[Market Dissection]
Yesterday, the market was booming, and many were hoping to replicate last year's &#34;9.24&#34; rally, but reality was quite stark, quickly fading today. Both indices in the two markets adjusted, with the Hang Seng Index opening lower and hovering underwater throughout the day, closing down 0.61%.
The barometer for Hong Kong stocks remains the U.S. stock market. Currently, there are again bearish voices in the U.S. stock market, with UBS warning that the current short squeeze in the U.S. stock market is nearing its end: its tracked short squeeze index recently surged by 43%. Torsten Sløk, chief economist at Apollo Global Management, believes the U.S. is at a critical turning point of stagflation, with economic growth slowing while inflation remains high. Sløk predicts that GDP growth will slow to 1.2% in 2025, inflation may hover around 3%, and the unemployment rate will rise to 4.4% or higher, with a 25% chance of economic recession in the next 12 months.
From Jerome Powell's latest statements, he also expressed concerns about the quality of economic data collected by U.S. government agencies. Simply put, there are doubts about the reliability of economic data. This possibility exists; for example, the U.S. Bureau of Labor Statistics has been constrained by budget cuts, leading to potentially shoddy data collection, much of which is estimated data. Moreover, it is usually overestimated. In fact, everyone is tacitly aware of this; it is no secret, and it only tends to be exposed when the situation worsens to the point that it cannot be concealed. The current exposure indicates that the situation is not optimistic.
Donald Trump is also well aware of this and is quite anxious. Reports indicate that Trump is considering announcing a replacement for Powell as Federal Reserve Chairman as early as this summer or fall, far earlier than the traditional 3-4 month transition period. He is attempting to pressure the current chairman Powell to accelerate the interest rate cut process using a &#34;shadow chairman&#34; strategy.
Internally, the situation is quite bad, making it difficult to maintain a strong external posture, and the stance has already been lowered. On June 25, Trump reiterated at a press conference during the NATO summit that he would not stop China from purchasing oil from Iran. Once upon a time, Huawei was sanctioned for its business dealings with Iran; now the attitude has rapidly changed—not that he doesn't want to stop it, but rather that he lacks the ability to do so, simply offering a personal favor to get closer. At the same time, when asked if he would relax sanctions on Iranian oil, he said: &#34;They need money to get this country back to normal. We want to see that happen.&#34; This is also the reason for the rapid surge in Shandong Molong (00568), which rose nearly 20%.
Liquidity in the Hong Kong market is shrinking. Reports indicate that after the Hong Kong dollar to U.S. dollar exchange rate reached the weak end of the convertibility guarantee level at 7.75 to 7.85, the Hong Kong Monetary Authority bought HKD 9.42 billion (approximately RMB 8.613 billion) in local currency on June 25. This led to a reduction in the bank system's balance, putting pressure on the stock market's liquidity. Additionally, with three new stocks listing today, a significant amount of funds has also been drawn out. For instance, Chow Tai Fook (06168) saw a subscription rate of 711.11 times for its public offering in Hong Kong, raising approximately HKD 1.193 billion globally, and today it rose over 12%.
The strong performance of securities yesterday could not continue its upward trend, with the leading Guotai Junan International (01788) initially surging in the morning but then continuously weakening, closing down over 4%. There are reports that several local Hong Kong brokerages (such as Victory Securities, Adept Securities, etc.) have completed the upgrade of their first license, and Guotai Junan International is not the only Chinese brokerage applying for a license, with more institutions likely to enter the market in the future
Brokerages mainly engage in &#34;distribution&#34; type trading services, rather than operating proprietary trading exchanges. The lack of scarcity, combined with merely providing access channels without involving high-risk altcoins or tokens, diminishes the imagination, leading to a cooling off. Hongye Futures (03678) fell over 11%, and other securities also adjusted.
However, the digital economy remains vibrant. The Hong Kong Special Administrative Region government today (26th) issued the &#34;Hong Kong Digital Asset Development Policy Declaration 2.0,&#34; reiterating its commitment to making Hong Kong a global innovation center in the digital asset field. The &#34;Policy Declaration 2.0&#34; proposes a four-strategy framework called 'LEAP' to help Hong Kong build a global digital asset center, promoting the tokenization of real-world assets such as precious metals, non-ferrous metals, and renewable energy, showcasing diverse technological applications. OKLink (01499) rose 20%, and New Fire Technology Holdings (01611) increased over 10%. The underlying fiber optics, such as Yangtze Optical Fibre and Cable (06869), also benefited indirectly, rising nearly 5%.
Today, Rongchang Bio (09995) was also significantly impacted. This morning, it announced that its wholly-owned subsidiary, Rongpu Partners, will acquire $125 million in cash and warrants (with a $45 million upfront payment and $80 million in warrants) from the U.S. company VorBio. Based on clinical development progress and sales upon listing, VorBio will also pay up to $4.105 billion in milestone payments for clinical registration and commercialization, as well as high single-digit to double-digit sales commissions. The market believes this deal is not worth it, with the price being too low. It indeed falls far short of expectations.
