Macro and market
Market review. The Hang Seng Index fell 1.64% to 22907 points, the Science Index / national index fell 4.6% / 2% to 5323 / 8016 points, and the market turnover was 155.307 billion yuan. China Mobile (941hk) A-Shares listed on the first day, coupled with the company's announcement of a large-scale repurchase plan for Hong Kong shares, China Mobile's Hong Kong shares rose 3%. The science and technology index hit a new low, with meituan (3690hk) down 11%, pushing down the Hang Seng Index by 194 points, Tencent Holdings (700hk) down 4%, BiliBili (9626hk) down more than 10%, reaching a new low. There was another Omicron import case in Macao, and Macao gambling stocks were under pressure. Sands China (1928hk) fell 7%, Galaxy Entertainment (27hk), Wynn Macau (1128hk) and SJM Holdings (880hk) fell between 4% and 5%. Hong Kong further tightened the epidemic prevention policy, and the decline of catering stocks widened at the end of the market. Xufulou group (1978hk) fell 9% and Tan Zi International (2217hk) also fell 4%. The rise in bond interest rates led financial stocks to build against the market, and HSBC Holdings (0005hk) rose nearly 3%. The oil group and its allies agreed to maintain the production increase policy. Petroleum and petrochemical stocks rose with the oil price, and CNOOC (883HK) and Petrochina Company Limited(601857) chemical (386hk) rose 2% and 3%. In terms of individual stocks, the semi new stock Shangtang (20hk) rose for four days, fell 15%, and China Huarong (2799hk) resumed trading, down 50%.
Industry outlook / stock review
Hong Kong stock market outlook in January: the valuation is low and disabled, and the national policy promotes upward revaluation. After Hong Kong stocks lost significantly to major global stock markets last year, their current valuation is low: the price to book ratio of the Hang Seng index is only 0.97 times, which is similar to the low levels in the past four crises for more than a century; The adjusted Hang Seng Index (excluding the high growth and overvalued components that have been included in the past year and a half) has a 21-year forecast P / E ratio of only 9.0 times, the lowest in the past decade. The discount of H shares to A-Shares is also the largest in ten years (the premium of A-Shares reached 47%), which has attracted mainland investors to buy Hong Kong shares again. Hong Kong stock connect has recorded net buying in the past five weeks. The data of the past decade show that when the A-H premium is high (especially > 30%), the chance of H shares outperforming A-Shares increases in the following 3-6 months. A key catalyst for the re rating of Hong Kong stocks is China's supportive policies. After a year of tightening regulation of many industries, the Chinese government now pays more attention to steady growth. The central economic work conference held last month stressed the importance of "stability", and the central bank's fourth quarter monetary policy conference also echoed the tone of the central economic work conference. We believe that this means that more policies for steady growth will be introduced soon, and the reserve requirement and interest rate may be reduced in the first half of 2022. Industry view: the Internet industry is expected to be moderately revalued because its predicted P / E ratio hit a five-year low, which should have digested most of the policy headwinds. We expect the fundamentals to improve in the second quarter of this year, and the valuation is expected to be moderately revalued in the short term. In the old economic sector, we are optimistic about construction machinery and materials because infrastructure expenditure will accelerate. On the other hand, due to the weakening of consumer confidence, we are cautious about the non essential consumer goods industry. In addition, profit taking may occur in the new energy industry. (strategy team)
