In this article, we will look at August’s Top 10 traded Hong Kong stocks on Phillip’s Online Electronic Mart System (POEMS), based on their gross market values traded. We hope this data will give you an overall macroeconomic view and insights on liquidity and consumer trend that affects these popular traded stocks.
In early August, we saw Hong Kong’s Hang Seng Index fall from its July high of 26,780 points on weak Hong Kong’s economic activities. The Index was supported around 24,500 level and its sentiment turned positive in the 2nd half of the month. Restaurants in Hong Kong are allowed to stay open as its COVID-19 measures show positive effects. Hang Seng Index gained almost 1,000 point by the end of the month, with a key 25,500 resistance level to look out for.
Alibaba, Xiaomi and WuXi Biologics will join the Hang Seng Index on 7 September 2020. The three firms will replace developers Sino Land, Snack Maker, Want Want China Holdings, and China Shenhua Energy in the index.1
Without further ado, let’s take a look at the top 10 list, starting from the 10th position:
10th: Zijin Mining (HK: 2899)
One of China’s largest gold producers, Zijin Mining posted a net profit of 2.42 billion yuan (US$349.9 million) for 1H (first half of the year) 2020 which rose 31% from a year earlier. This was attributed to the higher sales generated from both its gold and copper operations.
With Gold prices hitting an all-time high during the COVID-19 pandemic, price soared above US$2,000, a troy ounce for the first time and set new records this month. The company could receive a revenue boost from a strong gold price as it seizes on gold’s upward momentum by increasing output further in the second half of the year.
The gold segment is Zijin’s largest revenue contributor, accounting for more than 60% of 1H2020 revenue.12
9th: Yeahka Limited (HK: 9923)
Yeahka Limited, a leading payment-based technology platform in China providing payment and business services to merchants and consumers was listed on Hong Kong exchange on 1 June 2020. The company’s mission is to continuously create value for merchants and consumers, focusing on the needs of millions of small and micro merchants in China.
The COVID-19 pandemic has triggered offline merchants to jump-start their digitalisation process amidst rapidly increasing demand for technology. The company recorded a net profit of 222.6 million yuan for six months ending 30 June, as compared to a net loss of 18.6 million yuan for the same period in 2019. 11
8th: IGG INC (HKEX: 0799)
IGG INC, a leading global developer and operator of online games made it to the 8th position on POEMS. Its main games amongst others, include Lords Mobile and Castle Clash.
The COVID-19 pandemic led to a global rise in consumer spending on mobile and PC games. IGG shares surged by as much as 50% in August 2020 following their 1H report that included an 88% jump in earnings and dividend plans.10
7th: Meituan DianPing (HKEX: 3690)
As one of the largest food delivery e-commerce companies in China, Meituan Dianping is reaping the benefits of an increasing number of consumers shopping online. The COVID-19 pandemic has accelerated the demand for delivery of products and services to consumers’ doorsteps.
The company posted an operating profit of 2.2 billion yuan in Q2 as compared to a loss of 1.58 billion yuan in Q1 of 2020 as lockdown rules in China relaxed. Analysts forecast that the pace of digitisation will continue to accelerate and it has become a trend and habit for individual consumers to go digital.9
6th: BYD Co LTD (HKEX: 1211)
BYD is a major electric vehicle maker in China backed by U.S. investor Warren Buffett. When it executed a market expansion strategy, the Chinese company’s net profit rose to 2.47 billion yuan (US$ 359.8 million) in comparison to 575.20 million yuan the same period last year.
During the six month ending 30 June 2020, its revenue climbed to 31.39 billion yuan from 23.28 billion yuan. BYD started making masks early this year right after the COVID-19 outbreak and became the world’s biggest mask maker.8 today. BYD said it will focus on expanding its 5G products and Internet of Things solutions in the second half of 2020. The company made it to the 6th position in POEMS.
5th: JD.com, Inc (HKEX: 9618)
The dual-listed (NASDAQ: JD) company debuted on 18 June 2020 on the Hong Kong Exchange, closing 3.5% higher on its first day of trading.
Its debut coincided with one of China’s biggest shopping events, where the “618 festival” saw a transaction volume of 269.2 billion yuan through its online platform. With the increased revenue of 20.7% in the first quarter of 2020, JD.com showed that its core business has not waned despite the pandemic.
With continued expansion in its own supply chain and delivery systems, its positive growth is likely to continue even in the near future. 6,7
4th: Xiaomi Corporation (HKEX: 1810)
Xiaomi Corporation’s earnings release for Q1 2020 (54.28 billion yuan) beat the forecast figures (51.87 billion yuan) at over 4.6% increase. Revenue in Q2 2020 from its smartphone segment was at 31.6 billion yuan, upholding the top four position globally for smartphones.
