Under the "Yaxia" market, the characteristics of "American stock-like" are emerging in Hong Kong stocks, with DONGFANG ELEC surging 65% in a single day

The world's largest hydropower project, the "Yaxia" hydropower station, has officially commenced construction, and power equipment stocks in the Hong Kong stock market are riding the wave. As of the close on July 21, Dongfang Electric (01072) rose by 65%, Northeast Electric (00042) increased by 40%, Harbin Electric (01133) went up by 28%, and Shanghai Electric (02727) climbed by 6%.

Market analysis indicates that this surge reflects the trend of the Hong Kong stock market becoming more like the U.S. stock market. The U.S. stock market is known for being institutionally driven, highly liquid, and extremely volatile. In recent years, as foreign investment participation has increased, some characteristics of the U.S. market have gradually emerged in the Hong Kong stock market.

According to Zhitong Finance APP, the U.S. stock market is dominated by institutions and high-frequency trading (HFT), with thin order books but active trading, making large orders prone to causing significant volatility. On July 21, during the trading of Dongfang Electric (01072), an "erroneous order" sparked heated discussions.

At 9:30 AM today, an abnormal trading record for Dongfang Electric was noted—400 shares were traded at a price of HKD 119.90 per share, involving an amount of nearly HKD 48,000. Notably, this transaction price surged over 520% compared to the previous trading day's closing price of HKD 19.32 per share, causing significant fluctuations in the market value of Dongfang Electric. Additionally, in the Hong Kong stock market, where there are no limits on price increases or decreases, the volatility effect was amplified. The market generally speculated that this was a trader's operational error, intending to buy at HKD 19.9 but mistakenly inputting HKD 119.9.

However, the market reacted quickly, and the stock price automatically corrected to around HKD 20.85 per share in a very short time. Analysts pointed out that some investors mistakenly interpreted the abnormal volatility as a "buying signal," and as the stock price broke through the year's high, it triggered algorithmic trading's breakout buying orders. This directly led to the company's total trading volume exceeding HKD 10 billion for the day. It is worth noting that the trading volume for Dongfang Electric the previous trading day was less than HKD 200 million.

Meanwhile, this also resulted in a net inflow of HKD 1.085 billion from northbound capital into Dongfang Electric, accounting for 10.7% of the total trading volume for the day, boosting the stock price. The previous trading day saw a net outflow of HKD 1.5536 million from Dongfang Electric's Hong Kong Stock Connect. In contrast, Harbin Electric is not a Hong Kong Stock Connect target, which explains why Dongfang Electric's increase far exceeded that of Harbin Electric.

Market analysts pointed out that such "erroneous orders" are not uncommon in markets where institutional and quantitative trading proportions are rising, but they highlight the need for Hong Kong stock investors to adapt to new volatility characteristics. As foreign investment participation continues to rise, such U.S.-style price fluctuations may become the new norm.

It is evident that although the surge in Dongfang Electric was stimulated by favorable policies, it seems to be more significantly influenced by the trend of the Hong Kong stock market becoming more like the U.S. market. So, can the market heat for power equipment stocks be sustained?

Installed capacity exceeds three times that of the Three Gorges, the world's largest hydropower project ignites market expectations

On July 19, the world's largest hydropower project, the Yarlung Tsangpo River downstream hydropower project, officially commenced construction.

According to Zhitong Finance APP, the Yarlung Tsangpo River downstream hydropower project is located in Nyingchi City, Tibet Autonomous Region. The project mainly adopts the development method of cutting corners and straightening, with tunnel water diversion, and will build five cascade power stations, with a total investment of approximately 1.2 trillion yuan (RMB, the same below). The project's electricity will primarily be for external delivery, while also considering local self-use needs in Tibet. Previously, in December 2024, CCTV News reported that the project had received formal approval from the Chinese government According to an article titled "Supporting Green Goals - The Yarlung Tsangpo River Downstream Hydropower Project Will Not Harm India" in the mainstream English newspaper The Indian Express, cited by the Ministry of Foreign Affairs on January 23, 2025, the "Yarlung Tsangpo" project is expected to have an installed capacity of approximately 60 million kilowatts, making it the largest hydropower station currently planned in the world.

