Zhitong Hong Kong Stock Analysis | Bescent Quickly "Rescues" to Calm the Market, DHgate Unexpectedly Becomes Popular, Second Only to ChatGPT

[Market Dissection]

The trade war has eased somewhat, and the US stock market seems to have stabilized. The Hong Kong stock market fluctuated throughout the day, ultimately rising by 0.23%, but trading volume shrank significantly to HKD 185.1 billion.

Since the introduction of Trump's tariff policy, numerous issues have arisen, leading to a triple whammy in stocks, bonds, and currencies. The market is filled with various negative sentiments, and Goldman Sachs has issued a severe warning regarding the US economic outlook: the US economy is approaching 0% growth this year, with inflation expectations significantly raised to around 3.5%. Goldman Sachs also believes that the dollar is still overvalued by about 20%. The report indicates that recession risks remain, with a 45% probability that the US economy will fall into a full-blown recession within the next 12 months. Such statements from Wall Street giants are quite unfavorable for Trump.

According to reports, Chinese importers purchased at least 40 cargo ships carrying 2.4 million tons of soybeans from Brazil in the first half of last week. Insiders say that most of these soybeans will be shipped between May and July, with the purchase volume being one-third of China's average monthly imports. Some media described China's purchase as large in quantity and fast in pace. In recent years, China has continuously promoted the diversification of agricultural product imports, with Brazil replacing the US as China's largest soybean supplier.

At a critical moment, Treasury Secretary Mnuchin quickly stepped in to "rescue the situation." In an interview, he insisted that he does not believe foreign investors are selling US Treasury bonds, and that the rise in US Treasury yields and the decline of the dollar do not mean that the US is losing its "safe haven" status. He claimed that the dollar remains the global reserve currency and that the US government is still implementing a "strong dollar policy." Mnuchin has a Wall Street background and played a key role in Soros's century-old trade against the pound. His influence is considered the strongest within the entire Trump team, playing a crucial role in stabilizing the US stock market.

Regarding the final trade shape, Mnuchin mentioned that after the 90-day pause period ends, there may not be a real trade "document," but there could be a "principled agreement" allowing the US and partner countries to continue negotiations. This means a shift from hard pressure to a more flexible stance, trading long-term negotiations for short-term market stability.

The market remains concerned about the China card, which still needs to be played. During his visit to Argentina on April 14, Mnuchin stated in an interview that he still hopes to reach a significant trade agreement with Beijing, emphasizing that any US-China negotiations must occur at the highest levels. No one wants these tariffs to persist. These remarks are essentially aimed at reassuring investors and stabilizing the market. Until both sides genuinely initiate negotiations, investors will remain quite cautious, and gold stocks continued to strengthen today, with WanGuo Gold International (03939) rising over 6%.

Reports indicate that Sunac (01918) is negotiating with some creditors, planning to convert all offshore bonds into stocks. Creditors can choose mandatory convertible bonds with different conversion periods to convert into stocks. If implemented, it would be the first large mainland real estate company to convert all its US dollar bonds into stocks. Additionally, reports suggest that details, including the pricing of convertible bonds, are still under discussion and may change. If everything turns into debt-to-equity swaps, it would be good for the company, but likely unfavorable for investors, as they may not receive much if there are no buyers for the stocks. The market expects real cash solutions to address the debt, and today it fell by 6.58%. Real estate stocks generally declined The market today did not have any major hotspots, continuing to focus on domestic demand. Consumer staples performed relatively strong, with the logic being that under consumption downgrade, these ordinary consumer goods have better anti-cyclical properties. Additionally, the rapid development of new channels such as snack wholesale, new media e-commerce, and membership supermarkets will continuously stimulate sales, along with expectations for overseas expansion. Two A-share konjac concept stocks, Yizhi Konjac (839273) and Yanjinpuzi (002847.SZ), both reached historical highs, stimulating similar Hong Kong stocks like Zhou Hei Ya (01458) to rise nearly 8%.