The release of their latest 5G flagship smartphone, Mi 10 Ultra, garnered 400 million yuan in sales in just 10 minutes of its debut. With more than 600 million yuan in investment for a new smart factory and upgraded core strategy in AIoT segment, Xiaomi continues to maintain its foothold as a global leader in the smartphone industry. 5
3rd: Alibaba (HKEX: 9988)
The third most traded HKEX stock on POEMS for the month of August was Alibaba. Its share price had increased by more than 50% since its IPO to over HKD 280 per share.
Alibaba Group Holdings saw the largest stock offering of HK$94 billion in 2019. The stock closed 6.6% above its listing price (HKD 176) on the first trading day. As the world’s largest retailer and e-commerce company, it had a stellar performance in terms of revenue in Q1 2020 with a 22% YoY increase.
Despite the pandemic, we also saw an accelerated growth in Alibaba’s Tmall GMW growing 27% YoY. With its large market capitalisation and increased e-commerce penetration, Alibaba is slated to maintain its rate of growth and increased performance across all major business segments.4
2nd: Semiconductor Manufacturing International Corporation (HKEX: 0981)
In second place is SMIC, China’s largest chip foundry. Its recent earnings release showed that the company’s sales rose 18.7% YoY to US$938 million in Q2 2020.
In May 2020, the Made in China 2025 programme saw a combined investment of US$2 billion yuan in SMIC from the China National Integrated Circuit Industry Investment Fund and the Shanghai Integrated Circuit Industry Investment Fund. This investment helped to further SMIC’s growth through a US$6.7 billion yuan investment in facility investment.
We expect a higher increase in growth and production due to the receipt of extensive support such as subsidies and tax benefits from the local governments.3
1st: Tencent (HKEX: 0700)
As the world’s largest video game vendor, Tencent continues to grow and surpass forecasts in the face of the current COVID-19 pandemic and made it to the top position in August. Users across the globe turned to video games and smartphone-based entertainments in the midst of a global lockdown.
WeGame, Tencent’s flagship gaming platform, boasted over 200 million active users as the global leader in the video gaming industry. 1H 2020 performance showed a 28% increase YoY with a revenue of 222 billion yuan.
Faced with uncertainty as a result of the current pandemic, we can expect global users to continue seeking home entertainment such as video games and this would help to maintain the current growth in Tencent’s revenue2.
Conclusion
Since the start of the year, many companies’ profits have been affected by the COVID-19 pandemic. While companies in sectors like tourism, casino and hospitality suffered greatly, other companies grow from strength to strength. A common trend observed in the above list of stocks was the increased investments in the companies’ digital platforms. With China being the first to experience the consequences of the COVID-19 pandemic, it is also the first to recover and may become one of the few major economies to register a positive GDP growth this year.
Reference:
- [1] https://www.scmp.com/business/markets/article/3099187/hong-kong-stocks-gain-xiaomi-continues-surge-after-being-tapped
- [2] https://www.prnewswire.com/news-releases/tencent-announces-2020-second-quarter-and-interim-results-301110726.html
- [3] https://www.reuters.com/article/china-semiconductor-smic/china-semiconductor-fab-smic-gets-22-bln-investment-from-govt-funds-amid-global-chip-spat-idUSL4N2D019Y
- [4] https://www.alibabagroup.com/en/ir/earnings
- [5] https://company.mi.com/en-us/ir/indexContent/
- [6] https://www.cnbc.com/2020/06/18/jd-com-shares-hong-kong-secondary-listing-debut.html
- [7] https://ir.jd.com/quarterly-results
- [8] https://www.todayonline.com/world/electric-car-maker-byd-says-profits-becomes-leading-mask-maker
- [9] https://www.cnbc.com/2020/08/24/china-e-commerce-boosted-by-shift-to-online-shopping-after-coronavirus.html
- [10] https://investor.igg.com/
- [11] https://en.prnasia.com/releases/apac/yeahka-announces-2020-interim-results-technology-enabled-business-services-realized-rapid-growth-in-revenue-and-its-customer-base-289543.shtml
- [12] https://www.nasdaq.com/articles/first-half-profit-at-chinese-miner-zijin-jumps-by-nearly-a-third-as-gold-prices-surge-2020
Disclaimer
Important Information: This report is prepared and/or distributed by Phillip Securities Research Pte Ltd (“Phillip Securities Research”), which is a holder of a financial adviser’s licence under the Financial Advisers Act, Chapter 110 in Singapore.
By receiving or reading this report, you agree to be bound by the terms and limitations set out below. Any failure to comply with these terms and limitations may constitute a violation of law. This report has been provided to you for personal use only and shall not be reproduced, distributed or published by you in whole or in part, for any purpose. If you have received this report by mistake, please delete or destroy it, and notify the sender immediately.
The information and any analysis, forecasts, projections, expectations and opinions (collectively, the “Research”) contained in this report has been obtained from public sources which Phillip Securities Research believes to be reliable. However, Phillip Securities Research does not make any representation or warranty, express or implied that such information or Research is accurate, complete or appropriate or should be relied upon as such. Any such information or Research contained in this report is subject to change, and Phillip Securities Research shall not have any responsibility to maintain or update the information or Research made available or to supply any corrections, updates or releases in connection therewith.
