"Market Review" Hang Seng Index rebounds, Hong Kong Stock Exchange advocates optimizing the trading unit per lot

The Hang Seng Index today (18th) initially fell and then rebounded. Reports indicate that Oracle's (ORCL.US) data center plans in Michigan are uncertain, putting pressure on AI stocks. The Dow Jones Industrial Average fell nearly 0.5% on the night of the 17th, while the Nasdaq dropped 1.8%. At the time of writing, the yield on the U.S. 2-year Treasury bond fell to 3.464%, and the yield on the U.S. 10-year Treasury bond dropped to 4.135%. The U.S. dollar index rose to 98.48. Dow futures were down 9 points or 0.02%, while Nasdaq futures were up 162 points or 0.65%. A-shares showed mixed performance, with the Shanghai Composite Index rising 6 points or 0.16% to close at 3,876 points, while the Shenzhen Component Index fell 1.3%, and the ChiNext Index dropped 2.2%. The total trading volume in the Shanghai and Shenzhen markets reached nearly RMB 1.66 trillion. He Yadong, spokesperson for the Ministry of Commerce, stated that some general export license applications for rare earths have been approved.

The Hang Seng Index opened down 137 points, initially falling 207 points to a low of 25,261 points before rebounding. It later rose 43 points to report 25,511 points, ultimately closing up 29 points or 0.1% at 25,498 points; the Hang Seng China Enterprises Index fell 2 points or 0.02% to close at 8,841 points; the Hang Seng Tech Index dropped 39 points or 0.7% to close at 5,418 points. The total trading volume for the day decreased to HKD 162.377 billion. The total trading volume from northbound trading was HKD 73.495 billion, while southbound funds had a net inflow of HKD 1.257 billion today (compared to a net inflow of HKD 7.909 billion the previous day).

HSBC Holdings (00005.HK) rose 1% to close at HKD 118.7, setting a historical closing high after the ex-dividend date. BOC Hong Kong (02388.HK) rose 0.6%, and China Merchants Bank (03968.HK) increased by 2.4%. CSPC Pharma (01093.HK) surged 6.5%.

【Northbound inflow decreases, smartphone stocks turn bearish】

Alibaba-W (09988.HK) fell 1.3% to close at HKD 144.1, with a trading volume exceeding HKD 6.7 billion. Tencent (00700.HK) remained unchanged at HKD 605. Xiaomi-W (01810.HK) saw its stock price drop below the HKD 40 mark, closing down 2.5% at HKD 40.2, with a trading volume of HKD 5.136 billion. Smartphone component stocks Lens Technology (06613.HK), Q Tech (01478.HK), and GoerTek (01415.HK) fell between 2.6% and 3.6%. SenseTime-W (00020.HK) plans to issue shares at a discount of over 8% to raise a net of HKD 3.15 billion, with its stock price dropping 4.1% to close at HKD 1.89.

The Hong Kong Stock Exchange (00388.HK) saw its stock price rise nearly 0.9% to close at HKD 401.8. The Hong Kong Stock Exchange announced a 12-week consultation to optimize the trading unit framework for the Hong Kong securities market, proposing to consolidate the current over 40 trading units into 8, ranging from 1 share to 10,000 shares. Rob Lee, head of the Securities Product Development Department at the Hong Kong Stock Exchange, indicated that the practices of 15 major global exchanges were referenced, most of which standardize the trading unit to either 1 share or 100 shares, expecting this optimization to align with the trend of other major exchanges merging and simplifying trading units Roborain stated that the lower and upper limits of the value per lot serve as guidelines, and he believes that listed issuers will cooperate. If there are future instances where the value per lot deviates from the guidelines, the exchange will proactively communicate with the issuers to discuss how to make adjustments. Roborain emphasized that in the long run, he believes that unifying the number of shares per lot will bring significant benefits to the market, including simplifying market operations, streamlining transaction settlement processes, and reducing transaction costs. To this end, the Hong Kong Stock Exchange will continue to work closely with relevant stakeholders to provide opportunities for the market to unify the number of shares per lot in the future.

【One stock down a thousand, CICC resumes trading with gains】

The Hong Kong stock market has weakened, with a rise-to-fall ratio of main board stocks at 19 to 28 (compared to 29 to 18 the previous day). There were 1,151 declining stocks (a drop of 2.2%), with 50 constituent stocks of the Hang Seng Index rising and 38 falling, resulting in a rise-to-fall ratio of 56 to 43 (compared to 67 to 30 the previous day). The market recorded short selling of HKD 29.521 billion today, accounting for 20.527% of the total turnover of shortable stocks at HKD 143.817 billion.

CICC (03908.HK) plans to absorb and merge Dongxing Securities and Xinda Securities through a share swap. China Cinda (01359.HK) is expected to report a profit of RMB 20 billion, with CICC resuming trading up 2.5% at HKD 19.44, while China Cinda fell 2.9%.

Morgan Stanley's research report pointed out that CICC has announced the details of the share swap merger. The implied price-to-book ratio of the swap ratio (based on Q3 2025) includes CICC (601995.SH) A shares at 1.8 times, Dongxing Securities (601198.SH) at 1.8 times (including a 26% premium), and Xinda Securities (601059.SH) at 3.1 times. Morgan Stanley estimates that the dilution of net asset value per share will be very limited, around 9%, and no additional financing plans have been announced. The management is confident about the synergy effects and rapid integration. It is expected that net capital will double after the merger, providing opportunities for more client-driven equity business and investment opportunities. The firm stated that CICC's capital leverage ratio may increase from 12% to 20% after the merger; the net stable funding ratio is also expected to rise, thereby saving some bond financing costs. Morgan Stanley also pointed out that CICC's wealth management business will significantly benefit; the number of clients is expected to increase by 51% to 14.7 million