How to view this? It is essentially a question of short-term versus long-term. In the short term, this amount of cash is unlikely to cover the investment, and further financing will be needed to support ongoing development. In the long term, it requires betting on VorBio's ability to achieve results overseas. This tests the confidence of long-term capital. From an operational perspective, funds may seek self-rescue, but if they cannot quickly create high points, it will lead to a loosening of chips. This will put psychological pressure on other innovative drugs, but it is not fundamental.
With the absence of a flagship and obstacles for innovative drugs, funds can only seek alternative paths. Consumer goods are once again attracting funding attention. The &#34;Hong Kong Happy Shopping Festival,&#34; organized by the Hong Kong Retail Management Association, will be held from July 1 to August 31. The association stated that over 180 brands and about 5,000 stores are collaborating, offering 300 discounts through 13 platforms, totaling over HKD 1.9 billion. This discount amount is half more than last year, coupled with China Travel Service announcing a strategic investment in the Accor Hotel Group, Hong Kong China Travel (00308) surged nearly 86%, driving related textile and apparel stocks like Toppan (06110), 361 Degrees (01361), Li Ning (02331), and luggage brand Samsonite (01910) to strengthen. Other sectors, such as aviation, are also gaining focus.
The gaming stocks mentioned yesterday were also stimulated, with the expectation that many coming to Hong Kong will also visit Macau. Today, the strongest performers are the laggards, such as Melco International Development (00200) rising over 11%, and the leading MGM China Holdings (02282) increasing nearly 4%
In addition, the US dollar index fell below the 97.0 mark, down 0.72% intraday, hitting a new low since February 2022. The RMB to USD exchange rate broke through the 7.16 mark in both onshore and offshore markets, reaching a high of 7.1565 during the day, the highest since mid-November last year. With the dollar weakening, commodities surged, with Minmetals Resources (01208), China Hongqiao (01378), and Luoyang Molybdenum (03993) all rising over 4%.
The military industry is once again receiving a catalyst, as Trump stated that the conflict between Israel and Iran may flare up again. NATO is pushing for a 5% military spending target under the pretext of China, while Trump hopes to reduce F35 procurement numbers in the fiscal year 2026 and significantly increase drone investments. China Shipbuilding Defense (00317) and AVIC (02357) rose over 6% and 1.68%, respectively. Gold-related stocks are also making a comeback, with Shandong Gold (01787) and China Gold International (02099) rising over 5%.
【Sector Focus】
According to data from TravelSky, as of June 26, the ticket booking volume for domestic flights in the first month of the summer travel season (July 1 - July 31) reached nearly 17.9 million, an increase of about 5% compared to the same period last year; the ticket booking volume for inbound and outbound flights exceeded 7.74 million, an increase of about 14% compared to the same period last year.
Due to the graduation season and the arrival of summer, the tourism market is experiencing a peak in bookings, and ticket prices are expected to rise. At the same time, international oil prices have plummeted, reducing aviation fuel costs, and the stabilization of the Middle East situation has also boosted aviation demand.
Main Varieties: China Eastern Airlines (00670), China Southern Airlines (01055), Air China (00753), Cathay Pacific (00293).
【Stock Picking】
Li Ning (02331): Major shareholder continues to increase holdings, core products lead business growth
The company's shareholder, Extraordinary Leading, recently announced that it increased its holdings in Li Ning Company by a total of 18.09 million shares from January 10 to June 19, 2025, at a total cost of HKD 275 million, with an average price of HKD 15.20.
Commentary: The continuous increase in holdings by Li Ning's major shareholder helps to ensure stable progress in the company's operations and management. In the first quarter of 2025, Li Ning (02331) overall retail sales (excluding Li Ning YOUNG) experienced low single-digit growth year-on-year, with retail (direct sales) in offline channels declining in low single digits and wholesale (franchised) growing in low single digits; e-commerce grew in the low range of 10%-20%. The number of Li Ning sales points in China (excluding Li Ning YOUNG) decreased by 29 to 6,088 (with a net decrease of 6 in retail and 23 in wholesale); the number of Li Ning YOUNG sales points decreased by 15 to 1,453. Li Ning is focusing on the operational efficiency of its stores, orderly closing inefficient stores to make channel layouts more reasonable and improve overall channel efficiency.
Li Ning's revenue mainly comes from running, basketball, cross-training, badminton, table tennis, and sports lifestyle, with retail sales in running expected to grow by 25% in 2024, continuing to lead the market. The retail sales of the three core categories of running, basketball, and cross-training account for 64%; in terms of product dimensions, the revenue from Li Ning's professional products is close to 60%, and the revenue from Li Ning's shoe products is expected to grow by 7% year-on-year in 2024, with shoe revenue accounting for 50%. Among them, the core IP for running shoes is expected to exceed 10.6 million pairs for the whole year, and the sales of the Feidian series are expected to exceed 1.73 million pairs, a year-on-year increase of 35%
The sales of Chitu 7PRO exceeded 4.35 million pairs for the whole year, a significant increase of 45% year-on-year.
The company stated that in 2025, it will strengthen brand marketing. At the beginning of the year, the company officially announced its partnership as the official sportswear partner of the Chinese Olympic Committee and the Chinese sports delegation for the period from 2025 to 2028. The company's revenue has stabilized, e-commerce has recovered, and new products are being launched, gradually emerging from the operational low point. Core products continue to lead business growth, and the expansion of new categories such as outdoor products is expected to contribute incremental growth

