【True Insight Hong Kong Stock Masters】Hong Kong stocks are expected to remain volatile in the short term due to the impact of external markets. Shanghai Electric's acquisition of equity is favored by the market.
Hong Kong Stock Market Trends and Analysis
U.S. stocks performed weakly on Thursday, with mixed corporate earnings dragging the market down in early trading. The decline narrowed later, boosted by Tesla's earnings, which improved the performance of tech stocks. The three major indices closed with mixed results. The U.S. dollar fluctuated downward, and the 10-year Treasury yield fell to 4.21%. Gold prices remained stable, while oil prices declined. Hong Kong's pre-market ADRs were generally soft, suggesting the market would open lower following overseas trends. Mainland stocks fell yesterday, with the Shanghai Composite Index opening lower and closing down 0.7%. Trading volume in both Shanghai and Shenzhen also shrank. Hong Kong stocks followed the overseas downturn, with rising U.S. bond yields negatively impacting emerging markets. Additionally, market participants awaited further policy news, leading to fluctuating declines and slightly reduced trading volume. The overall market lacked a breakthrough, and the index is expected to remain range-bound in the short term, hovering between 20,000 and 21,000 points.
Industry News
$SH ELECTRIC(02727.HK) recently announced the acquisition of Ningsheng Industrial, which holds a 50% stake in Fanuc Robotics, for approximately 3.08 billion yuan from its controlling shareholder, Electric Holdings. The transaction constitutes a connected transaction and requires shareholder approval. The company stated that Ningsheng Industrial is an industrial robotics-related business holding platform, owning a 50% stake in Fanuc Robotics and a 25% stake in Fanuc International Trade. In the first half of the year, the investment income from its stake in Fanuc Robotics was about 178 million yuan. Fanuc Robotics sells industrial robots, smart machinery, and automated production systems to manufacturing users. In the first half of the year, its net profit was 356 million yuan, with revenue of 3.07 billion yuan. Last year's net profit was about 1.05 billion yuan, a 21% decline due to competitive pricing and market development strategies for some products, leading to an overall drop in profitability compared to 2022. The group stated that its subsidiary, Automation Group, would further collaborate with Fanuc Robotics in market expansion and product R&D post-acquisition. The acquisition will be funded by internal resources and acquisition loans, without using raised capital. The market responded positively to the deal, with significant cumulative stock price gains. However, it is advisable to monitor post-acquisition business performance.
(The author is an SFC-licensed professional and holds no positions in the mentioned stocks.)
Investment Director, Convoy Asset Management, CFA Kwok Ka Yiu
Date: Friday, October 25, 2024
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