Huatai Securities stated that the total investment in the "Yarlung Tsangpo" project exceeds 1 trillion yuan, but considering the project's site selection, it is speculated that the proportion of equipment is not high. The unit value of turbines and auxiliary equipment for conventional hydropower projects is approximately 0.74-1.33 yuan/watt. Considering the high construction difficulty and high head requirements for turbines, a conservative assumption is that the unit value of equipment per watt is 20% higher than the average level, leading to a total value of approximately 53.5-95.4 billion yuan for turbine and auxiliary equipment orders related to the project. Referring to the construction progress of the Zangmu Hydropower Station (the first large hydropower station on the mainstream of the Yarlung Tsangpo River), the "Yarlung Tsangpo" project is expected to take at least 10 years, with Huatai Securities estimating the production time between 2035-2040. Equipment bidding may occur around 2030, potentially becoming a new growth point for hydropower equipment, effectively ensuring full capacity utilization in the industry.

CITIC Securities believes that the ongoing construction of the Yarlung Tsangpo River downstream hydropower project will be a long-term benefit for leading suppliers of hydropower supporting equipment and core equipment for external power grid projects.

Hydropower Equipment Has Achieved Localization, Industry Leaders Are Highly Optimistic

CICC pointed out that the Yarlung Tsangpo project is another national-level major hydropower project following the Three Gorges Project, which is expected to bring long-term development space for manufacturers of hydropower units, GIL, and other electrical equipment. So far, China's largest hydropower project, the Three Gorges Project, has an installed capacity of 22.5 million kilowatts and a total investment of nearly 250 billion yuan. Based on the investment amount and the resource situation of the Yarlung Tsangpo, it is preliminarily judged that the installed capacity of the Yarlung Tsangpo project may be about three times that of the Three Gorges Project. Currently, China's hydropower equipment has achieved full localization, with Dongfang Electric and Harbin Electric being the main suppliers.

According to a report by Huatai Securities, from 2021 to 2024, the market share of Dongfang Electric and Harbin Electric in the hydropower business in China ranges from 61% to 94%, essentially completing domestic substitution. In recent years, industry leaders such as Harbin Electric, Dongfang Electric, and Zhejiang Fu Holding have been operating at near full capacity. Huatai Securities pointed out that the production capacity of the three companies in 2024 is approximately 55 sets/year, corresponding to a delivery of 15-17 GW/year from 2025 to 2027; after 2025, the three plan to expand production to 115 sets/year, which is just enough to meet the delivery peak of 36 GW in 2030. If future approvals for pumped storage slow down, domestic hydropower may return to a delivery level of 22-27 GW/year from 2031 to 2035; potential "Yarlung Tsangpo" orders after 2030 could contribute an average of 10-15 GW/year, effectively ensuring the capacity utilization of Dongfang Electric and Harbin Electric after 2030.

As the dual leaders in the turbine industry, Dongfang Electric and Harbin Electric account for 5% and 11% of their gross profit from hydropower business in 2024, respectively, with pumped storage orders in hand ensuring rapid growth from 2025 to 2030. In contrast, Dongfang Electric has advantages in high-head large-capacity impulse hydropower units, while Harbin Electric's advantages are more pronounced in the pumped storage field Huatai Securities continues to predict that coal and electricity may see high-level approvals from 2025 to 2030, and there are still highlights in the hydropower business after 2030. Combined with a strong balance sheet, it believes that the valuation of the power generation equipment manufacturing industry is expected to recover in the future.

In contrast, Dongfang Electric, which led the gains among its peers today, is also favored by various brokerages.

CICC stated that Dongfang Electric is currently developing high-head, large-capacity impact hydropower units to support the clean energy base in Tibet. It believes that hydropower units have high value, high barriers, and a concentrated market structure, and the Yalaxia project is expected to benefit industry chain companies in the long term.

Citigroup emphasized that Dongfang Electric is a leading hydropower equipment manufacturer in China. According to company data, it holds a 45% share in the conventional hydropower market and a 41.6% share in the pumped storage market. The company has a production and R&D base for plateau-type sediment abrasion hydropower units in Linzhi, Tibet, which can customize equipment for the high drop environment of the Yarlung Tsangpo River.

Overall, from this event, we see the increasingly "U.S.-style" characteristics of the Hong Kong stock market. The surge in stocks like Dongfang Electric reflects the liquidity-driven and quantitative trading strategies led by foreign capital, amplifying the volatility of Hong Kong stocks. As northbound funds continue to flow in and institutional participation increases, the pricing logic of the Hong Kong stock market is gradually aligning with that of the U.S. stock market—large orders can easily trigger trend acceleration, and algorithmic trading boosts breakout trends.

In the short term, the heat of power equipment stocks may be dominated by capital flows and technical factors, leading to increased volatility; but in the long term, the order fulfillment of the "Yalaxia" project and the industry's fundamentals remain the core support. As the project continues to advance, the demand for hydropower equipment is expected to see significant growth, coupled with the completion of domestic substitution and the gradual release of production capacity, the industry is expected to maintain a high level of prosperity