Zhitong Decision Reference | Hong Kong stocks fluctuate with the situation, Middle East situation mainly affects shipping, oil, and gold

[Editor’s Market View]

The Lujiazui Forum did not bring the expected positive news, coupled with the ongoing conflict in the Middle East, which continues to negatively impact Hong Kong stocks. Last week, the Hang Seng Index continued to adjust.

The United States finally took action, with Trump stating on social media on the 21st that the U.S. military had "successfully struck" three Iranian nuclear facilities, including using six bunker-busting bombs to attack the Fordow facility, which is 90 meters deep. Trump claimed that Iran's key uranium enrichment nuclear facilities had been completely destroyed.

In response, Iran may strike U.S. bases in the Middle East, and surrounding Arab countries may face higher security risks, with the regional situation likely to escalate significantly in the short to medium term.

The Iranian Islamic Revolutionary Guard Corps stated that on the morning of the 22nd, Iran launched 40 missiles in an attack on Israel, including the "Khoramshahr-4" missile. The Houthis stated that if the U.S. attacks Iran, they will target U.S. warships and vessels in the Red Sea.

In the past week, international average freight rates rose by 12%, with some high-risk routes, such as the Persian Gulf to Europe and the Asia to Europe route via the Red Sea, seeing freight rate increases of up to 2.5 times. Shipping stocks are expected to remain in high demand.

Undoubtedly, the market this week is highly focused on Iran's subsequent responses. On the positive side, everyone is looking for a way out, with Iran and the U.S. possibly resuming negotiations; on the worst side, Iran could strike U.S. troops in the Middle East, leading to greater U.S. intervention; the neutral scenario is maintaining the status quo without escalation. Hong Kong stocks will fluctuate based on the developments.

Other factors may have indirect effects. This week, Powell will submit the semi-annual monetary policy report and testify before both houses of Congress, providing insights into the Federal Reserve's assessment of the current economic situation and the independence of its policies.

In terms of hotspots, the situation in the Middle East mainly affects shipping, oil, and gold. Some event-driven factors are also worth noting. For example, the "Summer Davos Forum" will be held in Tianjin, with one theme being "New Energy and Materials," to see if it will gain traction.

On June 20, 2025, according to information disclosed by the regulatory platform, the IPO counseling status of Shenghe Jingwei changed to counseling acceptance. Shenghe Jingwei is a leader in advanced packaging in China, jointly incubated by SMIC (00981) and Changdian Technology.

On June 20, the National Medical Products Administration reviewed and approved the "Measures to Optimize Lifecycle Supervision to Support the Innovative Development of High-end Medical Devices," supporting the innovative development of high-end medical devices. Observing whether this will catalyze further developments.

[This Week's Golden Stock]

CNOOC (00883)

First-quarter production and output situation: The first-quarter output reached 189 million barrels, a year-on-year increase of 6% on a comparable basis, breaking the 2 million barrels per day production threshold for the first time. This year's capital expenditure is expected to be around 130 billion yuan, maintaining a stable and strong investment effort overall. Among this, exploration expenditure accounts for 16-17%, ensuring the realization of the reserve replacement rate. Last year's production equivalent was 726 million barrels, and this year the reserve replacement rate is expected to reach 130%. Currently, there is a ten-year reserve life, and the production base continues to increase. About 60% of capital expenditure is used for development, directly driving production growth Key Projects and Cost Analysis: The production growth expectation for the Guyana project is very significant. In terms of costs, the cost of onshore oil fields is $27-30, the cost of continental shelf oil fields is $37, deepwater oil fields $43, and shale oil $50. Currently, the daily production in the U.S. is about 20 million barrels, while OPEC's daily production is 40 million barrels.

Domestic Production and Cost Control: CNOOC derives 69% of its production from domestic sources, and cost reductions have entered a plateau phase. Among these, the cost in the Bohai Bay is 5-6 dollars lower than that in the South China Sea.

Financial and Debt Management: The company has significantly reduced interest-bearing debt and has repaid high-interest dollar bonds in advance. The current debt ratio is 28%, lower than the industry average. In the future, a certain intensity of new debt will be maintained to enhance the domestic substitution rate of oil and gas resources. Geopolitical risks have little impact on the company, which is currently focusing more on expanding overseas asset scale, with no plans to sell assets. The equity projects in Canada and the Gulf of Mexico are all in normal status.