01788

The Hong Kong stock market performed strongly yesterday but failed to maintain the upward trend, with the Hang Seng Index closing down 0.61%. GUOTAI JUNAN INTERNATIONAL's stock price fell over 4%. There are bearish voices in the U.S. stock market, with UBS warning that the short squeeze is nearing its end. Economist Sløk predicts a slowdown in U.S. economic growth, high inflation, and a 25% chance of economic recession in the next 12 months. Powell expressed concerns about the quality of economic data, and Trump is considering replacing the Federal Reserve Chairman early to expedite the rate-cutting process

- The market experienced a downturn after a strong previous day, with the Hang Seng Index closing down 0.61%.  
- UBS warned that the current bullish trend in U.S. stocks may be nearing its end, while concerns about economic data quality were raised by Fed Chair Powell.  
- The Hong Kong government announced a new digital asset policy to position the region as a global innovation center, while various sectors, including travel and retail, showed signs of growth amid changing market dynamics.

Zhitong

GUOTAI JUNAN I

CATHAY PAC AIR

COMEC

AIR CHINA

SD GOLD

LI NING

AVICHINA

CHINA TRAVEL HK

SHANDONG MOLONG

CHINA SOUTH AIR

OKG TECH

SAMSONITE

CHINAGOLDINTL

ZHOU LIU FU

YOFC

MELCO INT'L DEV

CHINAHONGQIAO

CMOC

VICTORY SEC

REMEGEN

Huawei

Zhitong Hong Kong Stock Analysis | The Indicator May Have Issues, Hang Seng Index Adjusts, Exchange Rate Strengthens, Commodities Rise