and Air China (00753) all rose over 2%. The catering sector also saw movement, with Yi Hai International (01579) representing a rise of over 7%, followed by Jiu Mao Jiu (09922) and Te Hai International (09658). Beer companies such as Budweiser APAC (01876) and Tsingtao Brewery (00168) also showed steady upward movement.

The recent relaxation of restrictions on Macau gaming has also provided indirect stimulation, such as transit to Macau from the mainland, combined with the Greater Bay Area's "one trip, multiple stops" promoting transit passenger flow. Citigroup's latest report pointed out that, according to industry channels, Macau's gross gaming revenue (GGR) for the first 25 days of May could reach approximately 17.5 billion patacas, which means the average daily gaming revenue for the week of May 19 to 25 is about 686 million patacas, a 16% increase from the previous week's average of about 593 million patacas. The bank noted that the surge in revenue was surprising and raised its forecast for Macau's gross gaming revenue in May from 21 billion patacas to 21.25 billion patacas (approximately 82% of the level in May 2019) Annual growth of 5%).

However, the gambling demand from high-net-worth clients in the Middle East is concentrated in the VIP sector, while Macau's VIP business has shrunk due to stricter regulations, with the revenue share dropping from 50% before the pandemic to below 20%. Therefore, overall, the positive stimulus is limited, and it still relies more on mainland customers. The main varieties are MGM (02282), Galaxy Entertainment (00027), and Sands China (01928).

At the Port Technology Innovation Conference hosted by the China Ports Association on May 27, Zhao Xiaohui, Deputy Director of the Innovation Development Department of the Ministry of Transport, revealed that the Ministry is fully promoting the "Artificial Intelligence + Transportation" initiative. Among them, the top-level design of the "Implementation Opinions on 'Artificial Intelligence + Transportation'" has completed the solicitation of opinions and will be expedited for release. The "Implementation Opinions" clarify that by 2030, artificial intelligence will be deeply integrated into the transportation industry, with a smart integrated transportation network fully promoted, forming a relatively complete artificial intelligence governance system, leading to a new level of high-quality development and high-level safety in transportation.

Several related companies, such as unmanned logistics vehicles and Robotaxi, have made positive progress. On May 27, Pony.ai announced a strategic cooperation with the Dubai Roads and Transport Authority (RTA) to launch a Robotaxi fleet locally; on the same day, WeRide officially released its market expansion strategy for Saudi Arabia, having completed testing and deployment of autonomous driving products such as Robotaxi, Robobus, and Robosweeper in major Saudi cities like Riyadh and AlUla. In the US stock market, Pony.ai initially rose by 20.2%, and WeRide rose by 18.1%, while the related low-altitude economy stock Xair (02507) in Hong Kong rose by over 8%.

Express logistics companies benefiting from the application of unmanned equipment that improves quality, efficiency, and reduces costs include SF Holding (06936) and SF Express (09699). Among them, SF Express (09699) is the largest third-party instant delivery service platform in China, fully covering the four main scenarios of the new consumption era: food delivery, local retail, near-field e-commerce, and near-field services. Today it rose by over 9%. In the commercial vehicle sector, major players include China National Heavy Duty Truck Group (03808) and Weichai Power (02338).

As mentioned yesterday, Xiaomi Group (01810) continued to perform strongly in its Q1 report, with revenue of 111.3 billion yuan, a year-on-year increase of 47.4%, and net profit growth of 64.5%, both hitting new historical highs again. In the first quarter, revenue from smart home appliances grew by 113.8% year-on-year. Due to favorable national subsidies, revenue and profits from mobile phones and home appliances also reached new highs. A highlight is that the gross profit margin for automobiles reached 23.2%, which is quite impressive, but today the stock showed a high pullback, indicating a divergence in funds regarding the current valuation. The reason is the slowdown in mobile phone growth and the need to digest public sentiment regarding automobiles.