Cash and Shareholder Returns: The company has over 200 billion yuan in cash on hand but currently lacks ideal investment channels. Regarding share buybacks, the main consideration is to increase buybacks during market fluctuations, with no related plans during stable market conditions. The dividend payout ratio has increased by 5% and will remain at a normal level.

Product Structure and Sales Model: The natural gas sales price of PetroChina is 2.2 yuan, while CNOOC's is 2 yuan, slightly higher than Sinopec. CNOOC's offshore gas is entirely self-produced and uses a point-to-point delivery model to customers, which differs from PetroChina's urban gas sales model -- CNOOC primarily focuses on wholesale, while PetroChina focuses on retail. Oil prices have dropped by 10% this year, and in CNOOC's product structure, 77% is oil and 23% is gas, while other peers generally have an oil-gas ratio of 7/3 or even 6/4. Although the profit margin for natural gas is relatively low, the price is more stable, thus the stability of CNOOC's performance is slightly lower than that of companies focused solely on oil business, with its downstream natural gas sales mainly used for power generation.

【Industry Observation】

New Oriental will launch a major AI one-on-one product on June 24, marking its first official AI product launch event; Tianli International will hold the "Tianli Qiming AI Companion" launch event on June 30 at the People's Daily headquarters Studio 1; Dou Shen Education will also organize a new AI hyper-personalized product launch event soon, with intensive AI education expected to accelerate the formation of the sector's synergy. The summer vacation is the peak season for the industry, and the launch of new products is conducive to accelerating market share, promoting data accumulation, and optimizing products; as AI applications gradually mature, education, as an important landing field for rigid demand, is expected to become the fastest-growing vertical field.

AI will significantly optimize educational scenarios, processes, and systems: From the student perspective, AI has a huge advantage over traditional teachers in terms of delivering quality resources, personalized interaction, and scenario restoration; from the teacher perspective, it is highly efficient in teaching record-keeping, homework grading, and personalized student tutoring; in the future, it may profoundly impact the underlying logic and direction of student development.

With the AI investments and product advancements of educational giants, there may be continuous impacts on the product capabilities of small and medium-sized institutions. The high-quality vertical data and user understanding accumulated by educational companies in the early stages of AI remain significant engineering challenges and future growth moats; the value of data assets is expected to replace standardized teaching capabilities as the core competitiveness of institutions Key stocks to watch in Hong Kong and the US include New Oriental (09901), Tianli (01773), China Oriental Education (00677), Zhuoyue (03978), Sikao Le (01769), and Fenbi (02469).

【Data Monitoring】

According to data released by the Hong Kong Stock Exchange, the total number of open contracts for the Hang Seng Index futures (June) is 110,637, with a net open position of 40,256. The settlement date for the Hang Seng Index futures is June 27, 2024, for this period.

At the 23,530-point level of the Hang Seng Index, the concentrated area of bull and bear certificates deviates from the central axis, indicating market hesitation. The necessity for rapid interest rate cuts in the US is not strong, and the situation in the Middle East is escalating, leading to a bearish outlook for the Hang Seng Index this week.

【Editor's Remarks】

Shipping stocks were discussed in the last issue, and this issue focuses on oil stocks.

One question is: If the Strait of Hormuz is really blocked, what macro and major asset impacts would it bring? Currently, the market generally believes that in this extreme scenario, oil prices could rise to around $100-130 per barrel. Although the US has basically achieved self-sufficiency in crude oil production, rising oil prices still have a global effect. A rough calculation shows that for every $10 increase in oil prices, US inflation could be pushed up by about 0.2 percentage points in the short term. This means that if the blockade of the Strait of Hormuz causes oil prices to double, the year-on-year growth rate of US inflation could rise by 2 percentage points to an important 4-4.5% in the coming months. Although the energy shock itself is similar to a tariff shock, it will only lead to a one-time increase in price levels (rather than the inflation rate) as long as inflation expectations do not become unanchored, considering that this "stagflationary shock" in the second half of the year may combine with tariffs, increasing the pricing motivation of manufacturing companies. Therefore, the possibility of the Federal Reserve cutting interest rates this year will further decrease (possibly no rate cuts).

This passive hawkish environment may recreate the situation of 2022, where the dollar faces certain upward pressure, the interest rate curve flattens, and global risk assets will decline, which is also not good for Hong Kong stocks