【True Insight Hong Kong Stock Market Experts】Market focuses on the outcome of the Federal Reserve's interest rate meeting, with funds shifting from tech stocks to traditional stocks.

Hong Kong Stock Market Trends and Analysis

U.S. stocks were mixed on Monday as the market focused on the outcome of the Federal Reserve's interest rate meeting. Funds shifted from tech stocks to traditional sectors, resulting in mixed performances for the three major indices. The U.S. dollar weakened, with the 10-year Treasury yield falling to 3.61%. Gold prices hovered at high levels, while oil prices continued to rebound. Hong Kong's pre-market ADRs were generally soft, suggesting a lower opening for the local market. Mainland markets were closed for the holiday, leading to narrow fluctuations in Hong Kong stocks. Trading volume hit a new low for recent months due to the absence of northbound capital. Disappointing mainland economic data raised concerns about macroeconomic prospects, with the market expected to remain range-bound in the short term, fluctuating between 17,000 and 17,800 points.

Industry News

Contemporary Amperex Technology Co. Limited (CATL) recently decided to suspend its lithium mica operations in Jiangxi, reducing mainland lithium carbonate production by 8% monthly, equivalent to 5,000–6,000 tons of lithium carbonate equivalent (LCE). This news triggered sharp rises in both lithium carbonate futures and spot prices, with lithium battery concept stocks also broadly gaining. In August 2022, CATL announced the acquisition of mining rights for the Jianxiawo mine in Yichun, Jiangxi. The mine has reserves of 960 million tons with an average lithium oxide grade of 0.27%, equivalent to ~6.57 million tons of LCE, making it Yichun's largest lithium mica deposit. Phase 1 of the project began mass production in mid-2023, with an annual output of ~42,000 tons of lithium carbonate. CATL's cash cost for lithium operations is approximately RMB 89,000 per ton. According to Shanghai Metals Market data, lithium carbonate spot prices have remained below CATL's cost line since mid-July 2024, implying two consecutive months of losses for its lithium business. While the suspension may support lithium prices short-term, the rally is unlikely to sustain due to sluggish overall demand, warranting caution toward related stocks.

(The author is an SFC-licensed professional. Neither the author nor related parties hold the aforementioned stocks.)

Daily Hong Kong Stock Analysis

Investment Director, Convoy Asset Management

Kwok Ka Yiu, CFA

Date: Tuesday, September 17, 2024