Kuaishou (01024) reported Q1 revenue of 32.6 billion yuan, a year-on-year increase of 10.9%, with adjusted profit of 4.58 billion yuan, a year-on-year increase of 4.4%. This performance is good, and today it rose nearly 6%.

In the latest news, on May 28, soldiers from Thailand and Cambodia clashed at the border between the two countries. The conflict occurred in the "Zongbo" area of Ubon Ratchathani, Thailand, which is a sovereignty overlapping area that has not yet been formally demarcated between the two countries It is unlikely to evolve into a large-scale conflict.

China Shipbuilding Industry Corporation (00317) announced a new dividend: HKD 0.762137 per 10 shares, which is quite strong, with a rise of over 4% today.

【Sector Focus】

With the upcoming Dragon Boat Festival, Children's Day, and summer vacation, the film market is gradually becoming active. According to data from Maoyan Professional Edition, as of now, the pre-sale box office for the 2025 Dragon Boat Festival period (May 31 to June 2) has exceeded 10.45 million yuan. The top three films include "Mission: Impossible 8: Dead Reckoning" introduced by China Film Group, "Doraemon: Nobita's Painting Adventure," and "Son of Time" produced by Maoyan Entertainment (01896).

Currently, several highly anticipated new domestic and foreign films have been scheduled for the summer, including the DC superhero movie "Superman," "Malice" co-produced by Shanghai Film Group and Hengdian Film Company, the first animated film in the "Chinese Strange Tales" series "Little Monsters of Langlang Mountain," and "Lychee of Chang'an," adapted from the popular novel by Ma Boyong. These films cover diverse genres such as comedy, animation, romance, and fantasy, with many possessing certain IP attributes and significant market potential.

Main varieties: Alibaba Pictures (01060), Maoyan Entertainment (01896), Huayi Brothers Media (01003).

【Stock Picking】

Nongfu Spring (09633): Bottled water business expected to stabilize and recover, demand for tea beverages continues to grow

The company achieved total revenue of 42.896 billion yuan in 2024, a mere 0.5% increase from 2023; profit attributable to the parent company was 12.123 billion yuan (after deducting one-time and non-operating gains and losses, it was 12.036 billion yuan).

Comment: Nongfu Spring has expanded its product specifications and categories, implementing a "factory construction at the water source" strategy. Revenue from the bottled water business increased from 11.8 billion yuan in 2018 to 20.3 billion yuan in 2023, with a CAGR of 11.5%, outpacing the overall industry growth. At the beginning of 2024, the company faced pressure on its bottled water business due to online public opinion, resulting in a year-on-year revenue decline of 21.3%, but its market share remains the highest in the country. Thanks to the company's long-term layout in high-quality water sources, in 2024, the company launched a new base in Huangshan, Anhui, while simultaneously advancing six water source projects nationwide, further consolidating its leading advantage in high-quality water source layout. As of December 31, 2024, Nongfu Spring has established 12 core water source bases nationwide. In the second half of the year, the company plans to gradually increase the share of green bottle water, and the new packaging of red bottle water launched in December will further strengthen consumer recognition. It is expected that after the public opinion storm, the revenue from bottled water in 2025 will stabilize and recover. The tea beverage products performed well, with a year-on-year revenue growth of 32.3%, becoming an important engine for performance growth. Products like "Oriental Tree Leaf" and "Tea π" have introduced new flavors. The demand for tea beverages continues to grow, while products like "Scream" have also launched new flavors and promotional activities. Revenue from juice beverage products increased by 15.6%, through product upgrades, such as "Nongfu Spring 17.5°" fresh orange juice entering "Sam's Club" and the upgrade return of "Nongfu Orchard" products It is worth noting that southbound funds continue to be optimistic about Nongfu Spring, increasing their holdings for five consecutive days. As the company's business gradually returns to normal, along with product innovation and market expansion, Nongfu Spring is expected to regain growth momentum