A hot news item today is that the Chinese cross-border e-commerce platform DHgate has jumped to become the second most downloaded free app in the US App Store, second only to ChatGPT. DHgate, originally a B2B software aimed at businesses and factories, has now become the preferred choice for American consumers (C-end). The reason is simple: someone is promoting products in a workshop claiming to be a "Lululemon" factory, telling Americans that the cost of alternative products is only $5-6, with "materials and craftsmanship almost identical," while the retail price in American brand stores exceeds $100. In an economic downturn, Americans are also looking for alternatives. This will stimulate foreign trade-related businesses, with logistics companies like ZTO Express (02057), J&T Express (01519), and JD Group (09618) expected to benefit.

After a long period of inactivity, there is new news about robots, as Samsung has launched the smart home robot Ballie, expected to be released this summer. Yujian (02432) rose 4.57%. Note that there will be news about a robot marathon competition coming up.

On the 14th local time, the Trump administration announced that it has initiated a "Section 232 investigation" into semiconductors and pharmaceuticals. The U.S. Department of Commerce announced that this "232 investigation" will cover, but is not limited to, semiconductor substrates and bare wafers, traditional chips, advanced chips, microelectronics products, and components for small and medium enterprises. Another separate "232 investigation" will examine all drug imports, including generic and non-generic drugs, as well as the ingredients used to manufacture these drugs. If these tariffs are implemented, it will impact global pharmaceutical giants, including Merck and Eli Lilly, which have dozens of production bases around the world.

Today, chip-related stocks like SMIC (00981) and Shanghai Fudan (01385) both saw declines. However, Rongchang Biotech (09995), a gold stock from April, surged again by over 10%.

【Sector Focus】

The National Development and Reform Commission and the Energy Administration issued the "Implementation Plan for the Special Action of Upgrading the New Generation of Coal Power (2025-2027)," which states that by 2027, a number of coal power units with rapid load-changing capabilities will be renovated and newly built in areas where it is difficult to meet the rapid adjustment needs of the power grid. This means that the coal power industry will undergo upgrades, focusing on enhancing the flexibility and rapid response capabilities of units to meet the peak-shaving needs of the power grid.

This mainly benefits the following categories: coal-fired power generation companies: Huaneng International Power (00902), Datang Power (00991), etc.; coal power equipment manufacturers: Harbin Electric (01133), Dongfang Electric (01072) [Stock Picking]

China Resources Beverage (02460): Net Profit Far Exceeds Revenue Growth, Beverage Business Maintains High Growth

China Resources Beverage's revenue for 2024 is HKD 13.521 billion, with a net profit of HKD 1.661 billion, a year-on-year increase of 24.7%; for 2024, a proposed annual dividend of HKD 0.307 per share and a special dividend of HKD 0.176 for the 40th anniversary, totaling a dividend payout ratio of 70.8%.

Commentary: China Resources Beverage has achieved stable development, with its first financial report since going public showing continuous improvement in profitability, with net profit far exceeding revenue growth, driven by a breakthrough increase in gross margin. The gross margin rose from 44.7% in 2023 to 47.3%, effectively boosting the net profit margin from 9.9% in 2023 to 12.3% in 2024.

China Resources Beverage's products mainly include brands such as "Yibao," "Benyou," "Zhiben Qingrun," "Honey Water Series," and "Holiday Series." The group has created a series of market product combinations, mainly divided into two categories: packaged drinking water products and beverage products.

By product, in 2024, China Resources Beverage's packaged drinking water products achieved revenue of HKD 12.124 billion, accounting for 89.7% of total revenue; among them, small-sized bottled water products generated revenue of HKD 7.028 billion, accounting for 52% of revenue; while revenue from medium and large-sized bottled water products was HKD 4.6 billion, accounting for 34.1%. Beverage products, as the "second growth curve" for China Resources Beverage, achieved revenue of HKD 1.397 billion, a year-on-year increase of 30.8%, accounting for 10.3% of total revenue. The proportion of self-owned production capacity has increased: the proportion of production from self-owned factories rose from 36% in 2023 to over 50% in 2024, with 22 new production lines added, reducing reliance on outsourcing and significantly lowering manufacturing costs.

China Resources Beverage stated that by 2025, its self-owned production capacity will increase to 60%. The retail sales of its packaged water business outperformed industry growth rates, with significant growth in medium and large specifications. The beverage business is actively building a second growth curve, maintaining high revenue growth