To The Moon

Hong Kong stocks closed lower on Wednesday, with the Hang Seng Index falling 1.43%, dragged down by persistent strength in U.S. Treasury yields and hawkish signals from the Federal Reserve's September meeting minutes.

The benchmark Hang Seng Index declined 344.71 points to close at 23,785.79, with total daily turnover reaching HK$207.255 billion.

The Hang Seng China Enterprises Index slipped 0.89% to 8,010.58, while the Hang Seng Tech Index dropped 2.89% to 4,073.38, touching its lowest intraday level since September 2024.

Galaxy Securities noted that a medium-term reversal has yet to be confirmed, with the market lacking catalysts for a sustained uptrend and rebounds being primarily structural in nature.

CITIC Securities observed that after two consecutive months of correction, Hong Kong stocks are beginning to offer attractive valuation levels, and further recovery in domestic demand driven by new property policies could support a "double play" of earnings and valuation improvements in the fourth quarter.

Among blue-chip stocks, HSBC Holdings (00005) led the declines, falling 4.87% to HK$142.6 with turnover of HK$4.646 billion.

UK Chancellor Rachel Reeves is set to unveil her first budget on October 28, with market speculation suggesting the government may impose a windfall tax on banks or raise tax rates.

Separately, reports indicated that HSBC is planning significant job cuts in its UK wealth management business, reducing a large number of financial advisors and other professionals as it pushes to leverage AI for client services.

Other blue-chip movers included China Overseas Land & Investment (00688), which rose 3.75% to HK$13.55, and Tingyi (Cayman Islands) Holding (00322), which gained 3.32% to HK$12.14.

Hua Hong Semiconductor (01347) dropped 9.21% to HK$95.6, while Weichai Power (02338) fell 7.97% to HK$28.4.

In the tech sector, internet stocks broadly declined, with Tencent Holdings losing over 2% and Alibaba Group shedding more than 1%.

Property stocks staged a rebound on expectations of policy support, with China Overseas Land & Investment leading blue-chip gains.

Oil stocks bucked the downtrend after the U.S. Energy Information Administration sharply raised its oil price forecasts for this year and next, while coal stocks were active on winter restocking expectations and shrinking overseas supply.

Conversely, semiconductor and optical communication stocks, part of the broader AI hardware segment, suffered heavy losses following Samsung Electronics' weaker-than-expected earnings and a Morgan Stanley research report on potential U.S. FCC restrictions on Chinese-made optical modules.

Innovative drug concept stocks also declined, pressured by rising long-end U.S. Treasury yields that weigh on long-duration asset valuations.

Oil stocks defied the broader market decline.

Shandong Molong Petroleum Machinery (00568) surged 16.1% to HK$4.075, China Oilfield Services (02883) climbed 5.59% to HK$7.75, China Petroleum & Chemical Corporation (00386) added 2.60% to HK$4.535, and PetroChina (00857) advanced 2.56% to HK$9.83.

The EIA significantly raised its oil price forecasts for both this year and next in its October Short-Term Energy Outlook, citing accelerating global inventory draws, a persistently tight diesel market, and the far-reaching impact of disrupted oil flows through the Strait of Hormuz.

The agency raised its 2026 Brent crude average price forecast to approximately US$98 per barrel, 8% higher than its previous estimate, and its fourth-quarter average price forecast to about US$105 per barrel, 15% above its prior projection.

International oil prices continued to climb on October 8, with Brent crude futures breaking above the US$104 mark.

Geopolitical tensions in the Middle East persisted, with multiple U.S. officials stating that the Pentagon had instructed U.S. Central Command several days earlier to complete preparations for a possible resumption of large-scale military operations against Iran.

The directive did not specify a date for any potential strike, and President Donald Trump has not yet made a final decision.

Coal stocks were actively traded.

China Shenhua Energy (01088) rose 3.13% to HK$43.42, Yankuang Energy Group (01171) gained 2.37% to HK$11.66, and China Coal Energy (01898) added 2.07% to HK$10.36.

After the National Day holiday, northern regions will gradually enter the winter restocking phase, with concentrated procurement expected to drive demand recovery and support coal prices.

Guotai Haitong Securities noted that the pace of winter restocking demand release is a key focus for the fourth quarter, and coal prices still have room for further upside.

Additionally, coal inventories at Indian power plants have fallen to near five-year lows, while monthly exports from Indonesia, the world's largest coal exporter, hit a five-year low, directly reinforcing the international coal price support logic through shrinking overseas supply.

Semiconductor and optical communication stocks plunged collectively.

