[ET Net News Agency, 14 August 2026] US producer prices for July rose by 4.7% year-on-year, lower than the expected 4.9% and slowing sharply from 5.5% in June. With inflationary pressures easing and interest rate hike expectations cooling, the three major US stock indices closed higher overnight. However, as Hong Kong stocks entered the earnings season, several heavyweight stocks saw their share prices plunge after releasing results, dragging the HSI down below the 100-day moving average (around 25,175) at one point before closing the half-day at 25,160, down 236 points or 0.9%, with main board turnover exceeding HKD 135.7 billion. The Hang Seng China Enterprises Index stood at 8,354, down 71 points or 0.9%. The Hang Seng TECH Index stood at 4,706, down 85 points or 1.8%.
"Alan Li: HSI expected to oscillate in the 24600 to 25700 range"
The HSI fell for the fourth consecutive session, oscillating around the 100-day moving average (around 25,176) during the morning session. Alan Li, Chief Investment Officer at Blue Water Capital, told ET Net News Agency that the recent decline in the HSI was mainly driven by sustained gains in US, Japanese, and Korea stock markets that attracted capital outflows from Hong Kong stocks, as well as lower-than-expected earnings from traditional internet heavyweight stocks. The HSI quickly broke below the 10-day moving average (around 25,657) and 20-day moving average (around 25,499) recently, indicating that the current round of rebound has ended. The lower support level is at 25,000; if this round number is breached, the next support level will be the 50-day moving average (around 24,646). He pointed out that, given the disappointing performance of two previous traditional internet platform stocks, market focus will shift to state-owned enterprise results in mid-to-late August, such as Mainland China banks, Mainland China insurance, and infrastructure sectors. If earnings bring pleasant surprises, they will provide support to Hong Kong stocks, and the HSI is expected to oscillate in the 24,600 to 25,700 range in the short term.
"SMIC expected valuation pullback has potential, Hua Hong's excessive premium leads to a dead-on-arrival sell-off"
Hong Kong's chip duo both announced their second-quarter results. SMIC (00981) recorded a net profit of USD 479 million, up 2.62 times year-on-year; revenue was USD 3.006 billion, up 36.1%. The gross margin was 25.3%, an increase of 4.9 percentage points year-on-year. Hua Hong Semi (01347) recorded a net profit of USD 38.639 million, up 3.86 times year-on-year; sales revenue was USD 718 million, up 26.8%, hitting a record high, with a gross margin of 16.5%, up 5.6 percentage points year-on-year. While both posted fold increases in net profit, their share price performances diverged post-results, with SMIC rising nearly 5% at one point, while Hua Hong plunged by nearly 9%.
Alan Li noted that Hua Hong's net profit growth appeared stronger than SMIC's mainly due to its lower base last year, but in fact, its net profit and operational guidance both missed market expectations. Moreover, Hua Hong's cumulative stock price gain year-to-date has been massive, with its expected PE approaching 300 times. High valuation coupled with disappointing financial reports made it difficult to sustain the share price.
In contrast, the situation for SMIC was completely the opposite. Market expectations for SMIC were lower, and its share price as of yesterday's close still recorded a decline compared to the beginning of the year, but its financial report far exceeded market expectations. Alan Li analysed that under full capacity operation, the company's second-quarter revenue grew by 34 percentage points, while shipment volume grew by only 20 percentage points, representing an average wafer selling price increase of over 10 percentage points. This is a very positive sign, demonstrating that the company can continue to generate profits under fixed cost conditions. Based on these data, various investment banks will upwardly revise their earnings forecasts for SMIC for this year and next. Once the revisions are complete, SMIC's expected PE will drop to below 50 times, leaving considerable upside potential ahead, and the subsequent trends of the two stocks are expected to diverge significantly, with SMIC's upside potential far surpassing Hua Hong's.
Regarding stock deployment, Alan Li suggested interested investors can chase-buy at current prices, with a short-term target looking up to the pre-July high of around HKD 86, and mid-to-long-term expectations to break record highs. As for Hua Hong, which has now fallen below the 100-day moving average (around HKD 134.46), Alan Li suggested investors execute a stop-loss at the current price, with lower support located at HKD 122, namely the July low.
"Alan Li: HSI expected to oscillate in the 24600 to 25700 range"
The HSI fell for the fourth consecutive session, oscillating around the 100-day moving average (around 25,176) during the morning session. Alan Li, Chief Investment Officer at Blue Water Capital, told ET Net News Agency that the recent decline in the HSI was mainly driven by sustained gains in US, Japanese, and Korea stock markets that attracted capital outflows from Hong Kong stocks, as well as lower-than-expected earnings from traditional internet heavyweight stocks. The HSI quickly broke below the 10-day moving average (around 25,657) and 20-day moving average (around 25,499) recently, indicating that the current round of rebound has ended. The lower support level is at 25,000; if this round number is breached, the next support level will be the 50-day moving average (around 24,646). He pointed out that, given the disappointing performance of two previous traditional internet platform stocks, market focus will shift to state-owned enterprise results in mid-to-late August, such as Mainland China banks, Mainland China insurance, and infrastructure sectors. If earnings bring pleasant surprises, they will provide support to Hong Kong stocks, and the HSI is expected to oscillate in the 24,600 to 25,700 range in the short term.
"SMIC expected valuation pullback has potential, Hua Hong's excessive premium leads to a dead-on-arrival sell-off"
Hong Kong's chip duo both announced their second-quarter results. SMIC (00981) recorded a net profit of USD 479 million, up 2.62 times year-on-year; revenue was USD 3.006 billion, up 36.1%. The gross margin was 25.3%, an increase of 4.9 percentage points year-on-year. Hua Hong Semi (01347) recorded a net profit of USD 38.639 million, up 3.86 times year-on-year; sales revenue was USD 718 million, up 26.8%, hitting a record high, with a gross margin of 16.5%, up 5.6 percentage points year-on-year. While both posted fold increases in net profit, their share price performances diverged post-results, with SMIC rising nearly 5% at one point, while Hua Hong plunged by nearly 9%.
Alan Li noted that Hua Hong's net profit growth appeared stronger than SMIC's mainly due to its lower base last year, but in fact, its net profit and operational guidance both missed market expectations. Moreover, Hua Hong's cumulative stock price gain year-to-date has been massive, with its expected PE approaching 300 times. High valuation coupled with disappointing financial reports made it difficult to sustain the share price.
In contrast, the situation for SMIC was completely the opposite. Market expectations for SMIC were lower, and its share price as of yesterday's close still recorded a decline compared to the beginning of the year, but its financial report far exceeded market expectations. Alan Li analysed that under full capacity operation, the company's second-quarter revenue grew by 34 percentage points, while shipment volume grew by only 20 percentage points, representing an average wafer selling price increase of over 10 percentage points. This is a very positive sign, demonstrating that the company can continue to generate profits under fixed cost conditions. Based on these data, various investment banks will upwardly revise their earnings forecasts for SMIC for this year and next. Once the revisions are complete, SMIC's expected PE will drop to below 50 times, leaving considerable upside potential ahead, and the subsequent trends of the two stocks are expected to diverge significantly, with SMIC's upside potential far surpassing Hua Hong's.
Regarding stock deployment, Alan Li suggested interested investors can chase-buy at current prices, with a short-term target looking up to the pre-July high of around HKD 86, and mid-to-long-term expectations to break record highs. As for Hua Hong, which has now fallen below the 100-day moving average (around HKD 134.46), Alan Li suggested investors execute a stop-loss at the current price, with lower support located at HKD 122, namely the July low.