Any opinions, forecasts, assumptions, estimates, valuations and prices contained in this report are as of the date indicated and are subject to change at any time without prior notice. Past performance of any product referred to in this report is not indicative of future results.
This report does not constitute, and should not be used as a substitute for, tax, legal or investment advice. This report should not be relied upon exclusively or as authoritative, without further being subject to the recipient’s own independent verification and exercise of judgement. The fact that this report has been made available constitutes neither a recommendation to enter into a particular transaction, nor a representation that any product described in this report is suitable or appropriate for the recipient. Recipients should be aware that many of the products, which may be described in this report involve significant risks and may not be suitable for all investors, and that any decision to enter into transactions involving such products should not be made, unless all such risks are understood and an independent determination has been made that such transactions would be appropriate. Any discussion of the risks contained herein with respect to any product should not be considered to be a disclosure of all risks or a complete discussion of such risks.
Nothing in this report shall be construed to be an offer or solicitation for the purchase or sale of any product. Any decision to purchase any product mentioned in this report should take into account existing public information, including any registered prospectus in respect of such product.
Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may provide an array of financial services to a large number of corporations in Singapore and worldwide, including but not limited to commercial / investment banking activities (including sponsorship, financial advisory or underwriting activities), brokerage or securities trading activities. Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may have participated in or invested in transactions with the issuer(s) of the securities mentioned in this report, and may have performed services for or solicited business from such issuers. Additionally, Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may have provided advice or investment services to such companies and investments or related investments, as may be mentioned in this report.
Phillip Securities Research or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report may, from time to time maintain a long or short position in securities referred to herein, or in related futures or options, purchase or sell, make a market in, or engage in any other transaction involving such securities, and earn brokerage or other compensation in respect of the foregoing. Investments will be denominated in various currencies including US dollars and Euro and thus will be subject to any fluctuation in exchange rates between US dollars and Euro or foreign currencies and the currency of your own jurisdiction. Such fluctuations may have an adverse effect on the value, price or income return of the investment.
To the extent permitted by law, Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may at any time engage in any of the above activities as set out above or otherwise hold an interest, whether material or not, in respect of companies and investments or related investments, which may be mentioned in this report. Accordingly, information may be available to Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, which is not reflected in this report, and Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may, to the extent permitted by law, have acted upon or used the information prior to or immediately following its publication. Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited its officers, directors, employees or persons involved in the issuance of this report, may have issued other material that is inconsistent with, or reach different conclusions from, the contents of this report.
The information, tools and material presented herein are not directed, intended for distribution to or use by, any person or entity in any jurisdiction or country where such distribution, publication, availability or use would be contrary to the applicable law or regulation or which would subject Phillip Securities Research to any registration or licensing or other requirement, or penalty for contravention of such requirements within such jurisdiction.
This report is intended for general circulation only and does not take into account the specific investment objectives, financial situation or particular needs of any particular person. The products mentioned in this report may not be suitable for all investors and a person receiving or reading this report should seek advice from a professional and financial adviser regarding the legal, business, financial, tax and other aspects including the suitability of such products, taking into account the specific investment objectives, financial situation or particular needs of that person, before making a commitment to invest in any of such products.
This report is not intended for distribution, publication to or use by any person in any jurisdiction outside of Singapore or any other jurisdiction as Phillip Securities Research may determine in its absolute discretion.
IMPORTANT DISCLOSURES FOR INCLUDED RESEARCH ANALYSES OR REPORTS OF FOREIGN RESEARCH HOUSES Where the report contains research analyses or reports from a foreign research house, please note: (i) recipients of the analyses or reports are to contact Phillip Securities Research (and not the relevant foreign research house) in Singapore at 250 North Bridge Road, #06-00 Raffles City Tower, Singapore 179101, telephone number +65 6533 6001, in respect of any matters arising from, or in connection with, the analyses or reports; and (ii) to the extent that the analyses or reports are delivered to and intended to be received by any person in Singapore who is not an accredited investor, expert investor or institutional investor, Phillip Securities Research accepts legal responsibility for the contents of the analyses or reports.
If Distribution is to Australian Investors This report is produced by Phillip Securities Pte Ltd and is being distributed in Australia by Phillip Capital Limited (Australian Financial Services License No. 246827). This report contains general securities advice and does not take into account your personal objectives, situation and needs. Please read the Disclosures and Disclaimers set out above. By receiving or reading this report, you agree to be bound by the terms and limitations set out above. Any failure to comply with these terms and limitations may constitute a violation of law. This report has been provided to you for personal use only and shall not be reproduced, distributed or published by you in whole or in part, for any purpose. If you have received this report by mistake, please delete or destroy it, and notify the sender immediately.