GigaDevice Semiconductor (03986) fell 7.47% to HK$398.8, Semiconductor Manufacturing International Corporation (00981) dropped 6.73% to HK$56.8, Yangtze Optical Fibre and Cable (06869) declined 6.73% to HK$167.6, and Zhongji Innolight (03308) lost 6.68% to HK$999.5.

Market rumors had circulated about optical chip price cuts, suggesting that current optical chip prices were already under pressure and that 1.6T companion optical chips faced further pricing pressure.

China Securities Journal contacted Changguang Huaxin, Suzhou Innolight Technology, and Yongding Co for verification, and all three companies stated they had received no information regarding optical chip price reductions.

Suzhou Innolight Technology noted that the sector correction may have stemmed from a Morgan Stanley research report published on October 1 regarding U.S. Federal Communications Commission policy.

Morgan Stanley's core assessment was that FCC restrictions on Chinese-made optical modules would most likely take effect at the 3.2T generation, but a "U.S. content exemption" pathway exists.

China Galaxy Securities analyzed that the restrictions do not constitute a comprehensive ban, with substantive financial impact expected to be delayed until after 2027.

Furthermore, TrendForce research indicated that DRAM memory overall maintained a supply-demand imbalance in the fourth quarter, though contract price increases slowed.

Notably, the market is broadly concerned that storage manufacturers' continuous capacity expansion will increase long-term supply and suppress chip prices.

Additionally, Samsung Electronics' latest earnings report showed third-quarter sales of 195 trillion won versus an estimate of 201.9 trillion won, and third-quarter operating profit of 107.4 trillion won versus an estimate of 108.67 trillion won, both missing expectations.

Innovative drug concept stocks came under pressure.

Ascletis Pharma (01672) fell 10.71% to HK$7.545, CSPC Pharmaceutical Group (01093) dropped 5.40% to HK$9.285, and Innovent Biologics (01801) declined 5.03% to HK$92.6.

The long-end U.S. Treasury yield center continued to rise, with the 10-year yield climbing to 5.30% and the 30-year yield rising further above 5.7%, the highest level since approximately 2002.

The September Fed meeting minutes were hawkish, with most officials expecting further rate hikes before year-end.

As typical "long-duration assets," innovative drug stocks are highly sensitive to discount rate changes, and the sector declined under pressure.

Among notable movers, D&S-B (02526) surged 21.75% to HK$292.2.

During the National Day holiday, AI4S (AI for Science) applications accelerated, with pharmaceutical R&D particularly active.

As a rare pure-play AI4S target in Hong Kong, D&S has built a comprehensive system spanning from data to models, models to products, and products to clinical application.

iMedLoop launched on July 4, 2026, integrating data access, professional annotation, review and quality control, training and evaluation, deployment and release, and application feedback.

Shein-W (00625) showed strong momentum, rising 8.93% to HK$35.88.

Goldman Sachs initiated coverage on Shein with a "Buy" rating and a target price of HK$62, citing the company's strong cash balance and free cash flow generation capability, and arguing that current valuations are overly pessimistic.

The company previously stated that the fourth quarter encompasses major promotional windows including Double Eleven and Black Friday, which are expected to drive significant order volume growth.

Sa Sa International (00178) rose notably by 8.33% to HK$1.3.

Sa Sa International reported unaudited sales data for the second fiscal quarter ended September 30, with group turnover reaching HK$1.414 billion, up 37.2% year-on-year.

Total offline sales reached HK$1.22 billion, up 47.6% year-on-year.

During the National Day holiday, the group's offline sales in Hong Kong and Macau rose over 60% year-on-year, with same-store sales also increasing over 50%.

Lead Intelligent Equipment (00470) saw both its A-shares and H-shares rise, with the H-share gaining 7.12% to HK$29.18.

The battery industry's "15th Five-Year Plan" is driving industrial upgrading, with solid-state batteries becoming a key focus.

Ping An Securities noted that solid-state battery manufacturing differs fundamentally from existing liquid battery production lines, creating new demand for core production equipment, and recommended attention to companies like Lead Intelligent Equipment that possess complete solid-state battery equipment supply capabilities.

COSCO Shipping Energy Transportation (01138) rose against the market trend, gaining 2.96% to HK$20.9.

Bank of America Securities noted that increased oil exports through the Strait of Hormuz have driven tanker freight rates to historic highs, and COSCO Shipping Energy Transportation's profitability and dividend capacity far exceed market expectations.

The report projected that the company's earnings per share for 2026-27 will be 20% above market consensus, with dividend yields expected to reach 7.7% and 9.2% respectively during the same period.