On September 17th, the Hong Kong stock market opened with a downward gap in early trading, reacting to the Federal Reserve's interest rate increase. As the session progressed, the pessimistic sentiment was gradually absorbed, leading to a recovery across major indices from their intraday lows.
By the close of trading on the same day, the Hang Seng Index settled at 24,604.29 points, marking a decline of 109.49 points, or 0.44%. Concurrently, the Hang Seng Tech Index finished at 4,310.74 points, shedding 14.71 points, a drop of 0.34%.
Where the market found its footing
A focal point of investor attention was the state-owned banking sector, where Bank of Communications Co Ltd (HK: 3328) saw its shares climb by 0.68% to close at HK$8.18. This performance not only outpaced the broader market but also propelled the stock to yet another historical high. Market analysts attribute the relative strength of Chinese banking stocks to a confluence of three primary factors. Firstly, in a low-interest-rate environment, the appeal of high-dividend-yield assets has significantly increased. Secondly, there is a growing expectation for a reduction in dividend tax for southbound stock connect investors. Thirdly, the six largest state-owned banks have elevated their interim dividend payout ratios. Notably, Bank of Communications' interim payout ratio reached 31%, with a planned distribution of 1.68 yuan per 10 shares.
The automobile sector displayed considerable vigor, with GAC Group (HK: 2238) H-shares surging over 7%, Seres Group Co Ltd gaining more than 4%, and BYD Co Ltd (HK: 1211) rising over 2%. This activity was spurred by a September 14th announcement from GAC Group, which revealed plans to sign an "Intent Agreement" with China FAW Group Co Ltd. The agreement outlines a strategic initiative to purchase a portion of equity in a joint venture vehicle company held by FAW, utilizing a share issuance method and raising matching funds. The objective is to foster the optimization and integration of industrial resources between local state-owned enterprises and central state-owned enterprises, thereby enhancing operational efficiency. Preliminary calculations suggest that upon completion of this transaction, FAW will become the second-largest shareholder of GAC, wielding significant strategic influence.
In other market movements, technology and internet stocks presented a mixed picture, with more decliners than advancers. Meituan and Bilibili Inc both dropped over 2%, while Tencent Holdings Ltd and Alibaba Group Holding Ltd fell by more than 1%. Conversely, Lenovo Group Ltd bucked the trend with a gain exceeding 1%. Gold-related equities experienced downward pressure, with Zhufeng Gold falling over 7% and Shandong Gold Mining Co Ltd (HK: 1787) dropping more than 5%. The oil sector also weakened, as PetroChina Co Ltd (HK: 857) declined by over 2%.
Regarding capital flows, southbound trading saw net purchases of Hong Kong stocks surpassing HK$3.3 billion by the market's close. This marks the ninth consecutive trading day since September 7th that southbound capital has recorded net inflows into the Hong Kong market.
Future outlook from major financial institutions
Looking ahead, Goldman Sachs has offered its latest perspective, noting that the policy direction outlined in Hong Kong's new Policy Address and first Five-Year Plan focuses on enhancing long-term competitiveness through a "four centers and one hub" strategy, deepening Greater Bay Area integration, accelerating the development of the Northern Metropolis, and improving people's livelihoods. However, the brokerage observed that new measures specifically targeting the property sector were quite limited, with no major stimulus packages announced, which was largely in line with market expectations. Given that investor expectations for significant property stimulus were already subdued, property developers and real estate investment trusts reacted mildly on the day, trading flat to up by 1% to 2%. The firm continues to favor developers with a strong sellable resources pipeline and/or robust balance sheets, including Sun Hung Kai Properties Ltd, Henderson Land Development Co Ltd, and Sino Land Co Ltd, all of which carry a "Buy" rating.
Morgan Stanley has suggested that while short-term liquidity in the Hong Kong market may be relatively weak, there are noticeable signs of overseas capital beginning to return. The investment bank anticipates a potential rebound window for Hong Kong stocks in mid-to-late September, during which the market could see renewed strength.
Everbright Securities also provided its strategic view, recommending that investors shift their September positioning in the Hong Kong market from short-term speculative trading to a more left-side, value-oriented approach. The brokerage suggests a portfolio structure comprising "dividend-yielding defensive stocks as a foundation, resource commodities for hedging, and technology growth names for offensive potential."
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